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CAPITAL INFRA TRUST INVIT IPO

IPO Details

-
-
150 Shares
₹ 15,000
₹ 99 – 100
₹ Up to 1578 Cr

Issue timeline

  • -
  • 14-Jan-2025
  • 16-Jan-2025
  • 16-Jan-2025
  • 17-Jan-2025

Subscription Status

Shareholder -
Qualified Institutional Buyers -
Non-Institutional Investor -
Retail Individual Investor -
Employee -
Total -

About Company

Capital Infra Trust InvIT IPO Everything You Need to Know

Capital Infra Trust (CIT) is an infrastructure investment trust sponsored by Gawar Construction Limited and was established in September 2023. The issue opens for subscription on 7 January and closes on 9 January. Let us look at the various aspects of CIT's business to help you decide whether to subscribe or invest in the IPO.

Below are the key details related to the Capital Infra Trust IPO:

  • Issue Size: Rs 1578 crore
  • Price Band: Rs 99 - Rs 100
  • Lot Size: 150 Shares
  • Issue Details: Fresh Issue of Rs 1077 crore + Offer for Sale
  • Minimum Investment: Rs 15,000

 

Capital Infra Trust: The Business

Capital Infra Trust is an infrastructure investment trust sponsored by Gawar Construction Limited (GCL or Sponsor). The trust was established on September 25, 2023, to carry on the activities of, and to make investments as, an infrastructure investment trust, as permissible under the SEBI InvIT Regulations. They got settled by way of the Trust Deed by GCL, read along with the Amendment to the Trust Deed, and registered as an infrastructure investment trust with SEBI on March 7, 2024, by the SEBI InvIT Regulations.

The sponsor is an infrastructure development and construction company in India, with over 15 years of experience, primarily engaged in the construction of road and highway projects across 19 states in India for various government/ semi-government bodies and statutory authorities, including NHAI, Ministry of Road Transport & Highways (MoRTH), Mumbai Metropolitan Regional Development Authority (MMRDA) and Central Public Works Department (CPWD).

They primarily intend to acquire, manage, and invest in the nine completed and revenue-generating Initial Portfolio Assets, aggregating to approximately 682.425 km, operated and maintained pursuant to concessions granted by the NHAI and are owned and operated by the Project SPVs. These roads are located in the states of Haryana, Rajasthan, Bihar, Uttarakhand, Himachal Pradesh, Madhya Pradesh and Karnataka. Their Initial Portfolio of Assets has a weighted average residual concession life of 11.7 years as of September 30, 2024.

Hedge against adverse interest rate movements

The NHAI hybrid annuity projects provide a natural hedge against the risk of adverse interest rate movement. In addition to the annuity payments due under the respective Concession Agreements during the operations period, NHAI is required to pay interest on the reduced balance of the completion cost (equivalent to 60% of the Bid Project Cost) throughout the operation period at the rate of 3% above the Reserve Bank of India Bank Rate.

Accordingly, any increase in the interest payable on loans with floating interest rates by the Trust, due to an increase in interest rates, gets offset by the increased revenues as a result of an increase in interest on reducing the balance of completion cost. This structure of the Concession Agreements effectively mitigates the interest rate risk to the Project SPVs and provides greater financial predictability and stability to the Trust investors.

Investment Strategy

Their principal business strategies are as below:

  • CIT intends to focus on achieving an optimal capital structure for its projects and will continue to draw upon the experience, relationship, and expertise of its sponsor in sourcing funds from multiple sources.
  • They intend to continue to manage their assets through the services of the Project Manager and the Investment Manager.
  • The Investment Manager intends to expand their initial portfolio by identifying and acquiring additional road projects that meet their investment objective by the provisions of the Trust Deed.

 

Objects of the Issue

The Offer Proceeds will be utilized towards the following objects

  • Providing loans to the Project SPVs for repayment/pre-payment of external borrowings, in part or in full from the financial lenders (including any accrued interest and prepayment penalty); and
  • Providing loans to the Project SPVs for repayment of unsecured loans availed by the Project SPVs from the Sponsor.

 

Capital Infra Trust: Industry Overview

The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development.

In other words, the infrastructure sector acts as a catalyst for India’s economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects. FDI in construction development (townships, housing, built-up infrastructure, and construction development projects) and construction (infrastructure) activity sectors stood at $26.61 billion and $ 33.91 billion, respectively, between FY01 to FY24.

Approximately 5,248 km of National Highways (NH) were constructed in 2023-2024 (up to November 2023). The length of the National Highways has increased by more than 60% from 91,287 km in 2014 to around 146,145 km in 2023. As of November 2023, the length of the National Highways is ~1,46,145 Km. The pace of construction of NH roads increased from 12.1 km per day in FY15 to 36.5 km per day in FY21 and was around 28.6 km per day in FY22.

Capital Infra Trust: Risks

Below are some risks associated with their business:

  • The Trust is newly settled and does not have an established operating history, which will make it difficult to accurately assess its future growth prospects.
  • Consummation of the Formation Transactions under which they will acquire the Project SPVs are subject to certain conditions.
  • If any of their Initial Portfolio Assets are terminated prematurely, they may not receive payments due to the company which may result in a material adverse effect on their financial condition.
  • Their revenues from their Initial Portfolio Assets are dependent on receiving consistent annuity income and interest on annuity income from NHAI.
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Capital Infra Trust InvIT IPO

₹ 15,000
150 Shares

Subscription Status

Shareholder -
Qualified Institutional Buyers -
Non-Institutional Investor -
Retail Individual Investor -
Employee -
Total -

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*The financials mentioned above are sourced from DRHP/ RHP documents.

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