According to a report by FICCI-Centrum, in the next couple of years, infrastructure investment trusts (InvITs) are slated to pick up and have the potential of unlocking USD 5-7 billion from assets, primarily in the roads, transmission and renewable segments.
“Companies with a strong portfolio, steady revenue stream and a resilient track record, can be potential candidates for this type of investment. Firms in power, roads and transmission, have applied for SEBI (Securities and Exchange Board of India) registration,” the report said.
Companies like IRB Infrastructure, MEP Infrastructure and GMR Infrastructure, have so far received the SEBI’s approval, for listing InvITs. According to the report, companies like IL&FS Transportation Networks, Sterlite Power Transmission, Adani Group and Mytrah Energy, have possibly also got approval from the SEBI to set up InvITs. However, the report notes that providing an attractive yield amid volatile interest rate, will be a major challenge for the issuers.
“Additionally, issuers may face challenges in obtaining a premium valuation for their assets, which would depend upon a number of factors like sponsor credibility and experience, quality and revenue generation ability of the underlying assets and government policies,” the report said.
See also: SEBI to allow REITs and InvITs to take off this year
Moreover, InvITs would be competing with similar domestic products, such as alternate investment funds (AIF), which offer more operational flexibility and allow investors to invest in all forms of infra assets.
With a view to help infra developers to mop up funds for long-term projects in a more transparent manner, SEBI had in August 2014, introduced InvITs as an investment vehicle that would enable promoters to monetise completed assets. However, the move failed to get enough attention of businesses, owing to taxation issues, which have been resolved by the government. Further, SEBI also decided to relax norms for both, real estate investment trusts (REITs) as well as InvITs.
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