Firms shelve InvIT plans as investors turn cold

Investors are yet to warm up to Infrastructure Investment Trusts (InvITs) despite the two listed ones targeting lucrative 12% annual yield.

Neither of the two listed InvITs – IRB InvIT Fund and India Grid Trust – has managed to touch or cross their listing price of Rs 100 per unit.

Experts said investors are either cautious or haven't understood the product, or the infrastructure sector is yet to recover from its troubled phase.

This has led to companies planning similar products putting their plans in cold storage, which has resulted in not a single InvIT being listed in the last four months.

GMR Infrastructure, Reliance Infrastructure, Larsen & Toubro, MEP Infrastructure Developers, IL&FS Transportation Network were among companies planning an InvIT.

Now, none of them wants to immediately get them listed.

Interestingly, IRB InvIT Fund, which distributed Rs 4.55 per unit for first half of this fiscal, is targeting an annual yield of around 12%.

To make the product attractive, IRB InvIT Fund added one more asset to the InvIT in September, resulting in a better payout to the investors.

Virendra Mhaiskar, chairman and managing director of IRB Infrastructure Developers, said,

"Our InvIT is doing good, we are on track in giving returns to the unit holders. In fact, we have announced two successive distributions within six months of listing, as against the minimum stipulation of half-yearly distribution. This demonstrates our capability and domain expertise to manage the InvIT affairs very effectively and efficiently."

Similarly, India Grid Trust is aiming at a yield of Rs 11.44 per unit, which is close to 12%. It has distributed Rs 3.67 per unit in the first four months since its listing in June.

India Grid Trust at present has two assets; it has plans to inject three more assets into the InvIT fold.

Next week it will hold a meeting to get approval for the transfer of its Rajasthan, Telangana and West Bengal assets.

But investors are not taking the bait despite an annual yield of 12% is certainly lucrative for an avenue that requires more than Rs 5 lakh investment.

Sudip Sural, senior director, corporate & infrastructure ratings, Crisil, said, "It is a complicated product to understand since it has characteristics of debt as well as equity. InvITs closely resemble equity investments, but are unique due to their features of tax-efficient and mandatory payouts."|

"Investor sentiment depends on the outlook for infrastructure sectors such as roads and power. Robust management, strong governance and continuous addition of good quality assets will determine the yields generated, and eventually determine investor interest in this instrument," he said.

Commenting on the overall InvIT related issues, Aditya Mehra, vice-president, mergers & acquisition and investor relations, India Grid Trust, said, "At the moment, only investors with large pockets are allowed in this product, despite the fact that small retail investors take more risks in the equity market."

The regulators may have to relook at this clause to make it open for retail investors too, he said.

According to Mehra, InvITs being traded below par is certainly a dampener.

However, he has a different take on why the product hasn't become popular. "Even mutual funds, when introduced took time for the investors to understand. It is only after several years, investors were confident with the product. As a result, we first need to prove the track record but setting up annual benchmark for gain investor confidence."

It may take another year for the market to see more InvITs, experts said, adding that companies may keep on deferring plans such as the Reliance Infrastructure, which was to launch the InvIT in June, but has repeatedly delayed it due to low investor sentiment. It now plans to launch it in the last quarter of this fiscal.

Larsen & Toubro's InvIT may be the next to be launched as it is working on its product but hasn't made the issue size public. "There will be four road assets and we plan to bring it out during this fiscal," said R Shankar Raman, chief financial officer, L&T.