POWERGRID Infrastructure Investment Trust (Powergrid InvIT) is sponsored by Maharatna PSU, Power Grid Corporation of India Ltd. Powergrid InvIT IPO envisages to raise Rs. 7,735cr in the price band is Rs. 99 – 100 per unit. Powergrid InvIT IPO issue is a combination of fresh issue and OFS. The Invit will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 4,993.5cr will be utilized for the repayment/prepayment of existing debt availed by its asset SPVs.
IPO details
- Powergrid InvIT IPO is open from 28-Apr-21 to 03-May-21
- Issue size: ₹ 7,734.99 Cr
- No. of Units: ~ 773,499,100 Units
- Price band: ₹ 99 – 100 per unit
- Bid Lot: 1,100 Units and in multiples
About Infrastructure Investment Trusts(InvIT)
Infrastructure Investment Trusts(InvIT) are quasi debt instruments, akin to mutual funds which are regulated by SEBI to enable investments into the infra sector by pooling together money from several individual investors for direct investment in infrastructure . In contrast to earlier methods like Infrastructure Bonds, these instruments provide a means for direct investment by individual investors in infrastructure mainly in revenue generating or completed projects. In the process they aim to return a portion of the income, after meeting expenses to unit holders of InvITs. This framework enables infrastructure developers to monetize completed assets.
About Powergrid InvIT
- The POWERGRID Infrastructure Investment Trust (“PGInvIT”) was formed on September 14, 2020 by the sponsor, Power Grid Corporation of India Ltd.
- Their Sponsor, POWERGRID also acting in the capacity of Project Manager, is is the 3rd largest CPSE in terms of gross block.
- POWERGRID is the largest power transmission company in India.
- The Initial Portfolio Assets comprise five power transmission projects located across five states of India. The projects comprise 11 transmission lines, including six 765 kV transmission lines and five 400 kV transmission lines, with a total circuit length of approximately 3,698.59 ckm, and three substations with 6,630 MVA of an aggregate transformation capacity and 1,955.66 km of optical ground wire.
- As of December 31, 2020, 8 of the Inter-state transmission system (“ISTS”) SPVs with the Invit had commenced commercial operations, comprising 39 transmission lines (6,398 Circuit kilometres with a total power transformation capacity of 9,630 MegavoltAmpere.
- The remaining Sponsor TBCB (Tariff Based Competitive Bidding) projects are at different stages of development.
Powergrid InvIT:Financials
| Particulars | 2020(09) | 2020(12) | 2019(12) | 2018(12) |
| Revenue from Operations | 992.28 | 1,324.29 | 977.16 | 343.57 |
| Revenue Growth (%) | – | 35.52% | 184.41% | – |
| Profit Before Tax | 547.65 | 487.42 | 348.04 | 128.53 |
| Profit for the Period | 337.14 | 378.83 | 248.06 | 114.13 |
| PAT as % to revenue | 33.98% | 28.61% | 25.39% | 33.22% |
| Equity Share Capital | 1,213.04 | 1,200.68 | 998.68 | 442.28 |
| Other Equity | 275.09 | 333.02 | 219.61 | 71.21 |
| Net worth | 1,488.13 | 1,533.70 | 1,218.29 | 513.49 |
| Net Debt | 4,945.40 | 5,136.90 | 5,574.10 | 5,329.70 |
| Cash Flow from Operations | 900.54 | 1,052.15 | 342.5 | 373.18 |
| Long Term Debt to Equity | 3.36 | 3.38 | 4.58 | 10.41 |
| Net Debt/EBITDA | 3.9x | 4.0x | 5.9x | 15.9x |
Powergrid InvIT IPO: anchor issue
PowerGrid Infrastructure Investment Trust raised Rs 3,480 crore from 47 anchor investors ahead of its initial public offer. the investors include SBI Mutual Fund (MF), HDFC MF, Tata MF, Fidelity Funds, Tata AIA Life Insurance Company, Tata AIG General Insurance Company, SBI Life Insurance Company, UTI MF, ICICI Prudential MF, Sundaram MF, Rainbow Investments Ltd , CPP Investment Board Private Holdings etc.
Salient Points & Assessment
- Powergrid InvIT is well positioned to take advantage of the growth potential of India’s power transmission industry due to support from the sponsor and a robust regulatory framework for power transmission in India.
- The Initial Portfolio Assets (IPA) of the Powergrid InvIT •are the assets were awarded under the Tariff Based Competitive Bidding (TBCB) mechanism on a build-own- operate-maintain (“BOOM”) basis with a long-term Transmission Service Agreement (TSA) of 35 years. The average remaining term of the TSAs is over 32 years.
- The transmission charges being contracted for 35 years result in minimal price risk arising from transmission charge resetting, which provides stability, consistent cash flows and long term visibility.
- Powergrid InvIT has a credit rating of AAA/Stable by ICRA Ltd., CARE Ratings Ltd. and CRISIL Ratings Ltd.
- Post the IPO, Powergrid InvIT trust will be virtually debt free and thus will be well positioned to finance growth without substantial dilution of the unitholders.
- The Powergrid InvIT intends to distribute at least 90% of the net available cash to the unitholders once at least every quarter in every financial year.
- The distribution is likely to consist of interest payment (~50%), dividend payment (~35%) and the rest will be repayments.
- FY22 budget has laid emphasis on invit route and thus favorable policy framework can be expected. NHAI is also likelly to come out with such Invit.
- With initial portfolio assets characterized with perpetual ownership, visibility on cash flows and lower operating risk, Powergrid InvIT is well placed to get benefited from expected growth in the power transmission sector.
- I intend to apply in Powergrid InvIT IPO as in my view it may provide returns better than fixed deposit , REITs etc. space. My expectation is about 9-11% pre tax return on the face value.
- Power transmission infrastructure is of strategic and critical nature with low risk of emergence of other alternate transmission infrastructure. Though the income distribution is expected to be lower than Indigrid Invit, the Indigrid Invit is quoting at a premium and the present Powergrid InvIT issue is at par, thus making it attractive.