Page 40 - Banking Finance February 2021

ARTICLE

On April 23, 2019 PIL issued INR 64,520 millions of NCDs to Y Frequent Policy changes & socio-political economic
banks and non-bank financial institutions. The proceeds were unrest might lead to halting of the project or delaying
used by PIL to immediately repay 645,200,000 of PIL NCDs, in its construction.
and in turn the Trust used the proceeds to repay in full the
63,700 of the Trust NCDs at a clean redemption price of INR Investor's Perspective
1012873 per NCD.
Y Parking funds into this investment option allows
Future Projects/Updates investors to generate fixed returns on the same. For
instance, an infrastructure investment trust has to
IndInfravit Trust ("IndInfravit") and Sadhav Infrastructure
Project Limited ("SIPL") executed definitive agreements distribute 90% of its total net cash flow to its investors.
whereby IndInfravit has agreed to purchase the entire It means that investors can generate steady earnings
equity shareholding of SIPL in nine of SIPL's operational road throughout the course of investment.
projects ("Roads Portfolio") from SIPL. The transaction Y Additionally, investors also receive dividend income on
values 100% of the Roads Portfolio at an enterprise value their investment in case the InvITs have surplus cash flow.
of approximately INR 66,100 million.
Y InvITs are inherently less risky category among the
The Roads Portfolio comprises seven toll roads and two various mutual funds out there as the majority of the
annuity roads, with total 2,619 lane kms in Gujarat, investment is done the infrastructure projects which
Karnataka, Maharashtra, Rajasthan and Telangana, some have already been completing and have started
of India's most economically vibrant states. The roads generating revenues.
forming part of the Roads Portfolio have been operational, Y The guidelines allow for the minimum risk exposure for
on an average, for approximately six years, and are used by the InvITS fund which encourages participation from
diverse groups of road users and commercial traffic. The investors who are looking for medium returns with
states in which these roads are present contribute 0.39% regular dividend payment on the long term basis.
to the GDP and 0.28% to the population of India.
Y It will have a positive impact on the Infrastructure sector
On completion of the transaction, SIPL will receive the
as the infrastructure project can be started without
proceeds in cash and allotment of units of IndInfravit. Post- capital holding issues.
completion, SIPL will hold not more than 10 per cent unit-
holding in IndInfravit. The InvIT platform clearly underlines Conclusion
how India remains an attractive destination for serious and
committed long-term investors, and look forward to more It is anticipated that investment in InvITs in India has a
such transactions in the near future. promising future and may prove beneficial in these following
ways.
Benefits 1. Existing projects would be provided with substantial
refinancing options in the long run.
Y The returns are 10-14% on the amount invested as
compared to other mutual funds 2. It would help disengage developer's capital to facilitate
reinvestment towards new infrastructure projects.
Y Less volatility in InvITs
Y Leads to diversification of investments, reducing the risk 3. It is expected to facilitate the refinancing of current debt
with cost-effective capital for the long term.
Y These funds are managed by professionals with
experience in investing 4. It would encourage international investors to invest in
the Indian infrastructure sector.
Risks 5. Prospects of increasing opportunity to diversify an
Y Regulation Risk - Infrastructure projects include investment portfolio with the help of quality
construction of Toll, Water Supply,Power Generation infrastructure assets remain.
Projects etc.

Y The government may announce subsidy on the same as Disclaimer:
a part of their policy, reducing the returns to the Information from Various public sources has been utilized
investor for writing this Article. T

40 | 2021 | FEBRUARY | BANKING FINANCE