Share Dilution

Fundraising via REITs, InvITs drop 59% to Rs 22,145-cr in FY22 due to global uncertainty

Fundraising through emerging investment vehicles – REITs and InvIT – plunged 59% to Rs 22,145 crore in 2021-2022, mainly due to global uncertainty and market volatility. stock market. In comparison, Rs 54,731 crore was raised in 2020-21. Previously, Rs 11,496 crore was raised through these channels in 2019-2020, according to data from the Securities and Exchange Board of India (Sebi).

The funds were raised through an initial offering, a preferential issue, an institutional placement and a rights issue. The total fundraising also included money raised by unlisted InvITs, Sebi noted. REITs and InvITs are relatively new investment vehicles in the Indian context, but extremely popular in global markets. While a REIT includes a portfolio of commercial real estate assets, much of which is already leased, InvITs include a portfolio of infrastructure assets such as highways, power transmission assets.

“Uncertainty in the world and volatility in the stock market are some of the reasons fundraising through these channels has slowed down lately,” said Harshad Chetanwala, co-founder of MyWealthGrowth.com.

He further said that many investors, including institutional investors, would like to assess the current situation and may be willing to invest once things start to calm down. Some institutions have delayed their InvIT at present, they plan to launch when risk appetite and investor sentiment improve.

“Inflation and a poor track record for infrastructure projects in India could be the reason why some of the funding has dried up. Margins for real estate and infrastructure projects are bound to be lower due to rising inflation and rising cost of capital,” said Nikhil Kamath, co-founder of True Beacon and Zerodha. Vijay Singhania, President of TradeSmart, believes that money should be raised when it is easily available and not when you need it.Fiscal 2020-21 saw global economies float in the silver with negative interest rates in advanced countries.Taking advantage of this scenario, REITs and InvITs raised Rs 54,761 crores.

“But as interest started to rise and investors had other ways to park their funds, these investment trusts decided to slow down their fundraising plan and only raised Rs 22,145 crore. during the 2021-22 financial year. Although the number of issues increased, the note size was smaller as the real estate market accelerated, leaving few investment opportunities for these trusts,” he said.

Of the total Rs 22,145 crore, a large chunk or Rs 21,195 crore was raised through InvIT and the rest Rs 950 crore was raised through FPI.

Although REITs’ share of funding raised in FY22 was marginal, it depends on the size, dilution and pipeline of each category in any given year, which keeps changing. Typically, REITs could be smaller than InvITs which house large infrastructure assets like power transmission, toll roads, etc., said Jatin Khemani, CFA, Managing Partner and CIO, Stalwart Investment Advisors LLP.

“We might have seen more REITs had it not been for a pandemic that has brought its own share of challenges for commercial developers and also dampened interest from the investment community. However, as normality resumes, the pipeline will continue to grow while awareness and popularity of these vehicles will also increase,” he added.

In terms of issuance, the mode of fundraising by REITs and InvITs increased to 11 during the period under review compared to 5 in 2020-21. Currently, 15 InvITs and four REITs are registered. Of these, seven InvITs and three REITs are listed on the stock exchange.

REITs and InvITs are innovative and smart ways for developers to monetize some of their business and infrastructure assets. They are also long-term assets and these vehicles offer an opportunity to free up capital to reinvest in new projects.

For investors too, it provides an opportunity to participate in income-generating assets that are otherwise out of reach given the size and complexity of management operations. Going forward, these vehicles would now be able to attract additional investment as the 2021 budget allowed them to raise capital from foreign portfolio investors, Khemani said.

Moreover, experts expect these investment vehicles to become popular among investors on several policy decisions made by Sebi.