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.

IPO Alert: What Should You Know About Barbeque Nation IPO?

IPO Alert: What Should You Know About Barbeque Nation IPO?

In the hot IPO season, another popular IPO is here. Barbeque Nation will be open for bidding on 24th March. Confused whether to subscribe to this IPO or not? Well, we got your back. Dive deeper into this story to get a basic understanding of the company, its financial performance and much more.

Crux of the Matter

Company Background

  • Founded in 2006, Barbeque Nation (BBQ) operates in the casual dining restaurants section.
  • 145 outlets: (138 in India | 5 in UAE | 1 each in Malaysia and Oman).
  • Famous for: Live grills embedded in dining tables – allowing guests to grill their barbecue right at their own tables.

Shareholding Pattern

  • Promoters: 60.24%
  • CX Partners: 33.79%
  • Alchemy Capital (The investment firm of Rakesh Jhunjhunwala): 2.05%

Equity shares worth ₹2 crores will be reserved for eligible employees, and the remaining stake is owned by other investors.

Objective
IPO Proceeds to be utilised for:

  • Expansion of Restaurant Chain.
  • Developing Delivery Business.
  • Debt Clearance.
  • General Corporate Purpose.

IPO Details

  • Issue Date: 24th March – 26th March
  • Price Band: ₹498 – ₹500 per share
  • Face Value: ₹5
  • Lot Size: 30 shares

Final Thoughts

Although the company has been raising fresh funds to fuel its restaurant chain, it has been incurring losses for the last 3 years, with the last year attributable to the pandemic.

However, its revenue has been growing steadily, and so is its debt. An investor must always be wary when a company uses too much debt to finance its growth.

On the governance front, the company has faced National Anti-Profiteering Authority under the GST Act, and some of its promoters are facing SEBI proceedings for non- compliance of securities law.

To read more about the company, you can read the ‘Draft Red Herring Prospectus’ available on SEBI’s website.

Curious to know how IPOs work? Click here to read about it in detail.

Curiopedia
  • Sajid Dhanani founded Barbeque Nation in 2006. Previously he ran the renowned Sayaji Hotels in Indore.
  • Barbecue is derived from the word ‘barbacoa‘ which means grilling on a raised wooden grate. It comes from the language of a Caribbean Indian tribe called the Taino.
  • Jubilant Foodworks invested Rs. 92 crores for a 10% stake in Barbeque Nation in January 2021.

Why Should You Be Cautious Of Nazara Tech IPO?

Nazara Tech became India’s first gaming company to go public. But amidst the IPO frenzy wave, here are some important things that an investor should know before investing in an IPO. Happy Reading!

Crux of the Matter

Back Story
Rakesh Jhunjhunwala backed Nazara Technologies is raising ₹583 crores via Initial Public Offering (IPO) at a price band of ₹1,100-01/share. Nazara tech is also India’s first gaming company filing for an IPO.

It also received approval for an IPO from SEBI in 2018, but didn’t go through it.

What Is So Peculiar?
IPOs are generally a way for companies to raise additional capital for expansions, or for paying off debt. However, they are also a good tool for existing investors to exit from the company (sell their stake). Such an exit is termed as “Offer for Sale”. The Nazara Tech IPO is also an OFS via which existing investors are exiting

The Caution
A snippet from Red Herring Prospectus of Nazara Tech IPO:

It must be noted that the company will not receive any money from the proceeds of the IPO. The company has reported loss in FY20 and in FY21 (year-to-date), besides reporting a steep growth in revenue in the same period.

Read more about Nazara Tech here.

What Are Special Purpose Acquisition Companies?

What Are Special Purpose Acquisition Companies?

Special Purpose Acquisition Companies (SPAC) an alternative to traditional IPO have been quite popular among investors during the pandemic. Let us understand in brief on how they operate.

Crux of the Matter

What Are SPACs?
Special Purpose Acquisition Company (or SPAC) is created solely for raising capital via an IPO for purchasing another company. Typically, it is established by investors who are experts in a particular industry domain.

What Is So Peculiar?
The founders usually have one target acquisition – which is not disclosed to avoid lengthy disclosures. Thus, SPACs are also known as Blank Cheque Companies since the investors have no clue where the money will be invested.

