Capital Infra Trust InvITs review (May apply)

•    The company is an infrastructure investment trust sponsored by Gawar group.
•    The offer constitutes of fresh units and offer for sale, with an overall size of Rs. 1578 cr.
•    This scheme is worth for well-informed investors for long term rewards.

ABOUT COMPANY:
Capital Infra Trust (CIT) - (erstwhile known as 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, an infrastructure investment trust, as permissible under the SEBI InvIT Regulations. The company was settled by way of the Trust Deed, by GCL (the Sponsor), read along with Amendment to the Trust Deed and registered as an infrastructure investment trust with SEBI on March 7, 2024 (updated vide SEBI registration certificate dated October 16, 2024) in accordance with the SEBI InvIT Regulations.

Its 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, its Sponsor has undertaken more than 100 road construction projects. As on the date of this Offer Document, its 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.

Its Sponsor has an established track record of efficient project management and execution involving trained and skilled manpower, efficient deployment of equipment and an in-house integrated business model. The in-house materials supply chain management ensures that key construction materials are delivered in a timely manner to the facilities and construction sites thereby enabling Sponsor to manage its processes effectively and maintain its key raw material inventory to an optimal manner. The project management team working in conjunction with the design and engineering team, ensures operational efficiencies through overall supervision of the development and project execution process. Five out of the seven indigenous HAM projects were completed before scheduled time and have received early completion bonus from NHAI.

CIT 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. Its Initial Portfolio of Assets has a weighted average residual concession life of 11.7 years as of September 30, 2024.

In addition to the Initial Portfolio Assets, the Trust, through the Investment Manager, will also have the right to acquire new projects through a right of first offer with Sponsor in accordance with the Right of First Offer Agreement (“ROFO Agreement”).

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden/combo book building route IPO of InvITs worth Rs. 1578 cr. The offer includes fresh units worth Rs. 1077 cr. and an Offer for Sale (OFS) of units worth Rs. 501 cr. The company has announced a price band of Rs. 99 – Rs. 100 per unit. The issue opens for subscription on January 07, 2025, and will close on January 09, 2025. The minimum application to be made is for 150 units and in multiples thereon, thereafter. Post allotment, units will be listed on BSE and NSE. From the net proceeds of the fresh equity issue, the company will utilize funds for loans to project SPVs for repayment/pre-payment of external borrowings, repayment of unsecured loans availed from sponsor.

The lead managers to this offer are SBI Capital Markets Ltd., HDFC Bank Ltd., while KFin Technologies Ltd. is the registrar to the offer. The sponsor of the scheme is Gawar Construction Ltd., Investment Manager is Gawar Investment Manager Pvt. Ltd. and Trustee is Axis Trustee Services Ltd.

The company has allocated not more than 75% for QIBs and not less than 25% for HNI investors. 

Each Unit represents an undivided beneficial interest in the Trust. A Unitholder has no equitable or proprietary interest in the Initial Portfolio Assets and is not entitled to transfer of the Initial Portfolio Assets (or any part thereof) or any interest in the Initial Portfolio Assets (or any part thereof). A Unitholder’s right is limited to the right to receive Distributable Income in accordance with Distribution Policy and require due administration of the Trust in accordance with the provisions of the Trust Deed and the Investment Management Agreement.

ALERT: INVESTMENTS IN UNITS INVOLVE RISKS AND BIDDERS SHOULD NOT INVEST ANY FUNDS IN THE OFFER UNLESS THEY CAN AFFORD TO TAKE THE RISK OF LOSING THEIR ENTIRE INVESTMENT. FOR MAKING AN INVESTMENT DECISION, BIDDERS MUST RELY ON THEIR OWN EXAMINATION OF THE TRUST, THE UNITS, THE OFFER AND OFFER DOCUMENT. BIDDERS ARE ADVISED TO CAREFULLY READ THIS OFFER DOCUMENT, INCLUDING THE SECTIONS “RISK FACTORS” AND “RIGHTS OF UNITHOLDERS” ON PAGES 21 AND 220, RESPECTIVELY, BEFORE MAKING AN INVESTMENT DECISION. THE UNITS HAVE NOT BEEN RECOMMENDED OR APPROVED BY SEBI OR THE STOCK EXCHANGES. SEBI AND THE STOCK EXCHANGES DO NOT GUARANTEE THE ACCURACY OR ADEQUACY OF THE CONTENTS OF THIS OFFER DOCUMENT. BIDDERS ARE ADVISED TO CONSULT THEIR ADVISORS ABOUT THE CONSEQUENCES OF AN INVESTMENT IN THE UNITS BEING ISSUED

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a special purpose combined basis) posted a total income/net profit of Rs. 1981.42 cr. / Rs. 125.56 cr. (FY22), Rs. 2518.92 cr. / Rs. 497.19 cr. (FY23), and Rs. 1543.51 cr. / Rs. 125.77 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 115.43 cr. on a total income of Rs. 792.27 cr. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Indus Infra Trust (previously Bharat Highways InvIT), and IRB InvIT funds as their listed peers. While Indus Infra is quoting around NAV, IRB InvIT is quoting at a discount of around 38%.