IPO Alert: Power Grid Infrastructure Investment Trusts

IPO Alert: Power Grid Infrastructure Investment Trusts

₹ 7,735 crore IPO of Power Grid Infrastructure Investment Trust (InvIT) got live on Thursday, 29th April. The trust is set up to own, construct, operate, maintain and invest in power transmission assets in India. Moreover, it is the first-ever Infrastructure Investment Trust IPO launched by a state-owned firm. Should you subscribe to it? Read the story to find out.

Crux of the Matter

Company Background
The IPO is launched by Power Grid Corporation of India , India’s largest power transmission company. It is the first-ever Infrastructure Investment Trust IPO launched by a state-owned firm.

Power Grid Infrastructure Investment Trust will initially have 5 assets (called Initial Portfolio Assests):

  1. PVTL (PowerGrid Vizag Transmission Ltd)
  2. PKATL (PowerGrid Kala Amb Transmission Ltd)
  3. PPTL (PowerGrid Parli Transmission Ltd)
  4. PWTL (PowerGrid Warora Transmission Ltd)
  5. PJTL (PowerGrid Jabalpur Transmission Ltd).

What Is InvIT?
An Infrastructure Investment Trust (InvITs) works like a mutual fund. It makes investment in infrastructure projects by gathering pools of money from various investors and earn a small portion of the income as return over a period of time.

Where Will The IPO Proceeds Be Used?
The proceeds will be mainly utilized for:

  • To own, construct, operate, maintain and invest in power transmission assets in India.
  • Providing loans to the Initial Portfolio Assets for its debt clearance.
  • General corporate purposes.

IPO Details

  • Issue Open Date: April 29 – May 3
  • Price Band: ₹90- 100 per share
  • Lot Size: 1100 shares.
    Minimum bid of ₹1.10 lakhs (1100x₹100) can be made via Netbanking ASBA facility only – UPI application for InvITs is not available.
  • IPO size: ₹ 7,734.99 cr
  • Fresh Issue: ₹ 4,993.48 cr
    Fresh Issue means stock offering made for the very first time to the public.
  • Offer for Sale: ₹ 2,741.51 cr
    Offer For Sale (OFS) is sale of shares (read exit of investors) owned by existing promoters.

Proposed Post Listing Structure

Combined Financial Of Power Grid Entities

Final Thoughts

The firm’s sponsors and the investment managers have a strong financial and operational background. It has rigorous government support, with no close competition in place right now. As per experts, this investment can be a better alternative to fixed income securities (like bond) because a 90% cash distribution (from profits) to unit holders amounts to 11-12% yearly payout (income).

  • POWERGRID’s original name was the ‘National Power Transmission Corporation Limited. Their name was changed to Power Grid Corporation of India Limited, which took effect on 23 October 1992.
  • On 18 August 2015, Cochin International Airport became the world’s first fully solar powered airport with the inauguration of a dedicated solar plant.
  • The first hydroelectric installation in India was installed near a tea estate at Sidrapong for the Darjeeling Municipality in 1897.

Tech Giants In Legal Trouble Over Competition

Tech Giants In Legal Trouble Over Competition

CEOs of tech giants Facebook, Google, Apple, and Amazon were summoned over allegations of unfair practices for obliterating competition in the market.

Crux of the Matter

Recent Case
CEOs of Apple, Google, Facebook and Amazon recently appeared before the congressional committee of the US for a “high profile anti-trust” hearing. The Democrat congressional committee accused the tech giants of wielding “their power in destructive, harmful ways in order to expand”, and accused them of abusing power to suppress competition or buying it entirely.

On the other hand, the Republicans accused these tech giants of “suppressing” conservative views on their platforms.

Amazon CEO Jeff Bezos appeared before Congress for the first time. In the hearing, he was accused of conflict of interest as Amazon “both hosts sellers and competes against them by offering similar products”. The company was also accused of using third-party seller data to enhance Amazon’s own versions of those products.

While Bezos stated that his employees are not allowed to use third-party sales data, he admitted that the policy “might have been violated”.

Facebook CEO Mark Zuckerberg was questioned over the takeover of Instagram and other “competitors”. The Judiciary committee accessed his internal mails sent before the acquisition of Instagram in 2012 and found that Zuckerberg had claimed in one email that Instagram could be “very disruptive” to his company. The committee accused him of neutralizing Instagram by buying it in 2012, which the committee considered a threat. In his reply, Zuckerberg “respectfully” denied the claims of pressurizing competition.

Apple CEO Tim Cook received a complaint about Apple’s App Store. Besides facing criticism over the fee of 15-30% levied on developers, the company also faced accusations of “cutting off” the app developers. Besides the US Congress, Apple also received an anti-trust complaint from Europe, filed by Telegram and Spotify. The complaint was filed over concerns on the 30% fee levied on these apps, Apple’s censorship, and its violation of user privacy.

Summachar Coverage: On Apple’s Tax Case & Tax Havens Of The World

Google was accused of “stealing content” from small firms like Yelp, and was also accused of thwarting companies from its ‘search’ which might divert traffic from its own.
Google CEO Sundar Pichai claimed that the firm prioritized user experience.

Antitrust Laws
Antitrust laws are defined as laws to protect consumers and small businesses from unfair practices of large businesses, with an aim to prevent unfair monopoly in the market. There are some key differences in antitrust laws applied in Europe and the US.

  • The European Commission (EC) penalizes companies with fines, while the US applies criminal law, and imposes both financial and custodial penalties against offenders.
  • Comparatively, more centralized control of mergers does occur in the European Union (EU) by the EC than the US.
  • Differing stance on cartels (collusion of firms to divide the market).
    The EU treats cartels as financial offence, while the US laws treat it as “property crime”.
  • The EC also has power to block or review mergers, while the Federal agencies in the US require permission from the Courts to do so.
  • Ian Madrigal is an activist and was in news in 2018 for dressing up as the Monopoly Man and sitting behind Sundar Pichai during his testimony before the US Congress. It was a metaphor for the corporate consolidation by wealthy technology monopolies by literally turning up as Mr Monopoly.
  • The Social Network is a 2010 American biographical drama film and portrays the founding of social networking website Facebook and the resulting lawsuits. It was named one of the best films of the year by 78 critics, and named the best by 22 critics, the most of any film that year.
  • PageRank is an algorithm used by Google Search to rank web pages in their search engine results. PageRank was named after Larry Page, one of the founders of Google.