‘Ours Will Be A Public InvIT’: Capital Infra Trust's Satnaliwala
Capital Infra Trust is raising Rs 1200 crore from the fresh issue of Units in what will be India’s fifth INVITs
Capital Infra Trust, (erstwhile National Infrastructure Trust) is raising Rs 1200 crore from the fresh issue of Units in what will be India’s fifth INVITs (Infrastructure Investment Trusts). Manish Satnaliwala, CEO, Capital Infra Trust explains the nitty-gritties’ in an interaction with BW Businessworld's Ashish Sinha. Edited Excerpts:
Could you tell us a little bit about the journey of Gawar Construction and why you chose to come out with an InvIT offering? Do you focus on only National Highways or State and Other Road Projects too?
Gawar Construction Limited, Founder & Promoter is Rakesh Kumar, who is the first generation entrepreneur. Kumar hails from Hisar in North India and started the business in the early 20’s by executing small PWD works. With focus on execution and timely delivery the company has achieved a top line of Rs 7000 crore approximately as at 31 March 2024. Gawar wants to focus primarily on EPC business and will create on building assets which can be monetised through InvIT. The focus of InvIT will be only on NHAI Road Assets.
How have InvITs been performing in the country and how does it stack up against investment in Equity via MFs or other vehicles like PPF and FDs? Is it a liquid, taxable and tradable instrument?
A very interesting question. To understand this, we need to understand InvIT in details. InvIT are more akin like an AIF structure but governed by separate SEBI InvIT Regulations 2014 as amended from time to time. The first InvIT was launched in 2017 which was a public one and since then there are total 21 InvITs operating with 10 of them in Road Sector itself. Our InvIT will make take the total to 22 and Road InvIT to 11. InvIT offer two different categories - Private and Public. We have only 4 Public InvITs till date out of 21 and we will be the 5th one. InvIT has come long way in last 7 years and has pumped in more than 10 Billion Dollars in the Infrastructure Sector. Public InvIt operate in similar way like Public IPO. They are tradable and is a liquid instrument. Private InvIt on the other hand comprises mainly of institutional investors. InvITs as an asset class is worth investing. They are a great hedge between a pure equity and pure debt product. In addition, InvIT offer taxation benefit on account of dividend distribution if any subject to if the SPV vehicle has opted for old or new tax regime. Today there is no asset class that fits between pure equity and pure debt both from liquidity and traceability perspective. InvIT as a hybrid instrument fits in between the asset class which provides good return, better liquidity and tradeability.
Tell us about your InvIT, the projects that will be a part of it, the ROFO with Gawar Construction, future prospects and expected yield that can be accrued by the investor? Additionally, how much is the Investment manager taking to manage the InvIT?
Our InvIT (National Infarstructure Trust) now name changed to Capital infra Trust on account of advisory from SEBI will be a Public InvIT. There will be 9 HAM assets initially with another 17 HAM assets as part of ROFO arrangement with Sponsor. As per InvIT regulation a Public InvIT is mandated to make at least two distributions in a financial year. We have adopted similar policy with minimum two distribution each year. The investment manager fees is in accordance with market and will be changing 1.10% of the revenues. In terms of yield InvIT our InvIT is backed by annuity cash flow which makes an interesting proposition for Investors and will generate accretive value to the unit holders.
Why the focus on Annuity instead of Toll Projects? Project focus has majorly been in Northern India, any particular reason? How do you manage the increasing O&M Costs?
There is no specific focus on annuity vs toll but since 2018, there were more HAM projects that was tendered by NHAI and accordingly Sponsor bidder for that. The InvIT cost structure is fixed for the entire life of 9 assets by Sponsor. The Investors are hedged against any risk of increasing cost.
Claims from NHAI due to delay in project execution due to various uncontrollable reasons… how much time does it take for such recoveries and how much is currently pending for CIT InvIT?
Sponsor doesn’t have any ongoing litigation with NHAI except change in law claims arising due to levy of GST on Annuity. All the 9 projects currently being transferred to InvIT doesn’t have any litigation with NHAI and vice versa.
