The company will also raise about Rs 3,500 crore loan from the State Bank of India at a rate in the range of 7-7.35 percent with 15-year maturity as it seeks to repay existing high-cost debt. Final sanction for the loan is awaited.
“Shrem has reached out to many investors that are currently in discussions,” said one of the persons cited above.
Individual investors could not be reached immediately.
“We aim to expand our presence in HAM-based road projects,” said Nitan Chhattwal, managing director at Shrem Infrastructure. “Our InvIT launch is aimed at that as it will make us more compliant with prudential norms, which in turn should bring borrowing costs down. We are in discussions with some of the leading marquee institutional investors, family offices and HNIs.”
Chhattwal declined to divulge the names citing regulatory restrictions. ICRA and India Ratings have rated Shrem triple-A grade for the loan facility.
The proposed loan from SBI will be used to bring down the cost of funds and also to consolidate the debt in InvIT that is now at the SPV (Special Purpose Vehicle) level.
“The proceeds from the InvIT issue will be utilised to reduce the overall leverage,” said Chhattwal.
The enterprise value of Shrem InvIT is expected to be Rs 7,100 crore with a debt of Rs 3,450 crore and equity of Rs 3,650 crore.
The company aims to double its road projects in the next three years with HAM-based projects being the prime focus area. Hybrid Annuity Model (HAM), which does not depend on toll collections, paves the way for secured income flows resulting in higher credit rating grades. It is also building a hotel near Mumbai international airport.
Shrem InvIT will likely offer an estimated pre-tax internal rate of return (IRR) of 10% to investors. It is also said to be returning the capital of around 5% to its investors over and above the IRR.
The Shrem Group had acquired a portfolio of two dozen projects from Dilip Buildcon a few years ago. Those road projects totalling 6,442.35 lane kilometres are spread across the five states including Maharashtra, Madhya Pradesh, Gujarat, Uttar Pradesh and Karnataka.