GR Infra plans to raise ₹1,200 cr through InvIT IPO

This will be the first initial public offering (IPO) of an InvIT since 2017. In 2017, IRB Infrastructure Ltd did the first IPO of a road InvIT, which was followed by an IPO of power transmission assets by Sterlite Grid.

Since then, while InvITs have seen a rise in popularity, companies and investors have preferred to set them up privately.

InvITs typically manage income-generating infrastructure assets, offering investors regular yields and a liquid method of investing in infrastructure projects.

“GR Infra is in talks to hire investment banks and lawyers and talks are on on a public InvIT structure right now. InvITs will have some of their operating hybrid annuity model (HAM) street assets,” said one of the above persons, requesting anonymity.

According to an investor presentation by the company, as of June 2021, GR Infra had seven operational road assets.

“There is a lot of interest in Indian road projects seeking returns from global investors. There is a pool of global capital seeking higher returns, and roads are one of the few areas in India that have inflation linked, hence a kind of inflation protection that is not the case with other sectors such as electricity. So, from a yield standpoint, if you’re getting inflation protection, that makes it very attractive. Also, the entire InvIT infrastructure is tested more in roads and transmission as compared to renewable energy,” said another person.

The inflation link comes about as a major part of the earnings from HAM road projects is through interest on annuity payments to be received in the future. The interest rate is linked to the average MCLR of the top five scheduled commercial banks, plus 1.25%.

If inflation rises resulting in an increase in interest rates by the central bank, interest payments also increase according to the above formula, protecting the returns.

Emails sent to GR Infraprojects on Thursday remained unanswered.

InvITs have emerged as a preferred structure for investors, and are being set up to hold operational projects in roads, transmission lines, renewable projects, telecom towers and gas pipelines.

While Reliance Industries, Sterlite Power, IRB Infrastructure, L&T and other companies have set up InvITs to monetize their operating infra assets, even state-owned entities heat up these structures Is.

In May 2021, PowerGrid Corp. of India Ltd picked up 7,700 crore through invocation of transmission lines. NHAI has also recently raised Rs 6,000 crore through an InvIT.

Mint reported on 3 September that the government’s ambitious 6 trillion monetization program to be closed by leasing out over 2,229 km of gas pipelines of GAIL (India) Limited to the private sector under the InvIT structure.