India: IRB InvIT Fund gains 1.2% on stock market debut

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IRB Infrastructure Developers Ltd’s infrastructure investment trust (IRB InvIT) fund on Thursday gained 1.2%, a tepid stock markets debut, following a subscription of 8.57 times for the initial public offering (IPO) of Rs5,033 crore last week.

The stock opened at Rs103.25 on the BSE and touched a high and a low of Rs103.85 and Rs102, respectively.

At 10.05am, it was trading at Rs102.50, up 0.5% from its issue price of Rs102 a share. Its arm IRB Infrastructure Development Ltd was trading at Rs249.65, down 2.8% from its previous close, while India’s benchmark Sensex index fell 0.48% to 30,512.31 points.

“The listing opens up the window for other road developers to exit completed projects and churn their equity/deleverage balance sheet and would also spur interest from the NHAI to award more BOT projects vs. EPC/HAM as bidding interest would be higher since developers would now have an exit option,” Emkay Global Financial Services said in a 24 April note to its investors.

The issue was open to bidding from 3-5 May. The portion of the share sale reserved for institutional investors was subscribed 10.81 times, while the portion reserved for high net-worth individuals and other non-institutional investors was subscribed 5.89 times.

On 2 May, the trust allotted shares worth Rs2,094.5 crore as part of the so-called anchor book allocation. Institutional investors who participated in the anchor book allocation included foreign investors such as the government of Singapore, Schroder Asian Asset Income Fund, Deutsche Global Infrastructure Fund and Jupiter South Asia Investment Co. as well as domestic investors such as Birla Sun Life Mutual Fund, HDFC Standard Life Insurance Co. Ltd and Birla Sun Life Insurance Co. Ltd.

The issue comprises a fresh issue and an offer for sale. The successful public offering will help IRB raise around Rs5,033 crore, including primary capital of Rs4,300 crore.

IRB will use about Rs3,300 crore to repay external debt and the remaining Rs1,700 crore will accrue to IRB as repayment of sub-debt/equity-invested. This will provide the company Rs1,700 crore of cash flow, which it can utilise to fund the equity requirement of current/future projects.

It will also reduce the gross debt at the consolidated level by Rs5,000 crore, reducing the leverage to 2 times from the current 3 times, thereby possibly improving its credit rating and borrowing cost. At the same time, the company keeps 15% in the InvIT, ensuring it gains from the cash flows and potential upside in the InvIT units’ price.

IRB’s InvIT consists of six projects spread across five states. All projects are operational and adhere to the criteria defined in InvIT regulations. Total capital invested in these projects is Rs8,080 crore, with equity investment at Rs2,150 crore.

For the nine month ended 2017, the fund posted a net loss of Rs13.05 crore on revenues of Rs734.99 crore. As of financial year 2016, it has a total debt of Rs4,478.31 crore, while networth of Rs1,828.24 crore.

Also Read: India: IRB InvIT Fund IPO subscribed 7% on Day 1

India: IRB Infrastructure InvIT raises $327m from anchor investors ahead of IPO

This article was first published on Livemint.com