India Firms to Raise $48 Billion Via Infra Assets, Icra Says

An unfinished property development in Wish Town by Jaypee Developers in Noida, Uttar Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)

India Firms to Raise $48 Billion Via Infra Assets, Icra Says

Indian companies will probably raise more than 3.5 trillion rupees ($48 billion) through infrastructure and real estate investment trusts in the coming year, compared with $29 billion raised to date, Icra estimates.

The lure of the hybrid instruments, which were in the making for a decade, has been boosted by recent rule changes, according to the local unit of Moody’s Investors Service. Icra predicts about 1 trillion rupees of commercial real estate assets and 2.5 trillion rupees of infrastructure assets including highways, power transmission, gas pipelines, renewable and digital fiber assets can be monetized.

Key rule changes:
  • InvITs and REITs now recognised as borrowers under the SARFAESI Act, which increases protection for lenders
  • Insurance regulator recently allowed insurers to invest in debt instruments of InvITs and REITs rated AA and above
  • Clarifications on the tax-free nature of certain dividends, will boost demand, Icra says

“The supporting regulatory framework for various stakeholders attracted both debt and equity investors towards these trusts,” Shubham Jain, senior vice president for corporate ratings at Icra, said in a report published Thursday. “Lenders are also increasingly becoming comfortable lending to such structures.”

Finance Minister Nirmala Sitharaman had proposed some of the measures in the budget presented earlier this year, as her government looks to bridge a budget shortfall that’s widening due to the coronavirus pandemic. In May, Power Grid Corporation of India Ltd. monetized five transmission assets via the public issue of its infrastructure trust that raised 77.35 billion rupees. Other state entities including National Highway Authority of India and GAIL are also looking at unlocking their assets via these platforms.

Till date, assets worth 2.1 trillion rupees have been floated through these platforms -- 64% through InvITs and 36% through REITs.

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