Published on 4/05/2017 1:48:34 PM | Source: HDFC Securities
IPO Note IRB Infrastructure Developers Ltd - HDFC Sec
Background & Operations:
IRB Infrastructure Developers Limited (the “Sponsor”) is, one of the largest infrastructure development and construction companies in India in terms of net worth in the roads and highways sector according to the NHAI's annual prequalification for public private partnerships in national highway projects report for 2016. Excluding the toll-road assets that will be transferred by IRB to them, as of December 31, 2016, IRB has 16 road projects, of which eight are “operational”, five are “under construction” and three are “under development”. They wish to acquire an initial portfolio comprising of the Project SPVs, all of which are currently either wholly or majority owned by IRB and its subsidiaries.
The Trust has been settled by the Sponsor pursuant to the Indenture of Trust in Mumbai, India, as an irrevocable trust in accordance with the Trusts Act. The Trust was settled with an initial settlement amount of Rs. 10,000 by the Sponsor. The Indenture of Trust is registered under the Registration Act. The Trust has been registered with SEBI as an infrastructure investment trust under the InvIT Regulations (Registration Number: IN/InvIT/15-16/0001). They intend to own, operate and maintain a portfolio of six toll-road assets in the Indian states of Maharashtra, Gujarat, Rajasthan, Karnataka and Tamil Nadu. These toll roads will be operated and maintained pursuant to concessions granted by the NHAI. They believe, upon the listing of the Units on the Stock Exchanges, they will be the first listed infrastructure investment trust focused on toll-road assets in India.
The object and purpose of the Trust, as described in the Indenture of Trust, is to carry on the activity of an infrastructure investment trust under the InvIT Regulations, to raise resources in accordance with the InvIT Regulations, and to make investments in accordance with its investment strategy. The Trust is required to make distributions to the Unit holders in accordance with the InvIT Regulations. Distributions are expected to be made by the Trust to the Unitholders, from time to time, in accordance with the Indenture of Trust and the InvIT Regulations. The Trustee will ensure that the Investment Manager declares distributions not less than once every six months in each Financial Year. However, Unitholders should note that there is no assurance or guarantee that distributions will be made in any amount or at all.
Overview of the Infrastructure Sector in India:
Development of the infrastructure sector has been a priority area for the government of India and has witnessed enhanced public investment. Many reforms have been initiated in the infrastructure sector, resulting in robust growth in most of the sectors. Major infrastructure sectors, namely power, road, railways, civil aviation, ports and telecommunication, have performed better during the financial year 2015 as compared to the financial year 2014. The civil aviation sector witnessed an improvement of 20.4% in domestic traffic and 7.8% in international passenger traffic during the period from April to November 2015 over the same period of the previous year. During the period from April to September 2015, while cargo traffic at all ports increased by 1.1%, major ports reported an increase of 4.1% and non-major ports a decline of 1.0% as compared to the corresponding period in the previous year. Yet, growth in infrastructure, based on an index of eight core infrastructure-supportive industries such as coal, crude oil, natural gas and refiner products, registered a cumulative growth of 1.9% during the period from April to December 2015 as compared to 5.7% during the corresponding period in the previous year.
In financial year 2017, the Government is focused on enhancing expenditure in priority areas such as the agriculture and rural sector, the social sector and the infrastructure sector. The Government sees higher investments in the infrastructure sector, particularly in the roads sector, as critical to growth. To further leverage the higher budgetary provision in these sectors, the Government has allowed an additional Rs. 313 billion to be raised through bond issuances. The funds will be raised through public sector enterprises and other government institutions like the National Bank for Agriculture and Rural Development and the NHAI. Except in the case of the NHAI, the Government will bear the repayment and interest servicing obligations.
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