Capital Infra Invit
about 1 day ago
IPO Size: Rs. 1,578 cr
- Fresh Issue of Rs. 1,077 cr, for repaying bank and related party loans (gross debt of Rs. 3,355 cr)
- Offer for Sale (OFS) of Rs. 501 cr by the sponsor
Price band: Rs. 99-100 per unit (not per share)
- Allocation: Minimum 25% for HNIs, maximum 75% for institutions, no retail quota
IPO Date: Tue 7th Jan to Thu 9th Jan 2025, Listing Fri 17th Jan 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Infrastructure Investment Trust (InvIT)
Capital Infra Trust, sponsored by Gurgaon-headquartered unlisted road constructing company Gawar Construction Limited, has a portfolio of 9 hybrid annuity road assets. It also holds the right of first refusal (RoFR) on sponsor’s 17 assets, which may be acquired as they start generating revenue.
Analysis
- Sponsor will be pocketing Rs. 501 cr OFS portion, as also, Rs. 487 cr from repayment of related-party loans. Is this InvIT, established in Sep 2023, aimed at only raising capital for sponsor, which is reeling under huge debt of Rs. 4,628 cr, as of 31.3.24, with debt-to-EBITDA of 2.6x and a debt-to-equity ratio of 0.9:1? Sponsor’s EBITDA declined 7% YoY from Rs. 1,897 cr in FY23 to Rs. 1,770 cr in FY24, despite rise in revenue. Thus, sponsor’s financial position does not instill much confidence.
- Post IPO, Capital Infra’s debt equity will be high, at 0.8:1. If the 17 RoFR assets are acquired, debt may increase.
- Yield on the InvIT is not quantified, only guided to be in double digit. Moreover, break-up of this distribution is not elaborated, so computing post-tax return is difficult, which will most likely be in single digit.
- Premium to NAV? The 9 assets have a net asset value (NAV) of Rs. 1,249 (at fair value), a premium of 34% to the pre-money value of Rs. 1,677 cr (dervied from expected mcap of Rs. 2,754 cr at the upper end of price band, less fresh issue component of Rs. 1,077 cr). Thus, the issue is being made at a premium, while peer Indus Infra (Bharat InvIT) is ruling close to NAV and IRB InvIT at 35% discount to NAV.
- Cash from operations, projected to reduce from Rs. 680 cr in FY26E to Rs. 658 cr for FY27E, which may reduce distribution to unit holders, impacting the yield.
- Anchor book is allotted at the lower end of the price band.
- Interest rates are expected to decline, but return from InvIT is not guaranteed and lie between debt and equity. Past performance of InvITs have been a mixed bag, with Indus rewarding and IRB destroying wealth.
