A cyclist rides past buildings under construction at a Larsen & Toubro construction zone in Kolkata, India. The company yesterday said it has started testing investor appetite for an up to $800mn initial public offering in Singapore of its India toll-road assets.

Dow Jones/Singapore

Larsen & Toubro has started testing investor appetite for an up to $800mn initial public offering in Singapore of its India toll-road assets, people with knowledge of the deal said yesterday, as the Indian construction firm moves to tap investor interest on a revival in valuations in the subcontinent.

Larsen & Toubro, which has business interests ranging from infrastructure to shipbuilding, has been looking to list its toll-road assets through a business trust in Singapore since last year, but delayed the plans due to weak market conditions. Now, however, Indian stock markets are up over 8% in the past month. Singapore too is among the region’s most buoyant stock markets in the past month, chalking up gains of over 4%.

But booming stocks and underlying valuations will have to offset growing gloom about yield plays like business trusts, the vehicle Larsen & Toubro is using to list its toll-road assets. Trust listings in Singapore, Asia’s top venue for such IPOs, have fallen this year, as yield-seeking investors leave emerging markets for developed markets, in anticipation of rising interest rates in the US.

Amid historically low interest rates, investors had flocked to Singapore listings of real-estate investment trusts and business trusts, which had been offering attractive yields. But the Fed’s decision to scale back its stimulus programme as the economy improves has led to the prospect of rising interest rates there and elsewhere, leading investors to return to the relative safety of developed markets or demand higher yields elsewhere.

Such sentiment has already hurt some planned listings in Singapore. Last month, South Korean shopping mall operator Lotte Shopping Co delayed its near $1bn trust IPO as investors sought higher yields that the company wasn’t willing to pay.

Larsen & Toubro, listed in Mumbai with a market value of nearly $20bn, is planning for its toll-road business trust to pay an initial yield at “low double digits,” said one of the people with knowledge of the deal. The pre-marketing exercise will go on for two weeks, the people said.

Bankers during the pre-marketing phase gauge investors’ interest in the IPO and start taking orders depending on demand. If demand is met and the company goes ahead with the offering, the business trust may list on the Singapore Exchange by late May or early June, one of the people said.

Larsen & Toubro didn’t immediately respond to a request for comment. An external spokeswoman for the company didn’t respond to a request for comment.

If successful, Larsen & Toubro’s IPO would be the largest in Singapore since a $1.1bn deal in May by Asian Pay Television Trust, an investment vehicle for one of Taiwan’s largest pay-TV operators. The listing would also be the third in Singapore by an Indian company, after Indiabulls Properties Investment Trust’s 353.3mn Singapore dollar (about $280mn) IPO in 2009 and Religare Health Trust’s roughly S$510.7mn flotation in 2012.

Bankers say a successful IPO could also boost other trust IPOs that are being planned in the city-state. Deals worth close to $1bn are in progress including a $500mn deal by Singapore conglomerate Keppel Corp, which is looking to list its data centers.

 

 

 

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