IRB InvIT Fund Review (Subscribe)

Review By Dilip Davda on Apr 25, 2017

Well, to ease funding for infrastructure sector, SEBI has been mulling a separate instrument for fund raising and meets this sector’s funding demands since June 2015. After mammoth task of opinions, feedbacks etc and the final approval was granted for a novel instrument called InvIT (i.e. Infrastructure Investment Fund) and IRB Infrastructure Developers Ltd (sponsor) is the first organization to bring this novel instrument called” IRB InvIT Fund” in the Indian Market for the first time with a very attractive features. Thus, in short, a new era has begun for infrastructure sector financing. Salient features of IRB InvIT Funds are as under:

Initial offering Units of IRB InvIT Fund (TRUST) is having a price band of Rs. 100-102. Minimum application is to be made for 10000 units (i.e. Rs. 10 lakh plus) and in multiple of 5000 units (Rs 5 lakh plus). Issue opens for subscription on 03.05.17 and will close on 05.05.17. Issue comprises of fresh issue of Rs. 4300 crore and offer for sale of 34761770 units thus making a total size of the issue of Rs. 4655 crore with an option to retain 25% of the offer size oversubscription. Thus it gives enterprise valuation of Rs. 5805 crore to Rs.5921.1 crore (based on lower and upper price band). The Trust has been assigned a rating of CARE AAA(Is) stable by CARE ratings indicating an opinion on the general creditworthiness of the trust and has not rated the Units of the Trust. India Ratings has assigned IND AAA Outlook Stable to Trust’s external senior debt reflecting combined credit quality of the underlying assets and has not rated the Units. Post allotment, Units will be listed on BSE and NSE. Post listing, these units will have a trading lot of 5000 units. InvIT will be registered with SEBI in due course.

BRLMs to this issue are IDFC Bank Ltd, Credit Suisse Securities (India) Pvt Ltd, ICICI Securities Ltd and IIFL Holdings Ltd. Karvy Computershares Pvt Ltd is the registrar to the issue.

Trust has acquired six projects that are already in operation and generating revenues at a CAGR of above 11 per cent. It includes Surat-Dahisar Project (NH8), Bharuch Surat Project (NH8), Talegaon Amravati Project (NH6), Jaipur Deoli Project (NH12), Tumkur Chitradurga Project (NH4) and Omalur-Salem-Namakkal Project (NH7). While Surag-Dahisar and Bharuch-Surat project has concession period tenure till January 2022 and Omalur-Salem-Namakkal till August 2026, other projects have concession tenures ending in June 2037. Sponsor has 22 BOT road projects on hand as on 31st December 2016 out of which 14 are operational, 5 are under construction and 3 are under development. Futures of all these projects are based on the daily traffic volumes, inflation and regulatory changes. Trust will follow factoring of WPI in the pricing of the projects.

Trust will have key investment conditions as under:

1. Invest at least 80% of the value of the assets in completed and revenue generating infrastructure assets
2. Balance 20% can be invested in under-construction infrastructure projects and securities of infrastructure companies in India (cannot invest in units of other InvITs)
3. InvIT should hold (directly or through SPVs) the infrastructure assets for at least 3 years from the date of purchase of the asset by the InvIT (except investment in securities of infrastructure companies)
Investment into SPVs is subject to the InvIT holding a controlling interest (at least 51% of equity share capital) in the SPVs

On dividend policy, investors are likely to get rewards based on

1. At least 90% of distributable cash flow of the SPV shall be distributed to the InvIT in proportion to its holding in the SPV
2. At least 90% of distributable cash flow of the InvIT shall be distributed to the unit holders
3. Dividend declared to be paid within 15 days; distributions to the unit holders to be made on a half yearly basis (however, management has intention to distribute dividends on quarterly basis as informed during road show. Such dividends will be totally tax free in the hands of the Unit holders. )

Trust will have full transparency under following guidelines

1. The Trust will have Right of First Refusal (RoFR) to acquire Sponsor’s existing operational and future assets
2. Also, the Trust can purchase Non-Sponsor assets as per its investment strategy
3. Prior approval of the unit holders will be required at the time of any purchase / divestment of assets

Enterprise value at the offer price of Units will facilitate raising further debt equal to its value at concessional rates.

Conclusion: Although the minimum amount to be invested is Rs. 10 lakh and in multiple of Rs. 5 lakh thereon, investors may invest in this novel instrument for long term investment.


Conclusion / Investment Strategy

Although the minimum amount to be invested is Rs. 10 lakh and in multiple of Rs. 5 lakh thereon, investors may invest in this novel instrument for long term investment.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Apr 25, 2017

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

IRB InvIT Fund IPO FAQs

  1. 1. Why IRB InvIT Fund IPO?

    The initial public offer (IPO) of IRB InvIT Fund offers an early investment opportunity in IRB InvIT Fund. A stock market investor can buy IRB InvIT Fund IPO shares by applying in IPO before IRB InvIT Fund shares get listed at the stock exchanges. An investor could invest in IRB InvIT Fund IPO for short term listing gain or a long term.

  2. 2. How is IRB InvIT Fund IPO?

    Read the IRB InvIT Fund IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. IRB InvIT Fund IPO what should investors do?

    IRB InvIT Fund IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the IRB InvIT Fund IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is IRB InvIT Fund IPO good?

    Our recommendation for IRB InvIT Fund IPO is to subscribe.

  5. 5. Is IRB InvIT Fund IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the IRB InvIT Fund IPO.

  6. 6. When will IRB InvIT Fund IPO allotment status?

    The IRB InvIT Fund IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit IRB InvIT Fund IPO allotment status to check.

  7. 7. When will IRB InvIT Fund IPO list?

    The IRB InvIT Fund IPO will list on Thursday, May 18, 2017, at BSE, NSE.

2 Comments

GURAVAIAH GARLAPATI
2. GURAVAIAH GARLAPATI  May 18, 2017 12:25
May I know what is the expected yield on investment at Rs.102/-
Mahesh Patel
1. Mahesh Patel  Apr 27, 2017 09:59
Sir, can I apply or not








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