The introduction of India’s first infrastructure investment trust, called IRB, in May underscores the expectation infrastructure spend will be a key driver of the country’s growth over the next few years.
The IRB trust, which holds six toll roads, features a 10-12% yield and it is likely to be the first of many such listings. To put this in context, just 10% of the Indian market’s large cap stocks yield more than 3%.
The government has plans for some US$20bn infrastructure spend on roads but we think trusts like IRB may benefit from more than just increased government spending.
Aviation, for example, is another key focus for the government. In 2016 there were some 150 million domestic flight journeys in India, compared to c900 million in the US and around 500 million in China. Air travel may cost more but it takes around 1/6th the time. As such we expect to see the number of airports increase and they are likely to go private (as public-private partnerships).
Naomi Waistell – Newton, a BNY Mellon company