Canada Pension Plan Investment Board (CPPIB) has subscribed to 30% of the units in an infrastructure investment trust (InvIT) floated by L&T Infrastructure Development Projects Ltd (L&T IDPL), increasing its exposure to the Indian company.
CPPIB, the North American nationâs largest pension fund, said on Wednesday it acquired IndInfravit Trustâs units worth nearly 200 million Canadian dollars ($152 million or Rs 1,014 crore) via a private placement that concluded last week.
The total size of the private placement was $510 million. Allianz Capital Partners, the in-house alternative investment firm of Munich-headquartered financial services firm Allianz, acquired 25% of the units worth an estimated $128 million, VCCircle estimates show after converting average foreign exchange rates for the past fortnight.
L&T IDPL will hold 15% of the units. The remaining the units were subscribed by other local and international institutional investors.
Citigroup and ICICI Securities were managers to the L&T IDPL's InvIT issue.
CPPIB had first invested Rs 1,000 crore ($157 million then) in L&T IDPL, a subsidiary of engineering and construction conglomerate Larsen & Toubro, in December 2014. It was the first direct private investment by a Canadian pension fund into an Indian infrastructure development company. A year later, the L&T arm received its second tranche of Rs 1,000 crore from CPPIB.
Scott Lawrence, managing director and global head of infrastructure at CPPIB, said the latest investment allows it to deepen its relationships with Allianz and L&T IDPL and demonstrates its commitment to investing in India.
L&T IDPL develops infrastructure projects with a focus on the road and electricity transmission sectors. Its units from the IndInfravit Trust private placement, which concluded on 4 May, will list on the stock exchanges on Thursday.
The IndInfravit Trust was selling a total of 323 million units â 279 million primary and 44 million secondary â at a fixed price of Rs 100 apiece. This translates into an annual implied rate of return of 12%, according to a Reuters report.
L&T IDPL is the sponsor of the trust and also the vendor of the secondary units. The firm has 17 infrastructure projects, of which 15 are operational and two are under construction. It has 33 toll plazas across India and will build additional five collections points within three years. L&T said last week it had transferred its stake in five subsidiaries to the Indinfravit Trust for about Rs 909.08 crore.
This was the first-ever private placement of an InvIT, and third overall, after regulations came into place roughly four years ago.
IRB Infrastructure Developers Ltd was the first company to launch a public InvIT in May 2017. While its IPO attracted strong interest from investors, its stock market debut was lackluster, with its units falling below the IPO price.
Sterlite Power Ventureâs offering, the India Grid Trust, was worse as its IPO struggled to garner full subscription. Its units dropped in value on listing day.
This damped investor sentiment at a time when at least five other infrastructure companies were seeking to float IPOs of InvITs. Billionaire Gautam Adani-controlled Adani Group has called off plans to float an InvIT for the power transmission arm anticipating few takers.
The Securities and Exchange Board of India (SEBI) made multiple amendments to regulations governing InvITs and real estate investment trusts to make them attractive for investors.
The capital markets regulator allowed strategic investors such as international multilateral financial institutions and non-banking financial companies to invest up to 25% of the total offer size. It later permitted such trusts to raise funds by issuing debt securities.