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).

Curiopedia
  • 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.