Rs 7,000-cr PowerGrid InvIT IPO opens on April 29. Should you invest?
Units will be available for bidding in a price band of Rs 99 to Rs 100
The initial public offering of PowerGrid Infrastructure Investment Trust (InvIT) will hit the market April 29. Units will be available for bidding in a price band of Rs 99 to Rs 100. The IPO closes May 3. Do know more, read on.
What is an InvIT
An InvIT is set-up to own, construct, operate, maintain and invest as an infrastructure investment trust, including in power transmission assets in India.
The two other listed InvITs are IRB InvIT and IndiGrid Trust InvIT.
The InvIT is sponsored by Powergrid Corporation of India Ltd (PGCIL), India’s largest power transmission company. The state-owned firm is engaged in project planning, designing, financing, constructing, operating, and maintaining power transmission projects across India. The PSU also undertakes operations in the Indian telecom infrastructure sector.
The InvIT investment Manager is PowerGrid Unchahar Transmission Limited, a wholly-owned subsidiary of PGCIL. It is responsible for managing the InvIT.
A InvIT can hold the operational infrastructure projects of sponsors with long concession periods and stable cash flows. As an investor in an InvIT you will obtain a share of the annual distribution of dividends and interests.
Listed InvITs are required to maintain a maximum-leverage ratio of 49%, which can be increased to 70%.
How it works
Powergrid invit pools money from several investors to be invested in income-generating assets. The cash flow generated is distributed among investors as dividend income. The Powergrid InvIT serves as a potent alternative for generating fixed income since InvITs have to distribute 90% of total net cash flow to its investors. Also, investors can make money by selling off units when the value of InvIT units appreciate, just like shares.
How many shares in IPO
The IPO issue includes a fresh issue of units up to Rs 4,993.48 crore. The selling unitholder is offering units worth up to Rs 2,741.50 crore.
In the Powergrid InvIT IPO, you can bid for a minimum 1,100 units. So, minimum investment will be Rs 1.08 lakh.
|Open date||Apr. 29|
|Close date||May. 3|
|Allotment date||May. 10|
|Listing date||May. 17|
|IPO band||₹99 to ₹100 per unit|
|Bid lot||1100 units|
What about company financial performance
The InvIT has have been given a credit rating of Provisional [ICRA] AAA (Stable), CARE AAA (Is); Stable and Provisional CCR AAA/Stable by ICRA Limited, CARE Ratings Limited and CRISIL Ratings Limited, respectively.
Its revenue from operations for the six months ended September 30, 2020 and the Fiscals 2020, 2019 and 2018, was Rs 661.39 crore, Rs 1324.28 crore, Rs 977.15 crore and Rs 343.56 crore, respectively. Profit for the period for the six months ended September 30, 2020 and the Fiscals 2020, 2019 and 2018, was Rs 208.90 crore, Rs 378.82 crore, Rs 248.06 crore and Rs 114.13 crore, respectively.
Following utilization of the IPO proceeds, InvIT’s consolidated borrowings and deferred payments net of cash and cash equivalents will be below 49% of the total value of assets, as prescribed by the InvIT regulations.
The company expects that the low debt position of its balance sheet (relative to assets) will provide it with the ability to finance the growth of business without substantial dilution to unitholders in the near future to ensure compliance with the InvIT regulations.
What assets does the InvIT hold
PowerGrid InvIT’s 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.
Who are BRLMs to this IPO
ICICI Securities, Axis Capital, Edelweiss Financial Services, and HSBC Securities and Capital Markets (India) are the book running lead managers to the offer.