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Shares of PowerGrid Infrastructure Investment Trust (InvIT) closed at 3% premium on Friday after its initial public offering was subscribed 4.83 times last week.

PowerGrid Infra shares closed at 103 on BSE, up 3% from their issue price of 100 a share. The benchmark 30-share Sensex gained 0.09% to 48,732.55 points.

PowerGrid Infra shares opened at 104 on Friday, compared with the issue price of 100 per share. Earlier in the day, they touched a high of 104.97 and a low of 102.84.

The InvIT raised 7,735 crore via a public issue by issuing fresh shares worth 4,993.48 crore and an offer for sale of 2,741.50 crore by PowerGrid.

As per management projections, Powergrid InvIT is likely to generate cash flow from operations at an average of 1,170 crore over the next three years, which implies a 10% cash flow yield.

Most brokerage firms have recommended subscribe rating to the IPO given competitive advantage of its sponsors, consistent and stable cash flow, strategic and critical nature of power transmission business and strong financial positioning.

The offer is priced at around a 3.5x multiple on the book value. Investors can expect a pre-tax yield of 9 to 11% based on the utilization of funds to repay the special purpose vehicle level debt, analysts said.

"Given that the PowerGrid InvIT will start out as debt-free, provides more room for growth from future acquisition of PWGR TBCB portfolio of 21,000 crore currently under construction. Listed companies, such as Sterlite Power-sponsored Indigrid, are trading at a 9% yield with a 9% premium to its net asset value (NAV), while PowerGrid InVIT is available at 11% yield and a 1% premium to its NAV at the upper price band. PowerGrid InVIT is a good option for investors looking for a 10-12% yield arising from stable cashflow," said Elara Capital in its note to investors.

The issue received bids for 2.05 billion equity shares against the issue size of 425.43 million shares, according to stock exchange data. At the upper end of the 100 price band for the issue, the issue drew bids worth roughly 20,547 crore

An InvIT 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, such as the one proposed by PowerGrid, can also offer an equity upside to investors.

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