Govt should take steps to encourage retail investments in InvITs: IndiGrid chief Pratik Agarwal

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Ever since InvITs were allowed, you have pushed for these trusts. What makes you so bullish about them?

On one hand, you need half a trillion dollars of infrastructure to be created in the country. But there is a shortage of money. And both PSU banks and promoters have exhausted their means. Also, global money is not coming in for key infrastructure projects in India.

On the other hand, you have among the world’s largest savings cultures  that is the Indian economy.

So where is the bridge? Why are we not able to use the public money in low risk operating assets in India?

The answer to that problem is infrastructure investment trusts. If the Indian public don’t want to take the risk of equity investments, where else do they go; 6 percent post-tax is the best return that they get. But through InvITs, they have an opportunity to get 10 percent post tax returns in AAA-rated assets.

How is it done internationally?

Globally, it’s a well-known investment option. In Singapore, it’s called business trusts, and REITS in Hong Kong, Japan and the US.

It sits well between the two classes of assets - debt and equity. It’s slightly riskier than debt, but has much better return.

But why haven’t InvITs taken off, at least in the way it was expected?

There are a few challenges. The current regulations have a minimum trading size of Rs 5 lakh. That is counter intuitive, because InvITs as a design is a safe product. So here we are with a safe product but we are saying, sorry, we can’t have retail investors invest in it. This, I think is a disservice to the product and to the investors in the country.

It’s time for the government take some decisive steps. We may not have to immediately bring down the limit, but can gradually take it down to Rs 2 lakh or Rs 1 lakh.

Why is this important?

Without this, the product will have challenges of liquidity in the market. And without liquidity, no investor will feel fully comfortable, because when he wants to exit, how will he without liquidity? So that is one challenge.

Internationally, are there any limits?

There are no limits. In the US, you can invest as low as USD 10.

In India, we should also remember that unlike in western countries, there is a restriction on how much the pension funds and insurance companies can invest in InvITs.

Once can understand the logic behind reducing the limit for retail investors. But not much is known about the transmission sector in India. How is it doing?

Most Indian consumers don’t have high quality, 24/7 electricity supply. In fact, apart from south Mumbai no place in India has it.

Our GDP is growing at about 7 percent, and the growth in demand for electricity will be similar. So the demand is robust.

In the generation side, there are conventional and non-conventional sources. But the non-conventional sources  are not located in the same place as coal and gas-based facilities. So one needs the transmission system to build this ecosystem, and second, to cater to the consumption growth.  This is critical. There is no point of having factories without highways. And transmission is the highway of the electricity sector.

Given the circumstances in the industry, what does it mean to have a sponsor in the form of Sterlite Power? (Pratik is the Group CEO of Sterlite Power)

We have 30 percent market share in all new projects awarded since the sector was opened up for private players. This is a sector with high entry barrier. You need high capital and the execution is complex. But in just five years, Sterlite Power has 5 percent share of the national grid.

With improvement in the ease of doing business, our project completion has improved. By the end of 2015-16, we were ahead of time in most of our project implementation. By 2017, we finished one project 14 months ahead of time.

In February, you completed the acquisition of three Sterlite Power assets, and you also acquired stakes in third-party assets. What does your portfolio look like now?

With the completion of these acquisitions, IndiGrid’s total portfolio increased to 13 transmission lines and 2 sub-stations fully operational across eight states in India. The asset under management (AUM) increased to Rs 5,300 crore.

You want to take the AUM to Rs 30,000 crore by 2022. What is your strategy?

It will include a mix of assets from our sponsor (Sterlite Power) and from third parties.

But how is the quality of assets in the market?

In general, in India and around the world, power transmission is considered as a stable and secure asset class. Fundamentally, factors that stress the power sector don’t impact the transmission segment. The  sector is healthy. I haven’t sound a single stressed asset or NPA.