IRB Infrastructure Developers Ltd has announced its Initial Public Offer (IPO) for infrastructure investment trust (InvIT) becoming the first firm to launch such product in the market. The company will raise up to Rs 5,040 crore through the IPO including fresh funds of Rs 4,300 crores and offer-for-sale of nearly 3.48 crore units by IRB Infrastructure Developers and its arms such as Modern Road Makers, Aryan Toll Road, ATR Infra and Ideal Road Builders. The IPO will open on May 3 and close on May 5.
On 7th September 2016, IRB filed its draft offer documents for the fund-raising plans with capital market regulator SEBI and got an observation from Sebi on February 9, which is necessary for any entity to launch public.
SEBI introduced regulations for InvITs September 26, 2014, an instrument meant to encourage broader participation in infrastructure investment. Since the introduction, however, no company had come forward to use this platform to raise capital. In a bid to push things forward, SEBI eased rules changing the allocation limits to different classes of investors, new norms on disclosures, filing of draft papers and appointment of merchant bankers.
Recently in this year, Securities and Exchange Board of India’s (Sebi’s) approved IRB to raise Rs 4,300 crore through initial public offering (IPO).
According to the company’s chairman and managing director, Virendra D. Mhaiskar, the funding will be utilized for repaying the external debt of the underlying SPVs (special purpose vehicles) created for the toll-road projects and the remaining Rs 1,700 crore will be utilised to pay back the sponsors’ sub-debt and equity.
What is an Infrastructure Investment Trust (InvITs)?
An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return. InvITs will be structured similarly to mutual funds, issuing units to investors, but will invest in infrastructure projects instead of listed equity or debt.
Apart from these, other infrastructure investment trusts registered with Sebi are GMR Infrastructure Investment Trust, MEP Infrastructure Investment Trust and IL&FS Transportation Investment Trust.