PowerGrid InvIT IPO

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A) What is InvIT?

1) An investment trust is something that has assets under its management and generates revenues from those assets and returns to the stakeholders or in this case, InvIT unitholders.

2) One of the most important factors underlying an investment trust is the underlying assets it owns.

3) They could be toll gates, transmission lines, rental buildings, and other investment yielding platforms.

B) When does PoweGrid InvIT Formed?

PowerGrid has registered an InvIT on 07.01.2021. This yield vehicle instrument has transmission lines and substations as its assets. It generates money through these transmission lines.

C) Why this IPO is coming and how investors will earn?

Here, PowerGrid has transferred 5 project assets to PowerGrid InvIT. Now, to pay the debt of these transmission assets, PowerGrid InvIT needs money. That is why they are coming up with an IPO to raise money to pay off the debt of these assets.

These assets will get rental income from PowerGrid. This income then will be distributed among the investors in the form of dividends. A simple mechanism is we (consumers) pay money to the PGCIL and it pools the money and distributes it to the various managers of the substations and in turn, PowerGrid InvIT pays to its shareholders the interest, which it calls DPU or distribution per unit.

Initially, PowerGrid InvIT has acquired five projects 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 December 31, 2020, across five states in India.

D) What is the minimum size of investment?

This is not the regular IPO where retail investors can put Rs.15000 application. The minimum ticket size is somewhere around 1 lakh.

QIB Quota = 75%

HNI Quota = 25%

E) Shareholding Pattern Post-listing

F) Video to understand basics of InvIT

G) Video to understand Yield and Chances of Allotment

H) Video to understand how investors of PowerGrid InvIT will earn money?

Objects of the PowerGrid InvIT IPO:

1. PowerGrid InvIT is raising 4993 Crores from the IPO to pay debt of 5 assets they have purchased from PowerGrid.
Name of the asset Amount
PVTL 783 Cr
PKATL 186 Cr
PPTL 1300 Cr
PWTL 1540 Cr
PJTL 1182 Cr
2. Apart from that, the issue comprises of OFS as well of 2741 Crores.

PowerGrid InvIT IPO Details:

Open Date: Apr 29 2021
Close Date: May 03 2021
Total Shares: 773,499,100
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 7734 Cr.
Lot Size: 1100 Shares
Issue Price: ₹ 99-100 Per Equity Share
Listing At: NSE,BSE
Listing Date: May 11 2021

Promoters And Management:

POWERGRID Unchahar Transmission Limited is the manager of the InvIT.

Financials of PowerGrid InvIT IPO:

(Figures in Crores)
Year Revenue Finance cost Other expenses PAT Shares EPS
2018 345 115 8 114 44.2 2.58
2019 984 328 32 248 99.86 2.48
2020 1334 429 38 378 120 3.15
9MFY21 1090 291 31 337 121 2.79
Future expected Cash-flows from 5 projects
Projects 2022 2023 2024
Expected cash flows
POWERGRID Vizag Transmission Ltd 260 225 201
POWERGRID Kala Amb Transmission Ltd 65 61 56
POWERGRID Parli Transmission Ltd 308 308 307
POWERGRID Warora Transmission Ltd 343 343 342
POWERGRID Jabalpur Transmission Ltd 242 242 242

Comparison With Peers:

Company Revenue (cr) Asset Size (cr) Circuit (Km) No. of transmission lines Mcap
Indi Grid 1243 10816 7570 13 9146
PowerGrid InvIT 1334 6321 3689 11 NA

Recommendation on PowerGrid InvIT IPO:

PowerGrid InvIT IPO Rating by InvestorZone team: 4/10 Pros: 1. Power is the backbone of economy. It is directly related to the GDP growth of the country and that is why power or electricity is one of the core sector of economy. India which is looking to become manufacturing hub in the coming years, will see huge demand for power. This in turn will be beneficial for InvIT unit holders. 2. The manager of this InvIT is Power Grid which has an excellent track record of serving this country's power need and it is a well managed PSU. 3. The transmission assets in which unit holders will invest money has life of 35 years which can be extended to 50 years. So clear visibility of cash-flows. Cons: 1. The biggest cons for us is, the company has not disclosed NAV value of assets. So, it is very difficult to calculate whether, the price band of 99-100 is cheaper or costlier than listed InvIT of Sterlite power i.e. Indi Grid. In yesterday management meet, we have asked this question twice, but they did not reply. This poses a question mark. 2. Plus along with fresh fund raising, the issue also have OFS. That means whole 7734 will not go to company. ~2234 crores will go to government. 3. We pay electricity bills to DISCOMS( distribution companies), they in turns pays to PGCIL(Power Grid) and then Power Grid finally pays to the different transmission lines operated by public and private companies. This means, if DISCOMS which are struggling from last few years to pay dues to Power Grid, then delay in payment to transmissions lines will happen and which ultimately delays the dividend to unit holders of InvIT. However, there are provisions of payment of penalty if dues are not paid within 45 days to InvIT.

Registrar of PowerGrid InvIT IPO:

  1. Kfin Technology Private Limited

Discussion on PowerGrid InvIT IPO:

11 Comments

    PGInvIT – Basis –
    NIB ( HNI ) – 4.62216x
    QIB – 4.77015 x
    Unblocking of Funds – mostly today i.e. Tuesday, 11th May 2021

    i want to withdraw it..can anybody quickly tell how can i do it..i m not getting it in ICOCI

    Today is last date to apply. Minimum 3-4 applications are required to get one confirmed lot…

    The IndiGrid InvIT which was listed in 2016-17, is currently giving ~10% of Interest every year. Let us see how much we get in Power Grid that only be known after six month when they distribute dividends till then only projections can be made.

    The 5 Assets are awarded under the Tariff Based Competitive Bidding (TBCB) mechanism on a build-own-operate-maintain (“BOOM”) basis with a long-term Transmission Service Agreement (TSA) of 35 years from the
    COD. The average remaining term of the TSAs is over 32 years.

    So, clear visibility of cash-flows for the next 32 years.

    There is no lottery system here. The allotment will be done on proportionate basis.

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