Capital Infra Trust InvIT (Neutral)

Highlights

Capital Infra Trust (erstwhile National Infrastructure Trust) is an infrastructure investment trust sponsored by Gawar Construction Limited (GCL or Sponsor), established on September 25, 2023 with the objective to carry on the activities of, and to make investments as, aninfrastructure investment trust, as permissible under the SEBI InvIT Regulations.

Their 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).

Since 2008, Sponsor has undertaken more than 100 road construction projects. As of now Sponsor has a portfolio of 26 road projects on a hybrid annuity mode (HAM) with NHAI, of which 11 are completed projects, including the five acquired assets which were erstwhile owned by Sadbhav Infrastructure Project Limited, and 15 under-construction projects.

They primarily intend to acquire, manage and invest in the nine completed and revenue generating Initial Portfolio Assets, aggregating to approximately 682.425 kms, 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.

Out of the total proceeds of Rs. 15,780 mn, ~Rs. 10,770 mn would go towards Providing loans to the Project SPVs for repayment/pre-payment of external borrowings, in part or in full, from the financial lenders and Providing loans to the Project SPVs for repayment of unsecured loans availed by the Project SPVs from the Sponsor. Rs. 5010 mn would go towards existing selling shareholders.

Key Highlights

• The Government launched the National Infrastructure Pipeline (NIP) with a forward-looking approach and with a projected infrastructure investment of around Rs. 111 trillion during FY20 – 2025. The NIP currently has 8,964 projects with a total investment of more than Rs. 108 trillion under different stages of implementation. Out of the total capital outlay under the NIP, 55 pct are 140 under implementation, 16 pct are at a conceptual stage and 29 pct are under development stage.
• All of the Initial Portfolio Assets are HAM projects awarded by NHAI. The Sponsor will be monetizing future annuity payments and O&M income receivable from the NHAI by transferring the Initial Portfolio Assets to the Trust. Their revenue stream primarily comprises interest income on financial assets receivable from NHAI, as well as revenue from operations, maintenance of roads, construction services, and operating revenues received from NHAI.
• Their principal business strategies are (i) Goal to maintain optimum capital structure to maximise distributions to Unitholders (ii) Active asset management (iii) Expand the portfolio of road asset.
• They will seek to optimise their debt and equity mix in such a manner that the aggregate consolidated borrowings and deferred payments of the Trust, net of cash and cash equivalents does not exceed 70 pct of the value of the Initial Portfolio Assets.
• As part of their operations and maintenance systems and processes, the Investment Manager intends to work with the Project Manager to employ both preventive and corrective measures in order to optimise the long-term performance of each project, to minimize downtime or defects with respect to the Initial Portfolio Assets.

Key Risk

• Their revenues from their Initial Portfolio Assets are dependent on receiving consistent annuity income and interest on annuity income from NHAI.
• They may be subject to increase in costs, including O&M costs, which they cannot recover by increasing annuity income under the relevant Concession Agreement.
• The Project SPVs have entered into Concession Agreements which contain certain onerous provisions and any failure to comply with such Concession Agreements could result in adverse consequences including penalties and the substitution of the concessionaire.

Financial Performance

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