India Infra InvIT to raise fund via debentures

News Excerpt:

Brookfield Asset Management-backed India Infrastructure Trust (India Infra InvIT) will raise Rs 6,452 crore via Non-Convertible Debentures (NCDs).

More details on news:

  • India Infrastructure Trust will raise Non-Convertible Debentures (NCDs) to refinance debt  maturing at the Special Purpose Vehicle (SPV) level to acquire the East-West gas pipeline (EWP) from Reliance Industries Holdings.
  • EWP is the sole pipeline connecting the gas-producing eastern coast to the western coast of India.
  • It also connects key industrial clusters and is connected to GAIL’s trunk and other pipelines.

Debentures

  • Debentures are long-term financial instruments which acknowledge a debt obligation towards the issuer.
  • Some debentures have a feature of convertibility into shares after a certain point of time at the discretion of the owner.
  • The debentures which can't be converted into shares or equities are called non-convertible debentures (NCDs).
  • Non-convertible debentures are used as tools to raise long-term funds by companies through a public issue.
  • To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of return compared to convertible debentures.

Special Purpose Vehicle (SPV)

  • A Special Purpose Vehicle (SPV) as the name says, is formed for a specific purpose. The name SPV is given to an entity which is formed for a single, well-defined and a narrow motive.
  • Its powers are limited and its life is destined to end when the purpose is attained.
  • An SPV can only be formed for fulfilling any lawful purpose and cannot be formed for activities to be undertaken which are prejudicial or opposed to public policy.

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