Dilip Buildcon plans to float InvIT, may raise Rs 4,000 crore

Mumbai: Dilip Buildcon (DBL), a private infrastructure construction company, plans to float an infrastructure investment trust (InvIT) by early next fiscal year, said people aware of the development.

DBL is likely to raise about Rs4,000 crore through the proposed InvIT, where the equity value of the assets under the venture would come about Rs4,500-5,000 crore, said one of the people. The assets may fetch an enterprise value of Rs15,000 crore.

At present, DBL has 23 hybrid annuity model (HAM) projects (including 11 projects secured in fiscal 2021), along with two mine development and operator projects, which entail a total equity commitment of Rs1,390 crore over FY22-FY24. In HAM projects, 40% of the cost is paid by the government and 60% is borne by the developer

Of these, 8-10 projects will be completed this fiscal year, while all the projects will be operational incrementally over the next two financial years.

"DBL plans to bring most of the projects under the InvIT and discussions are ongoing with a few sovereign, global pension and private equity funds to sell a controlling interest," said a person aware of the plan.

A DBL spokesperson declined to comment.

In the first half of the ongoing fiscal 2022, DBL entered into a sale agreement with its wholly owned subsidiary, DBL Infra Assets Pvt Ltd, for the transfer of stakes in 10 HAM projects, of which six are in an advanced stage of completion. In 2019, DBL had sold five HAM projects to Cube Highways for Rs700 crore. The company had orders of around Rs 25,500 crore as on June 30, 2021.

DBL had raised Rs 510 crore through a sale of shares to institutional investors in April 2021 and an additional debt round in the first half of this fiscal year. These funds have been used for repayment of debt obligations to meet equity commitments and working capital requirements, said a recent India Ratings & Research report.

The existing order book is moderately concentrated, given 58% of the projects are from the roads, bridges and highways segment, 17% from the irrigation segment and 15% from mining, with the balance 10% spread across the tunnelling, elevated metro and airport segments. Also, the top 10 projects account for 49% of the total order book.

DBL is geographically diversified by executing orders in 15 states, of which the top six — Karnataka, Gujarat, Jharkhand, Odisha, Uttar Pradesh and Madhya Pradesh —contribute more than 68% to its projects.

About 70% of the orders are from central government authorities such as the National Highways Authority of India, Ministry of Road Transport and Highways, Northern Coalfields and Mahanadi Coalfields, which aid payment security. Furthermore, projects such as the Bundelkhand Expressway and the Nagpur-Mumbai Expressway have been fast-tracked by the state governments, since they are of strategic importance, added the India Ratings report.

The government’s National Infrastructure Pipeline estimates funding requirements of over $1.4 trillion by 2025.

Real estate investment trusts and InvITs had raised capital of more than $4 billion in India and the combined market cap was over $7 billion for the three locally listed REITs and over $10 billion for seven InvITs, consulting firm EY said in September.

“InvITS and REITs will play a significant role in funding the government’s infrastructure plans as well assist in meeting its asset monetisation plans and at the same time enable deleveraging existing balance sheets which would in turn help meet the capitalisation requirements of banks,” said Gaurav Karnik, tax partner at EY.

Last month, the National Highways Authority of India had raised Rs 5,000 crore through an InvIT.

Canadian Pension Plan Investment Board and Ontario Teachers' Pension Plan Board were the anchor investors to the InvIT along with more than a dozen domestic institutional investors.

Two publicly-listed InvITs — India Grid Trust and IRB InvIT — have given returns of 56% and 83%, respectively, in the past year. PowerGrid InvIT, which was listed in May this year, has given over 20% returns so far. There are six other InvITs listed privately.

At least half a dozen InvITs, including MEP, Roadstar, Shrem, Virescent Renewable Energy and the Indian Highway Concessions Trust are planning to list on Indian bourses in the coming months.