What triggered overseas investor exuberance in InvITs

MUMBAI: Investing in Infrastructure Investment Trust or InvIT is fast catching on with yield hungry international investors too. Savvy foreign portfolio investors such as Deutsche Global Infrastructure Fund, Future Fund Board of Guardians (Australian sovereign wealth fund), Schroders Asia, UK-based National Westminster Bank, Discovery Global Fund, Jupiter South Asia have invested units in IndiGrid, an Anil Agarwal owned power transmission company.

GIC Singapore, DE Shaw, the world’s fourth largest hedge fund, Australian-based Platinum Fund were some of the long term players who invested in IRB InvIT which closed for subscription last week after an overwhelming response. IRB offered an yield of 12%.

“A combination of factors including investment returns, tax efficiency and exposure to infrastructure sector are enticing overseas investors,” said ?Arka Mookerjee, partner at J Sagar Associates, the lead counsel in the IRB InvIT, which is also working on future sale of such securities. “The buoyancy is likely to continue in the forthcoming issues as more FPIs are turning keen on the instrument.”

Dealers are expecting at least 100 basis points dip in the yield leading to capital appreciation for investors after IRB securities gets listed on stock exchanges on Thursday.

With Modi government’s big push to spur the country’s growth, infrastructure sector is expected to open up a plethora of investment opportunities, experts said. "We see big demand coming from overseas investors,” said Rajkamal Bajaj, director at Bajaj Consultants that is actively involved in InvIT advisory.

The product is nothing new to foreign investors who have been dealing with it in the past one decade at their home turf. The demand for anchor investors actually helps decide the price of the issue.”

“With Indian InVits they could at least earn 4-5% higher yield as compared to global rates. A rising currency is an additional boon for them,” he said.
Many long term sovereign or debt or pension funds see InVit instruments as a new route to earn higher rates.

IndiGrid Trust is raising Rs 2,250 crore via a fresh issue of units, in the price band of Rs 98 to Rs 100 per unit. Besides the anchor investor, the primary issue opened for subscription Wednesday raising about Rs 1,262 crore. IndiGrid, according a market source, would offer an yield of about 10.90%.

The first day began with a sale worth of about Rs 84.2 crore. It is expected to pace up as it happened in IRB's case as well.

Besides overseas funds, domestic fund houses and insurers including Birla, ICICI-Pru, DSP Blackrock, Kotak Mahindra Old Mutual Life Insurance, HDFC Life Insurance are among those who have invested.