IRB InvIT Fund IPO Review

IRB InvIT Allotment Status is Out :

Check Allotment Here


Allotment ratio for NII has been around 1 out of 4.74 applications.

IRB InvIT Fund  IPO : Subscription etc.  

IRB InvIT Fund IPO get good response despite a hefty minimum, 10 Lac appl. size.

Subscription: IRB InvIT Fund  IPO  ( x times)
  QIB NII Total
Day 3(approx) 10.81x 5.89x 8.57x
Day 2 . 0.49x 0.77x 0.62x
Day 1 0.04x 0.1x 0.7x
List of Anchor Investors

IRB Infra InvIT: Raises ₹2,095 cr from 28 anchor investors.  The institutional investors who participated in the anchor book allocation included foreign investors such as government of Singapore which took the largest pie of 20%, Platinum International Fund,Schroder Asian Asset Income Fund, Deutsche Global Infrastructure Fund and Jupiter South Asia Investment Co. as well as domestic investors such as BNP Paribas Arbitrage Fund, Birla Sun Life Mutual Fund, HDFC Standard Life Insurance Co. Ltd and Birla Sun Life Insurance Co. Ltd. etc.

Click here for Anchor Investors of IRB InvIT Fund

Issue Snapshot:
  • Issue Open: May 03 – May 05 2017
  • Price Band: Rs. 100-102
  • Issue Size: 45.63304 cr units (including Fresh Issue of 42.15686 cr units + Offer for sale 3.476177 cr units) + option to retain over subscription upto 25% of issue size. In terms of size in Rs. the issue comprises fresh issue of Rs 4300 crore and offer for sale of Rs 354.56 crore, thus making the total size of the issue of around Rs. 4655 crore, with an option to retain 25% of the offer size oversubscription.
  • QIB upto 75% , Non Institutional at least 25%
  • Face Value: Rs 100 Bid size: – 10,000 units and in multiples of 5,000 units thereof Trading Lot : Upon listing, such number of Units that exceed Rs. 0.50 million and as specified by the Stock Exchanges
  • Issue Listing: BSE & NSE
  • Book Running Lead Manager: IDFC Bank Ltd., Credit Suisse Securities (India) Pvt Ltd., ICICI Securities, IIFL Holdings Ltd
About InvIT

SEBI introduced Infrastructure Investment Trust (InvIT) Regulations for infrastructure
projects keeping in mind the huge infrastructure needs of our country. Infrastructure Investment Trusts(InvIT) are akin to mutual funds which are regulated by SEBI to enable investments into the infra sector by pooling together money from several individual investors for direct investment in infrastructure . In contrast to earlier methods like Infrastructure Bonds, these instruments provide a means for direct investment by individual investors in infrastructure mainly in revenue generating or completed projects. In the process they aim to return a portion of the income, after meeting expenses to unit holders of InvITs. This framework enables infrastructure developers to monetize completed assets by pooling multiple projects under a single entity i.e. Trust structure. For more Details Infrastructure Investment Trusts (invIT): A Primer

About IRB InvIT Fund
  • IRB InvIT Trust is the Registered Infrastructure Investment Trust under the InvIT Regulations. I shall be be India’s first publicly listed infrastructure investment trust.
  • The Trust’s Sponsor is IRB Infrastructure Developers Limited, one of the large infrastructure development and construction companies in India. Excusing the 6 toll road asset transferred by the sponsor IRB infra to the IRB InvIT Fund Trust, the sponsor IRB Infra had a total of 16 Road projects, out of which 8 are operational and others are in construction or development phase.
  • The Trust intends to own, operate and maintain a portfolio of six NHAI  toll-road assets. aggregating to  3,645 lane km of highways across five states in western and southern India. These Toll Road assets are operational and generate income through inflation-linked tariff hikes and have weighted average balance concession period of ~16 years.
 IRB InvIT Fund Structure
  • Investors are expected to be offered returns in the form of dividend, interest and buyback for holding units in the InvIT.
Objectives of IRB InvIT Fund  IPO:

IPO proceeds will be utilized towards repayment of loan availed by the project SPV from lenders, prepayment of subordinate debt provided to the project SPV by sponsor and prepayment of unsecured loans and advances availed by the project SPV from sponsor and certain members of the sponsor group i.e. IRB Infra.


The IRB InvIT  will own 100% of the six project SPVs. Each of these project SPVs own, operate and maintain a toll-road project and  toll revenue trend of six SPVs over the past three years is given below.

