Is it time for InvITs to gain traction from investors?

Pushkar Kulkarni is a member of Canada Pension Plan Investment Board’s (CPPIB) Indian Infrastructural investment team. They rank among the world’s top ten pension funds with AUM of C$ 400 billion, and invest 85% of their assets in other countries’ developing assets on behalf of its 20 million Canadian beneficiaries. 

 

Do you think the time has come for InvITs to finally gain traction for investors? Where do you see the trend heading? 

CPPIB started evaluating investment in this area a few years ago, but I would definitely say that these are still early days. More recently, we invested in IndInfravit Trust, in which CPPIB is a founding investor, and in May 2019, we co-sponsored a $600 million renewable energy trust with Piramal. Brookfield have already found success with pipelines and towers, similarly Sterlite with transmissions and Starlight, and IRB InvIT with roads. I would say that the time has come for InvITs to start being game changers in the market, especially when they start getting multiple investors, and functioning properly with the right management and governance. As the governance around it shifts, especially with SEBI taking a closer look, it may open the doors up for InvITs to really take off. So there is definitely potential there. Whether investors will actually grab the potential remains to be seen. 
 

Where is CPPIB looking to expand in the near future? 

CPPIB’s mandate within the infrastructure sector is to look at core regulated assets, and invest with a very long term plan. We will continue to look across the infrastructure sector at roads, airports, ports and renewables.


And why is it so important for renewables to be a part of InvITs? Are investors seeing a lot of potential?

I think it, as with most other occurrences happening in infrastructure, emanates from government policy. And the current Indian government has announced some very ambitious goals regarding renewable energy that they fully intend to meet. Given these ambitious plans, InvITs should play a big role in asset recycling.


Is there any other ways the recent Indian election will affect infrastructure?

Well, if you look back to the last 20 years and the 4 or 5 governments that have been elected during that period, I think the one policy that has been consistent in India is the focus on infrastructure - because everyone recognises two things.

One is the huge potential and need to develop infrastructure in India, and the other is the way in which infrastructure touches everyone's lives - it benefits pretty much everybody.



For more information on the Indian infrastructure market, India Infra GRI 2020 will take place on the 19th and 20th February, in New Delhi. 

Article by Matt Harris