NEW DELHI: The National Highways Authority of India board has approved engineering and construction firm L&T’s plans to set up a business trust in Singapore and list six toll road projects on theSingapore stock exchange that could raise up to $1 billion.The business trust will be set by the firm’s subsidiary L&T Infra Development Projects Ltd (IDPL) and the parent company can offload its equity in these six road projects to the trust, persons familiar with the matter told ET.The trust will have to form a special purpose vehicle, which will float or issue units to investors on these assets through an initial public offer. The trust will then issue debt instruments in the form of debentures to the SPVs undertaking these highway projects, said the persons, who did not wish to be named.

This will be implemented as a policy measure so that other developers looking at a similar route can follow suit, they said.

“Infrastructure stocks on the Indian stock market are not doing too well whereas the Singapore stock market is and they have mature investors who can handle long-term investments. While this will be subject to many factors including the Singapore stock exchange allowing it, if it is successful it will be a positive development since other developers can use it as an additional source of funding for their projects,” said Abhaya Agarwal, partner-infrastructure and PPP at consulting firm EY.

The six road projects include the Rs 1370 crore Krishnagiri-Walajahpet project in Tamil Nadu which is under implementation and five other completed projects including the Vadodara-Bharuch, Palanpur-Swaroopganj, Krishnagiri-Thopur projects and the Panipat elevated corridor.

The business trust model is similar to REIT or real estate investment trust model which offers revenue-generating real estate to investors.

A spokesperson of L&T told ET, “The company does not comment on market speculation.” L&T IDPL did not respond to the questionnaire sent by ET.

The NHAI board’s approval is subject to certain checks and balances which it has said the company must follow including that the company must get a legal opinion on the matter and the interest rate at which the trust lends to the SPVs must not be more than the interest rate it pays to its current lenders. In addition, the foreign exchange risk must be borne by the trust, it has specified.

“Road projects are public assets and in any case of equity transfer of more than 15%, it has to be approved by NHAI. Also, refinancing or changes in debt structure have also to be approved by us,” said an official familiar with the matter.

Source-http://economictimes.indiatimes.com/