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Indian Wind Companies Seek Business-Trust Listings in Singapore

According to reports, Indian wind-power developers and a toll-road operator are flocking to list in Singapore, but they could be in for a bumpy ride thanks to India’s struggles with a weaker currency and an ailing economy.

Companies from the South Asian country seeking to unlock value from their assets are planning to raise close to US$2 billion by listing business trusts in the city-state, where yield-hungry investors have pumped billions of dollars into trust listings this year. Firms that establish trusts get a chunk of capital as they sell shares in certain businesses, usually those that offer steady streams of income. They generally compensate investors by offering a guaranteed yield for a set period, funded by those cash flows.

Unlike India, Singapore has established a legal framework for trust listings, so Indian companies are seeking to take advantage of it.

Leading the charge from India is Larsen & Toubro Ltd.  The country’s biggest engineering and construction company by sales plans to tap Singapore’s trust market and could list some of the toll roads that it operates across India for as much as US$700 million, according to people with knowledge of the deal.

Infrastructure-development firm IL&FS Engineering & Construction Co. is looking to list a trust in Singapore comprising its wind-power generation operations for up to US$500 million, people with knowledge of the deal said. Vice Chairman Hari Sankaran said IL&FS is in the process of complying with Singapore’s listing rules, but declined to elaborate.

Earlier this year, Mytrah Energy  (India) Ltd., a London-listed wind-power producer, said in a statement it was exploring the option of listing its wind power assets in Singapore. The company, based in South India, is hoping to raise about US$400 million, people with knowledge of this deal said. Mytrah declined to comment.

Port and toll-road operators and utility companies often list business trusts because they have steady streams of revenue.

The city-state is home to around 50 business and real-estate-investment trusts with a total market capitalization of about US$65 billion. Trusts accounted for nearly 90% of the total US$4.24 billion raised via IPOs on the Singapore exchange this year, according to Dealogic, a data provider.

In India, the market for new equity issuance has been moribund. Companies raised $280 million via IPOs in the year to Oct. 1, a fraction of the $5.5 billion in the same period in 2010, according to Dealogic.

“India’s economy is still developing and has a huge need for capital,” said Lawrence Wong , head of listings at the Singapore Stock Exchange. Singapore’s market can help India and its companies raise funds, addressing that need, he said.

While Singapore is an attractive destination for trust listings, analysts say Indian companies will face questions from investors wary about their home country’s economic outlook. The Indian economy grew at 5%, its slowest pace in a decade, in the last fiscal year, which ended March 31, and some analysts expect it to post growth of less than 5% this year.

“Global investors who are evaluating an offering by an Indian corporate…are concerned about the uncertain macroeconomic outlook for India and risk of further weakening” in the rupee, said Tan Kok Huan , managing director of capital markets at DBS Bank.

The Indian rupee has fallen as much as 20% against the Singapore dollar this year and is now down around 10%. The weakness could spark concerns about Indian companies’ ability to pay the yields promised on the proposed Singapore-listed business trusts, given that the trusts would rely on Indian assets that collect revenue in rupees.

Federal elections, due before May 2014, add a degree of uncertainty among investors, Mr. Tan said.

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