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Last Updated : Jul 24, 2019 08:35 PM IST | Source: PTI

'New Sebi norms to help InvITs AUM to jump 5-fold to Rs 2 trillion'

According to the Crisil, the amendments in InvIT regulations by the Sebi has accelerated adoption of the financial instrument as an asset class.

Representative image
Representative image

Issuances of infrastructure investment trusts (InvITs) are expected to grow fivefold to more than Rs 2 trillion in next two years, following the relaxation of some norms by the regulator Sebi, says a report.

According to the Crisil, the amendments in InvIT regulations by the Sebi has accelerated adoption of the financial instrument as an asset class.

It can be noted that recently Sebi relaxed the leverage norms for AAA-rated InvITs to 70 percent from 49 percent earlier, provided a track record of six continuous bonus/dividend distributions to unitholders. The new leverage cap is not applicable to privately placed and unlisted InvITs.

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"Though the amendment would increase adoption of the instrument, the impact can be seen in a slew of new InvITs being announced with the participation of marquee investors such as global private equity, and pension and sovereign wealth funds. As a result cumulative assets under InvITs are expected to increase to over Rs 2 trillion over the next two years," Crisil said in a report Wednesday.

While the regulations were introduced in 2014, the first InvIT was floated only in May 2017. Till June 30 there are just two publicly listed and two private listed InvITs having total AUM of Rs 40,000 crore.

InvITs have seen in the power transmission, roads and gas pipeline sectors and the five to seven new trusts having announced plans to invest even in relatively newer sectors such as telecom infrastructure and renewable energy.

"Long-term offtake contracts and strong counterparties provide revenue visibility, making these five sectors attractive to investors. Other infrastructure assets having similar characteristics, such as ports and airports, may also be suitable for InvITs," it said.

For sponsors, InvITs provide a convenient route to monetise assets, unlock equity gains and deleverage balance sheets. This is critical to keep them invested in infra development, which, as per the budget 2020, will require fresh funding of Rs 100 trillion over the next five years, it said.

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First Published on Jul 24, 2019 08:35 pm
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