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Power Grid files offer document for InvIT IPO, first ever by a PSU

This will also be only the third InvIT to be listed in the Indian markets, after IRB InvIT and India Grid Trust both of which went public in 2017 (Photo: Bloomberg)Premium
This will also be only the third InvIT to be listed in the Indian markets, after IRB InvIT and India Grid Trust both of which went public in 2017 (Photo: Bloomberg)

  • This will be the first time a state owned entity is monetizing its infrastructure assets through the InvIT route
  • The InvIT will initially comprise of 11 power transmission lines currently owned and operated by Power Grid

Mumbai: State owned power transmission company Power Grid Corp of India Ltd has filed the draft IPO papers for its first infrastructure investment trust (InvIT) - Powergrid Infrastructure Investment Trust.

This will be the first time a state owned entity is monetizing its infrastructure assets through the InvIT route. This will also be only the third InvIT to be listed in the Indian markets, after IRB InvIT and India Grid Trust both of which went public in 2017.

An infrastructure investment trust is a quasi debt instrument that provides investors with a steady yield derived from cashflows from operating infrastructure projects such as roads, transmission lines or renewable energy projects. Publicly traded InvITs, like the one proposed by Power Grid can also offer an equity upside to investors.

The IPO will see the InvIT raise up to 4,995 crore by selling new units of the trust, while its sponsor Power Grid also plans to sell units worth up to 3,000 crore through the IPO, taking the total size of the share sale to almost 8,000 crore.

The InvIT will initially comprise of 11 power transmission lines currently owned and operated by Power Grid.

"We propose to acquire five projects initially with a total network of 11 power transmission lines of approximately 3,698.59 ckm and three substations having 6,630 MVA of aggregate transformation capacity, as of 30 September 2020, across five states in India (the “Initial Portfolio Assets"). The Initial Portfolio Assets were awarded to our Sponsor under the TBCB mechanism on a build-own-operate-maintain (BOOM) basis," the offer document stated.

"The Initial Portfolio Assets earn revenues, i.e. availability based transmission charges. In addition, maintaining availability of the Initial Portfolio Assets in excess of 98%, gives us the right to claim incentives," it added.

Domestic investment banks ICICI Securities, Axis Capital and Edelweiss are managing the InvITs initial share sale.

Power Grid is not the only state owned entity that plans to raise funds through the InvIT route.

Mint reported on 15 January that state owned National Highways Authority of India (NHAI) plans to mobilize almost 10,000 crore this calendar year through an InvIT and other avenues.

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