June 6, 2017 / 6:17 AM / 3 months ago

India Grid Trust shares fall on market debut after $350 mln IPO

A broker monitors share prices while trading at a brokerage firm in Mumbai August 22, 2013. REUTERS/Danish Siddiqui/Files

MUMBAI (Reuters) - India Grid Trust’s shares fell as much as 6.3 percent on their debut on Tuesday, clouding the listing prospect for other infrastructure investment funds after raising 22.5 billion rupees ($349.68 million) in an initial public offering.

India Grid Trust shares were down 1.55 percent at 98.45 rupees by 0605 GMT on the National Stock Exchange, having dropped to a low of 93.70 rupees compared with their issue price of 100 rupees.

The company is only the second infrastructure investment fund to list in India after IRB InvIT Fund debuted in May with another lacklustre opening. Its shares are trading below the issue price after the fund raised $782 million in its IPO.

Traders and investment bankers attributed the weak performance to a lack of clarity in India about this new product, an entity that invests in rent-yielding assets and distributes most of their income to shareholders as dividends.

“There seems to be a perception issue with these instruments,” said Arun Kejriwal, founder of Kejriwal Research and Investment Services.

“There was marketing fervour when the issues came, but now reality concerns are stepping in. Until the first round of interest and dividend is paid out and people understand how these instruments operate, any further issue is most unlikely.”

At least $1.3 billion in listings from other infrastructure investment funds were expected in India this year, including from Reliance Infrastructure InvIT, MEP Infrastructure Developers and IL&FS Transportation InvIT.

The India Grid IPO was subscribed only 1.35 times versus 8.6 times for IRB InvIT Fund, and well below the responses seen at other IPOs earlier in the year.

The lack of investor interest in infrastructure investment funds comes as India heads to a bumper year in IPOs, including up to $1 billion listings by National Stock Exchange as well as SBI Life Insurance Co Ltd.

“This is a yield-generating asset so we should not evaluate these instruments right away at the listing. We can evaluate these instruments once they give their first pay out to the unit holder,” said Abhishek Lodhiya, senior equity research analyst at Angel Broking.

($1 = 64.3450 Indian rupees)

Reporting by Swati Bhat; Additional reporting by Tanvi Mehta and Krishna V Kurup; Editing by Rafael Nam

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