PowerGrid InvIT IPO: PowerGrid InvIT IPO sails through on Day 3 led by HNIs

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NEW DELHI: The IPO of infrastructure investment trust (InvIT), sponsored by the Power Grid Corporation of India, sailed through on the third day of the bidding process on Monday. The issue was subscribed 4.8 times by 5:00 pm.

The issue received bids for 2,05,40,48,700 units against 42,54,25,000 units on offer for subscription. Quota for HNIs was subscribed 5.1 times and for QIBs 4.6 time. The issue had been subscribed only 61 per cent till the end of Day 2.

Most analysts believe investors should subscribe to the issue as it offers prospects of lucrative and consistent yields. The issue is a good option for investors looking for a 9-12 per cent yield arising from stable cash flow, they said. The management says the InvIT is likely to give distributable cash flow at an average of Rs 1,150 crore over the next three years, which implies a 11 per cent cash flow yield, according to analysts. .

“The product offers stability in cash flow, low counterparty risks, strong lineage of Power Grid Corporation and growth from future acquisition of projects. This coupled with replacement of Power Grid Corporation debt via IPO proceeds implies the InvIT will start out as debt-free,” said Rupesh Sankhe of Edelweiss Securities.

The stability in cash flows stems from transmission charges being fixed for a period of 35 years. There is minimal price risk arising from transmission charge resetting, which provides stability and long term visibility. Power transmission projects are characterized by low levels of operating risk. Once a transmission project has been commissioned, it requires low levels of expenditure for O&M.

The infrastructure trust is a first of its kind offering by a state-owned entity in India and is priced at Rs. 99-100 per unit. Power Grid InvIT is looking to raise Rs 7,735 crore through the issue which includes a fresh issue as well as an offer for sale from the sponsor.

The infrastructure trust has said it plans to acquire five projects initially from Power Grid with a total network of 11 power transmission lines of 3,698 km and three substations having 6,630 MVA of aggregate transformation capacity across 5 states in India.

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