Shrem group, a Mumbai-based road and infrastructure operator, is raising ₹600 crore through an infrastructure investment trust (InvIT) comprising 24 operational road projects with an enterprise value of ₹7,000 crore, a senior executive told Mint in an interaction.
This will be the first InvIT offering with hybrid annuity model (HAM) road projects. Government annuity payments will comprise 85% of the InvIT’s revenues and the remaining 15% will come from toll collection.
Shrem had acquired a portfolio of 24 projects from Dilip Buildcon Ltd in 2017 and 2018. These 24 road projects totalling 6,442.35 lane kilometres are spread across Maharashtra, Madhya Pradesh, Gujarat, Uttar Pradesh and Karnataka.
“We are targeting Indian institutions, high net-worth individuals and family offices for the fundraise,” said Nitan Chhatwal, founder of Shrem group.
The plan is focused entirely on a primary fundraise and Shrem is not selling any of its units in the transaction, he said.
The funds will be used to repay debts of the road projects.
In addition, the company is also in the process of raising around ₹3,400 crore of debt from State Bank of India to refinance the debt of the road portfolio.
“After these transactions, we will be able to achieve annual interest cost savings of around 1.5%. Our current average cost is around 9%,” said Chhatwal.
The company aims to double its assets under management in three-five years.
“In the last four years, we completed 10 under-construction projects and have been collecting annuities from the government without delay by maintaining the road assets. Given the government focus to drive infrastructure-led growth, there will be huge opportunities in the road and highways sector. We are looking at these upcoming business opportunities cautiously in line with the investment objective,” said Chhatwal.
“The InvIT will aim to deliver a pre-tax annualized return of around 10%,” Chhatwal added.