PowerGrid InvIT IPO: Key things to know

28 Apr 2021  Read 979 Views

The number of companies releasing their IPOs doesn't seem to stop anytime soon. There is yet another company releasing its IPO on 29th April 2021. But this is a slightly unique one. Power Grid Corporation of India is hitting the market with an IPO of its infrastructure investment trust. Let's understand all about the company and the IPO to figure out if it's worth a shot!

PowerGrid Infrastructure Investment Trust

PowerGrid infrastructure investment trust is owned by the government-run electric utility company Power Grid Corporation of India Limited. It is India's first infrastructure investment trust to be floated by a public sector company.

Infrastructure investment trusts are very similar to mutual funds. They help individuals or institutional investors to invest their surplus directly into the infrastructure sector. They are paid returns on this investment. Infrastructure investment trusts are a modified version of the real estate investment trusts. In India, SEBI regulates the operations of infrastructure investment trusts. 

PowerGrid InvIT was launched on 14th September 2020 and registered with the SEBI on 7th January 2021. The trust consists of 4 parties:

  • Sponsor: Similar to a promoter of a company, a sponsor is responsible for transferring or undertaking to transfer the initial portfolio of the assets to InvIT. The Sponsor is required to lock in 15% or 25% of the total outstanding units of an InvIT held by it for a period of three years. Power Grid Corporation of India is the sponsor of this trust. 
  • Trustee: Trustee is an entity that holds the assets of the InvIT, overlooks the activities of investment manager and project manager and ensures compliance with SEBI. IDBI Trusteeship Services Limited is its trustee. 
  • Investment manager: An Investment manager is responsible for managing the InvIT assets, undertaking investment decisions on behalf of the InvIT, initiating activities related to the general functioning of the InvIT. PUTL has been appointed as the investment manager.
  • Project manager: A project manager executes an infrastructure project and strives to achieve project milestones in accordance with the project documents. POWERGRID Corporation has been appointed as the project manager to the Trust.

Financials of PowerGrid

The PowerGrid InvIT's Initial Portfolio Assets comprises five power transmission projects that are located across five states of India. They are:

  • POWERGRID Kala Amb Transmission Ltd.,
  • POWERGRID Warora Transmission Ltd.,
  • POWERGRID Vizag Transmission Ltd.,
  • POWERGRID Parli Transmission Ltd.
  • And POWERGRID Jabalpur Transmission Ltd.

These 5 assets are collectively referred to as the SPV group.

The below mentioned financial information is of the SPV group (Rs. In millions)

Particulars 

30th September 2020

31st March 2020

30th March 2019

Total assets

68,727.28

68,212.16

70,002.62

Total revenue

6,745.72

13,340.94

9,841.20

PAT (Profit After Tax)

2089.01

3788.25

2480.63

 

Projections of revenue from operations and cash flow from operating activities (Rs. In millions)

Particulars 

2022

2023

2024

Revenue from operations

13,137.86

12,587.71

12,344.21

Cash flow from operating activities

12,085.81

11,684.89

11,373.88

PowerGrid InvIT IPO Details

  • The units of PowerGrid InvIT are to be listed on both NSE and BSE
  • The IPO opens for public subscription on 29th April 2021 and remains open till 3rd May 2021. The anchor book opens for bidding for a day on 28th April 2021. Anchor investors are qualified institutional buyers like commercial banks, mutual funds, venture capitals and others, for whom an IPO opens a day before it is opened for the public.
  • The price band of PowerGrid InvIT has been fixed at Rs 99-100 per unit.
  • Any interested investor other than the institutional investors can bid for a minimum of 1,100 units and in multiples of 1,100 units thereafter.
  • PowerGrid infrastructure investment trust IPO includes a fresh issue of Rs. 49,934.84 million and Rs. 27,415.08 million from offer for sale by selling unitholders. Fresh issue refers to a new set of shares issued to the public. Whereas in an offer for sale, the shares held by the promoters are offered for sale to the general public. The company does not get any funds through an offer for sale.

The Lead Managers to the Offer are Edelweiss Financial Services Limited, Axis Capital Limited, ICICI Securities Limited, and HSBC Securities and Capital Markets (India) Private Limited.

Purpose of the IPO

The trust intends to provide loans to the Initial Portfolio Assets for the repayment or pre-payment of debt, including any interest that is accrued, availed by the Initial Portfolio Assets. As mentioned above, the Initial Portfolio Assets of the trust include POWERGRID Kala Amb Transmission Ltd., POWERGRID Warora Transmission Ltd., POWERGRID Vizag Transmission Ltd., POWERGRID Parli Transmission Ltd. and POWERGRID Jabalpur Transmission Ltd. 

How to apply?

Generally, there are 2 ways to apply for an IPO. One can apply through the UPI IPO method or net banking ASBA (Applications Supported by Blocked Amount). But for the IPO of an infrastructure investment trust, UPI is not yet available.

One must apply through ASBA. ASBA is an application that helps block the application money in the investor's bank account. This amount is debited if and only when the shares are selected for allotment.

Reasons to consider

  • PowerGrid infrastructure investment trust is owned by a profitable public sector company, having a long-standing in the industry. It automatically implies trust worthiness.
  • Investment in infrastructure investment trusts is a good way to diversify an investor's portfolio.
  • It is also a great investment avenue to earn fixed returns.

Reasons to be cautious 

  • It requires huge investment and, therefore, might not be feasible for small investors.
  • PowerGrid InvIT is relatively new when compared to the other infrastructure investment trusts existing in the market.
  • InvIT is risky because even the slightest change in the regulatory framework relating to the infrastructure sector could negatively impact the trust.

Conclusion

India, being one of the fastest-growing economies in the world, is focusing a lot on the infrastructure sector. Having said that, the supply of capital towards infrastructure by sources other than government expenditure is limited, which is one of the many reasons for the establishment of investment trusts in this sector. 

Though this offer may seem lucrative at the first instance, it is always better to do research and use one's own knowledge and experience to rationally evaluate before investing.

So, assuming you've done your homework, is this IPO a hit or a miss

About the Author: Kaveri Iyer | 11 Post(s)

Kaveri is currently pursuing a Master of Commerce specializing in Applied Finance. the Varied areas of interest include finance, music, literature, psychology and metaphysics. She loves the art of storytelling and has an unquenchable thirst for knowledge.

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