How Does It Work?
A SPAC raises money through IPO by selling shares (typically at $10 each). Along with it, a warrant is sold that gives investors preference to buy more stock at a fixed rate in future. The money raised via IPO is kept in an interest bearing trust until one of the two things happen:

  • The sponsors identify the target and acquire it or buy a stake in it using the funds raised. If the target is an unlisted firm, it becomes public via SPAC’s acquisition.
  • The SPAC is unable to find a company to merge/acquire in a time span of 2 years (subject to change) – resulting in its liquidation.

SPAC v/s IPO
Traditional IPOs are subject to:

  • Heavy regulations
  • Investor scrutiny
  • Take 4 -6 months to complete
  • Need to hire underwriters, do roadshows, pitch meetings, etc.

SPACS:

  • Quick listing possible due to no scrutiny
  • More like shell companies
  • Rely on the reputation of sponsors
  • Sponsors usually receive 20% of the target’s shares at a heavily discounted price .

Significant SPACs

  • Bill Ackman raised $4 billion through its SPAC Pershing Square Tontine Holdings Ltd.
  • Chamath Palihapitiya’s (former Facebook executive) Social Capital Hedosophia Holdings acquired a 49% stake in Virgin Galactic in 2019.

Curious to know how IPOs work? Read here

Curiopedia
  • A reverse merger or reverse IPO is the acquisition of a public company by a private company so that the latter can bypass the lengthy and complex process of going public. An IPO through a SPAC is similar to a standard reverse merger. SPACs are essentially set up with a clean slate where the management team searches for a target to acquire. This is contrary to pre-existing companies going public in standard reverse mergers.
  • According to an industry study published in January 2019, from 2004 through 2018, approximately $49.14 billion was raised across 332 SPAC IPOs in the United States. NASDAQ was the most common listing exchange for SPACs in 2018, with 34 SPACs raising $6.4bn. 
  • SPACs compete directly with the private equity groups and strategic buyers for acquisition candidates. The tightening of competition between these three groups could result in a bid for the best company and possibly increase valuations.

Most Awaited IPOs Of 2021

Most Awaited IPOs Of 2021

Since the beginning of 2021, there is a lot of interest in upcoming IPOs (Initial Public Offerings) among investors. With the government’s disinvestment goal acting as a perfect catalyst, let us look at some of the popular IPOs expected to be floated in 2021.

Crux of the Matter

Understanding Market Parlance
Fresh Issue
Issuing new equity shares of the company and selling them to investors in an open market.

Offer For Sale
Selling of shares by an existing promoter. A mechanism that allows the promoters of the company to reduce its holdings.

Life Insurance Corporation

  • LIC IPO is being touted as India’s biggest ever
  • The insurer controls 72% of the market and enjoys a 66% share in total first-year premium collection
  • Expected to contribute  a huge chunk to GOI’s goal of ₹2.1 trillion of disinvestment in FY21

Zomato
After raising $600 million from Tiger Global and others in a pre-IPO round, Zomato is expected to file for an IPO this year. This could be the first of the new-age Indian startups to go public.

Nykaa
The very first by an online cosmetic market, Nykaa plans to launch an IPO at the valuation of $3 billion mostly in the second half of 2021. 

Bajaj Energy

  • One of the largest thermal energy generators, BE’s issue size is expected to be ~₹5,450 crores.
  • It is also looking to acquire Lalitpur Power’s 1980 MW power plant from the proceeds of the IPO.

Kalyan Jewellers

  • One of the leading jewellery brands in India, the company is planning to raise ₹1,750 crores.
  • The IPO may consist of a fresh issue of ₹1,000 crores with the rest being Offer for Sale

RailTel Ltd.
From the department of Railways, this ICT infrastructure provider’s tentative issue size is ₹700 crores.

Read in detail about how do IPO’s work here

Curiopedia
  • Yogakshemam Vahamyaham“, the slogan of LIC is derived from Bhagavad Gita, which means “Your welfare is our responsibility“.
  • Nykaa was founded in 2012 by Falguni Nayar. The Nykaa brand name is derived from the Sanskrit word ‘Nayaka’ which means ‘one in the Spotlight.’
  • As of 2015, Indian Railways was India’s largest employer with ~1.4 million employees. It was also the world 8th largest employer.