India Grid Trust has come up with a non-convertible debentures (NCDs) issue offering a coupon rate in the range of 6.65-8.20% for an investment horizon of three to ten years.
The NCD issue is rated AAA by Crisil and India Rating. A stable business, established institutional investors as promoters, high credit rating and higher interest rate compared to other AAA rated investment options make IndiGrid NCD an attractive long term debt investment option. Read on to know more.
What about NCD issuer
IndiGrid was set up on October 21, 2016, as an irrevocable trust pursuant to the trust deed under the provisions of the Indian Trusts Act, 1882, and was registered with Sebi as an InvIT on November 28, 2016, under Regulation 3(1) of the InvIT Regulations.
IndiGrid was originally sponsored by Sterlite Power Grid Ventures Ltd while later KKR, a leading private equity fund, was inducted as the co-sponsor of the trust.
India Grid Trust (IndiGrid) is the country’s first listed power sector infrastructure investment trust.
What about NCD offering
The Rs 1,000-crore NCD issue of India Grid Trust opens on April 28 and closes on May 7.
The NCDs rated the highest AAA will be issued on a first come, first served basis. These are secured NCDs.
The interest rate offered is 6.75% for the three year, 7.6% for the five year, 7.9% for the seven year period and 8.2% for 10 years.
For seven year and ten year period, quarterly interest payments option is also available.
Currently, the yield of AAA oriented corporate bond mutual funds is around less than 6.0%.
These IndiGrid NCDs would be listed on BSE and NSE. So, they are reasonably liquid investments.
If liquidity and single company risk exposure is not a consideration, the IndiGrid NCD offers higher interest with similar risk profile.
Minimum NCD investment – Rs 10,000 (10 NCDs) (for all options of NCDs, namely Series I, II, III, IV, V and VI) and thereafter in multiple of Rs 1000 (1 NCD)
NCD issue size – Rs 1.000 crore (including oversubscription)
What about NCD taxation
Coupon from NCDs received will be taxed in the hands of investors at the marginal rate of tax.Â
Long term capital gains (held for more than 12 months) on transfer of listed debentures of IndiGrid shall be taxed @10% (without indexation).Â
Short term capital gains will taxed at the marginal rate of tax.
Is IndiGrid a reliable company
IndiGrid is in the power transmission sector having various transmission assets through various special purpose vehicle (SPVs).Â
As per Crisil, in the prospectus, all transmission SPVs have stable operations with a healthy track record of above-normative transmission line availability of over two years.Â
Revenue of a transmission SPV is completely delinked from the power demand-supply situation and volatility in electricity prices.Â
Almost all SPVs under IndiGrid are interstate transmission system (ISTS) licensees and come under the PoC pool mechanism.Â
Financial risk profile is robust, driven by stable cash accrual, healthy net debt-to-value ratio, strong DSCR and a three-month DSRA. The financial risk profile is also supported by the expectation that distribution of cash flow from IndiGrid to its unitholders will take place only after servicing of the external debt.
Who should invest
The NCDs are ideal if you are looking for regular income for short to long term. This will be through regular interest that the NCDs promise.Â
