India-based Virescent Renewable Energy Trust (VRET) raised Rs 10 billion ($134.4 million) in non-convertible debentures (NCD) its debut issuance, which was split into three tranches of three, five, and seven years. This is the first time a renewable energy InvIT has issued securities in India. As per a company statement,  the funds will mostly be used to refinance existing debt and support future acquisitions. The NCD structure benefits from a thorough covenant package, securing CRISIL and India Ratings’ highest domestic rating of AAA. Barclays Bank PLC, Trust Investment Advisors and ICICI Bank acted as arrangers on the issuance.

L&T Finance has also agreed to provide VRET with an extra Rs 10 billion ($134.4 million) in long-term funding. This ensures VRET’s immediate near-term acquisition pipeline is debt-free. VRET has also received a Rs 1.5 billion ($20.2 million) working capital facility from Tata Capital to help it improve its liquidity and achieve its credit rating standards. Funding at the InvIT level involves a cash pooling mechanism as well as cross-collateralization of security, resulting in a cleaner capital structure that benefits all lenders, including both NCD investors and long-term financiers.

In September 2021, VRET was established as a private listed InvIT with a $62 million equity raise led by Alberta Investment Management Corporation from a consortium of global and local investors. Headquartered in Mumbai, Virescent has an installed capacity of 394 MWp across 9 operational projects with an additional ~55 MWp of assets in pipeline.

REGlobal’s Views: Infrastructure investment trust (InvIT) is an important emerging financial instrument for the clean energy sector. With the success of VRET which is India’s first renewable energy InvIT, more are expected in the near future.