InvITs to deleverage infra sector by around ` 13,000 Cr in FY18: Ind-Ra

The first four infrastructure investment trusts (InvITs) which are likely to hit the primary markets in 2017-18 could reduce the overall debt of developers by around ` 13,000 crore, said India Ratings and Research (Ind-Ra) in a note.

The companies which are likely to deleverage by using the InvIT route in FY18 are Sterlite Power Grid Ventures, Reliance Infrastructure, IL&FS Transportation Networks and IRB Infrastructure Developers.

“Deleveraging will provide a fillip to the coverage metrics of SPVs housed under the InvIT structures and refinancing (through bond/bank loans) and will further improve the credit profile of InvITs,” the research agency said.

Ind-Ra had highlighted in the report ‘Softened Interest Rates Likely to Brighten Solar Sector’ that bank financing to the infrastructure sector has been declining, which makes it imperative for investors and developers to scout for alternate sources of funding such as masala bonds, InvITs among others. The current low interest rates regime is favourable for the bond market as well as InvITs.

InvITs would allow infrastructure developers to not only deleverage their balance sheets but also refinance remaining debt at lower interest rates. InvIT structures have robust debt service coverage ratios, and refinancing will further improve the credit profile of InvITs.

9