IRB InvIT Fund : Gross Toll Revenue and Revenue Growth   (Rs. Crore)
Sno. Project SPV 9MFY17 2016 2015 2014 CAGR Fy14-16
1 Surat–Dahisar NH-8 Project 420.75 613.48 554.93 487.94 12.13%
2 Tumkur–Chitradurga NH-4 Project 142.57 201.91 184.15 162.99 11.30%
3 Bharuch–Surat NH-8 Project 133.57 193.55 185.73 166.57 7.79%
4 Jaipur–Deoli NH-12 Project 81.2 120.62 101.45 34.24 87.69%
5 Omalur–Salem–Namakkal NH-7 Project 54.43 74.94 75.61 61.27 10.59%
6 Talegaon–Amravati NH-6 Project 34.61 47.22 46.13 26.42 33.69%

The projections for IRB InvIT  for the next three years as given in RHP filed with SEBI are as follows:

 Projected Financials of InvIT
Tax Implications
  • Major income is likely to be in form of dividends and Dividend Income distributed by the Trust is exempt in the hands of the unit holders.
  • Units held for more than 3 years are exempt as Long Term Gains
  • Units sold before three years shall attract Short Term Gains @15% proved STT has been paid.
  • Interest Income paid, if any shall become taxable in the hands of the unit holders of the Trust.
Plus Points
  • The road sector is attractive sector with strong underlying fundamentals
  • The sponsor IRB Infra has good experience and track record in this field.
  • The Project Manager is a wholly-owned subsidiary of the Sponsor, having executed a majority of all EPC work being undertaken by the Sponsor. 
  • As per projections in DHRP & Management claims ,the trust which has acquired six operational projects is likely to generate revenues at a CAGR of above 11%. Based on the future projections of cash flows by the trust, it may generate IRR of around 12.5% every year.
  • InvITs have to ensure that they distribute 90% of their net cash flows to the investors on a half yearly basis.
  • Diversified road project portfolio and revenue base provides an edge and acts as a safeguard against potential impact of any region specific development.
  •  At the 102 IPO price, the enterprise value (EV) of the assets works out to Rs. 5,921 crore. In earlier  draft red herring prospectus, IRB Infrastructure had sought an EV of Rs7,900 crore for the InvIT, which it is now listing at about Rs5,900 crore.
  • The equity valuation (including the sub-ordinate debt) at which the assets are to be transferred from the sponsor IRB Infra  to Invit is at around 1 times the  P/BV. Traffic growth of around 5% is projected to calculate future cash flows of Invit, which seems reasonable.
  • Capital gains are also possible if the IRB InvIT Fund is able to raise debt at lower interest rates  in future and is s able to acquire projects with high IRR (internal rate of return)
  • While for the period 9M FY17 , the assets under InvIT have reported an aggregate net loss of Rs 13 crore. they are expected to turn profitable as interest costs  decline after debt repayment.
  • IRB InvIT Fund  Trust has rating of CARE (AAA) Stable by CARE and IND AAA Outlook Stable by India Ratings.
Minus Points
  • The present issue is the first initial public offer of units of an infrastructure investment trust registered under the InvIT Regulations in India. There are no listed infrastructure investment trusts in India. Hence, no comparison is available in terms of issue price and valuations.
  • The debt financing proposed to be provided by the Trust to each of the Project SPVs comprises certain unsecured, interest-free and interest-bearing loans (the “Unsecured Trust Financing”), as well as loans that will be secured by a charge on (i) the cash flows deposited in the escrow account and (ii) the escrow account of such Project SPV.
  • Based on the figures given in the prospectus, IRB Invit fund expects to yield tax free dividend of around 9-10% annually. However, returns are not fixed and will vary deepening on the actual operations and cash flows.
  • The returns could be affected due to  a decline in traffic volumes on account of other alternative roads available. Further  toll pricing is partially linked to Wholesale Price Index (WPI) and a lower inflation would mean lower increase in toll charges while  maintenance cost may remain at same level.
  • Capital losses as well as lower yields will accrue if any of the fund’s projects face any problem and suffers losses or lower cash flows than expected
  • Due to higher minimum trade-able lot, Liquidity may be low.High application amount also poses a greater risk to retail investor.
Overall Assessment
  • Worldwide InvITs are positioned as high-dividend paying investments suitable for investors who are looking for long-term, stable cash flows with moderate capital appreciation.
  • InviTs are hybrid debt-equity instruments i.e. they are are neither pure equity nor pure debt and have  features of both.
  • Anchor issue of IRB InvIT Fund IPO witnessed good response.
  • Though there are risks involved, InvIT has potential to give good returns. 
  • There are uncertainties as it is an untested product  and SEBI has purposely kept investments limits high and as product may have complexities and risks not suited to retail investors.
  • Iam just making a single application in this issue.

Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.

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