By Elzio Barreto and Swati Bhat
HONG KONG/MUMBAI (Reuters) - India's first infrastructure investment trust posted a lackluster trading debut on Thursday, potentially acting as a dampener for similar upcoming listings of high-yield securities that aim to tap investors' appetite for stronger returns.
IRB InvIT Fund traded flat in the afternoon compared to its IPO price of 102 rupees ($1.58) per share, reversing gains of as much as 2.9 percent shortly after the opening. Volume was heavy at more than 51 million shares on India's National Stock Exchange, making it the top traded stock.
Investment bankers mainly attributed the tepid price performance to the newness of the product. Infrastructure investment trusts (InvITs), like real estate investment trusts (REITs), invest in rent-yielding assets and distribute most of their income to shareholders as dividends.
"I would have expected a stronger opening," said Aditya Mongia, analyst at Kotak Institutional Equities.
The fund, which owns, operates and maintains a portfolio of six toll-road assets, raised $782 million in an IPO that was about 8 times oversubscribed and priced at the top of expectations.
Still, for global asset managers looking for liquidity in investments, concerns about a lack of depth in the market for such a new product may have weighed on demand.
"They will need global infrastructure and real estate investors to make it work," said an investment banker who has worked on several Asia-Pacific IPOs and was not authorized to speak publicly about the IRB InvIT deal. "The market may be able to gain critical mass after the first few deals price there."
The performance of the fund, which was priced to yield 12 percent a year, will be closely watched by other issuers looking to raise at least $1.3 billion in similar deals this year and the weak debut could impact future listings, analysts and investors said.
"There is a lot of confusion regarding the product itself. Initial excitement prevailed as people mistook the product to derive the same returns, risks and rewards as an equity product," said Naveen Jain, proprietor at Chandan Shares, a research and proprietary trading firm.
"Market intermediaries will take time to better understand the scope of hybrid instruments like InvITs."
The IPO was subscribed 8.6 times. Investors including Singapore government entities bought shares of IRB InvIT in the so-called anchor portion of the sale.
IRB InvIT Fund was the largest of a series of InvITs expected to tap Indian equity markets in coming months, including Reliance Infrastructure InvIT fund's $388 million deal, India Grid Trust's $350 million, and others from MEP Infrastructure Developers and IL&FS Transportation InvITs.
"The immediate impact from the stock's performance today...would have a very significant impact on the subscription of the India Grid IPO," said Arun Kejriwal, founder of Kejriwal Research & Investment Services.
India Grid didn't immediately reply to a Reuters request for comment. It lured $157 million in orders from anchor investors for its deal, which opened on May 17.
