Bengaluru: Tata Realty and Infrastructure Ltd (TRIL) plans to invest up to ₹ 10,000 crore in infrastructure projects and launch an infrastructure investment trust (InvIT), as it seeks to increase its focus on public works.

The firm, a subsidiary of Tata Sons Ltd, also plans to buy land with its investor partner for office projects, and build more retail shopping malls, said a top executive.

The Mumbai-based firm intends to build on its infrastructure project portfolio and will invest ₹ 9,000-10,000 crore over the next few years in light rail urban transport, airports, highways and roads, and ropeway projects.

It plans to bid for projects mainly through the public-private partnership (PPP) route, where it will build, maintain and collect tolls.

“The objective is to build a larger infrastructure platform going forward, across many verticals, and also look at doing an InvIT. We will raise the money through debt, by divestment of stake in each project SPV (special purpose vehicle) and invest our own capital as well. We are also ramping up our team for the expansion we are planning," said managing director Sanjay Ubale.

TRIL has built both real estate and infrastructure projects, but its real estate portfolio was the heavier one. The company wants to change that.

MIA Infrastructure, promoted by TRIL and French group Vinci Airports SA, is one of three shortlisted bidders for the proposed Navi Mumbai International Airport.

TRIL, which has already won two new ropeway projects—Dharamsala-McLeodganj and Palchan-Rohtang—is in discussions for two more. It is also exploring two opportunities in the light rail segment.

The firm bid for road projects through the PPP model as well, and plans to acquire three road projects from a road development company.

“We want to do more urban transport projects, and ropeways can be city-centric mode of transport as well. Ropeway projects generate about 19% IRR (internal rate of return) and make a good business vertical," Ubale said. The internal rate of return is a method used to assess the viability of projects based on the current value of future returns.

TRIL’s focus on infrastructure projects and its plan to start an InvIT come after such trusts received a push in this year’s Union budget. Finance minister Arun Jaitley said that any distribution of the income of a special purpose vehicle to InvITs having a specified shareholding will not be subjected to dividend distribution tax (DDT).

In May, the Securities and Exchange Board of India released norms for the public issue of units of InvITs—the final set of major rules that were awaited before companies could start to market their issues.

InvITs are trusts that manage income-yielding infrastructure assets, typically offering investors regular yields and a liquid way of investing in infrastructure projects. They bring in more foreign investment in the sector, reduce the burden on bank debt and let developers unlock value of such assets.

IRB Infrastructure Developers Ltd and Sterlite Power Grid are gearing up to list their InvITs, Mint reported on 27 July. Other infrastructure companies such as IL&FS Transportation Networks Ltd, GMR Infrastructure Ltd and MEP Infrastructure Developers Ltd are also looking to raise money and cut debt via structures such as InvITs.

“The interest shown by developers and operators in InvITs, so far, has been more than in REITs (real estate investment trusts). InvITs emerged as a logical, compelling reason for companies to get institutional funding and deleverage their balance sheets," said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India.

“It’s a good strategy for Tata Realty, as part of a large corporate group, to look at long-term deployment of funds for asset creation and then formalize it through an InvIT," Jain added.

Tata Realty and Standard Chartered Private Equity, with which it has a ₹ 2,600 crore investment partnership, are looking to buy a 25-acre information technology (IT) special economic zone (SEZ) in Gurgaon from M3M India Pvt. Ltd for about ₹ 375 crore; 20-25 acres from a larger SEZ in Hinjewadi, Pune; and a piece of land in the Mumbai Metropolitan Region (MMR).

TRIL and Standard Chartered PE inked the partnership last year, under which the two will jointly scout for new development opportunities for commercial office space, and buy brownfield projects as well. The partners will put in the money on a project-to-project basis, with Standard Chartered holding a 30% stake and TRIL the rest.

In its first transaction, TRIL has divested a 26% stake to Standard Chartered in an existing IT office project in Mumbai’s Malad suburb. The project was bought by TRIL from Kotak Realty Fund in 2011 for ₹ 525 crore.

“We are looking at both greenfield land developments and brownfield or distressed opportunities in NCR (National Capital Region), Mumbai, Pune, Hyderabad, Chennai and Bangalore. The acquisition of land will happen over the next two years and development of the projects in a phased manner," said Ubale.

Eventually, TRIL plans to have a portfolio of two projects each in Bengaluru, Chennai and Mumbai, and one in Pune, Noida, Hyderabad and Gurgaon.

Once the portfolio of projects is substantial, the firm is looking to list the assets through a REIT.

While the commercial office sector has performed relatively better than the residential space, demand for high-quality space lags supply, encouraging developers to look at expansion. According to an estimate by property advisory Cushman and Wakefield India, the assets that may qualify to be included in REITs may reach $20 billion by 2020. In the first three to five years, as much as $12 billion could be raised.

TRIL, which now has only one mall in Amritsar, is also eyeing opportunities to buy and operate shopping malls. Its retail space within a mixed-use project in Nagpur will be ready next year.

It is now in the process of acquiring a shopping mall in Gurgaon and is also looking to buy a mall that is ready but not operational in southern India.

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