Can Infra Firms Regain The Trust?- Part 1

Leveraged infra companies are banking on a new instrument to turn around their fortunes

Illustration: Kishore Das

It was in the year 1990 that 19-year-old Virendra Mhaiskar joined his family’s construction business. Today, he is sitting pretty with a personal net worth of over Rs.5,000 crore, what with IRB Infrastructure Developers emerging as the country’s most dominant highway construction company and clocking revenues of over Rs.5,000 crore from 18 states. While there have been several firsts associated with Mhaiskar’s company, IRB has added yet another feather to its cap by emerging as India’s first infrastructure company to float an infrastructure investment trust (InvIT).

Simply put, InvIT is a vehicle through which leveraged infrastructure companies, listed and unlisted, can hive off some of their assets to the trust, in which the sponsor or the company promoting the trust will hold 25%. The regulations allow infra companies to float two types of InvITs: one which will house completed and revenue-generating infrastructure projects, and the other which has the flexibility to invest in both completed and under-construction projects. While the former can make a public offer of its units, the latter can only opt for a private placement of its units. The units will be listed on the stock exchanges, thus enabling one to trade or invest in them at market determined prices. In a typical InvIT structure, investors will get units equivalent to their equity contribution in these projects held under the trust.


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