Infrastructure investment trusts (InvITs) have emerged as a crucial source of financing in the roads and highways sector. Foreign investors have found these products lucrative for investments while developers are using these structures for freeing up capital. In an interview with Indian Infrastructure, Pawan Kant, Chief Executive Officer, Interise Investment Managers Limited (Investment Manager for Interise Trust) shares his experience, challenges faced and future strategies…
What is the current project portfolio under the InvIT? What has been the experience so far?
Interise Trust (formerly IndInfravit Trust) is a one of the largest InvITs in the roads sector and among India’s first InvITs to be listed on private placement basis on the NSE and BSE in May 2018. Currently, we have a diversified project portfolio of 17 build-operate-transfer (BOT)/annuity road assets across eight states spanning a network of approximately 7,300 lane km. Interise Trust has emerged as India’s first self-sponsored InvIT and is backed by global investors, namely CPP Investments, OMERS Infrastructure and Allianz Capital Partners, who are significant unit holders in the trust.
What has been the financial performance of the trust during the past year?
The Interise Trust currently has an enterprise value (EV) of Rs 200 billion. The key financial highlights of 2022-23 are as follows:
- Revenue from operations – INR 19,696.33 million (increased by 18 per cent over the previous year)
- EBITDA – INR 13,323.76 million (increased by 24 per cent over the previous year)
The InvIT has made the highest distribution to unitholders in FY2023, which is the highest ever done by the trust in the past five years. This is despite the volatile financial markets and increase in credit spreads.
The year has seen achieving strategic imperatives, asset management practices and growth for the portfolio. The trust has completed the refinancing of its short-term fixed cost borrowing with a long tenor variable loan from new set of financial institutions. This exercise not only enhances our presence in the financial markets but also places us in a position to benefit from any compression in interest rates in the near future. The trust acquired a portfolio of roads at an EV of $1 billion in the first quarter of FY2024. This addition would almost double the EV of the portfolio and increase the operational footprint to new growth corridors of India.
What are some of the initiatives towards improving O&M of assets?
We are institutionalising infrastructure management through building systems and processes of global asset management practices.
A key initiative has been the creation of in-house project manager for efficient asset management of various special purpose vehicles (SPVs) of the trust. This swiftly created an organisation structure of dedicated and experienced technocrats capable of managing all current and upcoming assets.
In a span of six years, the trust has grown through acquisition and integration of large portfolio deals. The platform today includes three of the largest road packages of approximately 200 km each. From over 160,000 passenger car units (PCUs) traversing across our roads in 2018, today close to 450,000 PCUs traverse our highways.
During FY2023, there has been significant rise in enhancing organisation wide safety measures. Key accomplishments include reduction in the incident rate by 25 per cent as compared to last year, and roll out of Zero Tolerance Policy and Traffic Safety Manual for our employees.
An online ISMART application has been launched for monitoring performance of assets and undertaking various activities in respect of enhancing safety and productivity.
We have taken initiatives in association with eminent institutions, namely IIT, Bombay and IIT Madras, for R&D of long-term life cycle cost optimisation based on new methodologies such as utilisation of old/recycled material, optimal positioning and type of glass grid to optimise strengthening requirements, improving the performance equivalent to PG grade, efforts on adoption of stone mastic asphalt, superplast & GI pave and micro-surfacing with acrylic fiber. Interise Trust is probably the only InvIT to have adopted six ISO standards across all its operations, namely:
- ISO 9001: 2015 Quality Management System
- ISO 14001: 2015 Environment Management System
- ISO 39001: 2012 Road Traffic Management System
- ISO 45001: 2018 Occupational Health and Safety Management System
- ISO 31000: 2018 Risk Management System
- ISO 27001: 2022 Information Security and Management System.
What are the risks/challenges and growth drivers?
Key challenges which our sector faces are managing volatility in prices of materials, increasing cost of borrowing, ensuring data security, and rapidly developing alternate modes of transport.
Some of the growth drivers for the company are strong demand in four-wheeler and freight traffic, greater government focus on infrastructure through asset monetisation and expected easing of interest rates in the near future. Growth of logistic hubs and inclusion of residential townships will spearhead growth of traffic across Indian highways.
What are the future plans and growth strategies?
We are focused on the growth story of Indian Infrastructure especially Indian roads. We intend to participate in various monetisation initiatives by the government for highway projects. Growth essentially will be through organic and inorganic models – focusing on secondary BOT (toll), annuity, HAM and TOT projects.