PowerGrid InvIT IPO – IPO Price Band, IPO Price Valuations and Review
PowerGrid InvIT IPO (Powergrid Infrastructure Investment Trust InvIT IPO) would open for subscription on April 29, 2021. PowerGrid InvIT owns, constructs, operates, maintains and invests in power transmission assets in India. Power Grid has recently registered as InvIT with SEBI (Jan-2021). Should you invest in PowerGrid InvIT IPO? In this article we would provide PowerGrid InvIT IPO dates, IPO Price band, market lot, reasons to invest, risk factors, IPO Price valuations and review on whether one should invest or avoid.
Also read: Indigrid Trust NCD offers up to 8.2% interest – Should you invest?
What are Infrastructure Investment Trusts (InvITs)?
You can skip this section if you are already aware of the business model.
InvITs are trusts, registered with SEBI. These InvITs can hold the operational infrastructure projects of sponsors with long concession periods and stable cash flows. Once registered with SEBI these InvITs can raise funds via public or private placement and issue units to investors.
In return, investors obtain a share of the annual distribution of dividends and interests. Listed InvITs are required to maintain a maximum-leverage ratio of 49.0%, which can be increased to 70.0%, subject to a track record of six (6) continuous distributions to unit-holders (post listing), an AAA-rating, additional disclosure and compliance requirements, and end-use restrictions.
About Power Grid Infrastructure Investment Trust InvIT Limited
Company is an InvIT set-up to own, construct, operate, maintain and invest as an infrastructure investment trust as permissible in terms of the InvIT Regulations, including in power transmission assets in India. They were registered with SEBI as an InvIT on January 7, 2021.
There are generally 3 parties for every InvIT i.e. Sponsor/project manager, investment manager and trustee.
1) Its Sponsor and project manager is Power Grid Corporation of India Limited, also acting in the capacity of its Project Manager, is a CPSE under the Ministry of Power, GoI and is listed on BSE and NSE.
2) Its Investment Manager is PowerGrid Unchahar Transmission Limited, a wholly-owned subsidiary of PGCIL. It is responsible for managing the InvIT, the Initial Portfolio Assets as well as undertaking investment decisions relating to its assets.
3) Its Trustee is IDBI Trusteeship Services Limited is a SEBI registered debenture trustee. This trustee is responsible for ensuring that its business activities and investment policies comply with the provisions of the InvIT Regulations, and monitoring the activities of its Investment Manager and the Project Manager.
PowerGrid InvIT competitive strengths
1) Strong lineage and support of its Sponsor and Project Manager
2) Consistent and stable cash flows from assets with long term visibility and low counterparty risks
3) Strong financial position
4) Government support and an established regulatory framework
5) Strategic and critical nature of power transmission infrastructure with low risk of emergence of alternate transmission infrastructure
6) Skilled and experienced Investment Manager has a strong corporate governance philosophy
PowerGrid InvIT IPO Dates, Price Band and Issue Details
PowerGrid InvIT IPO opens on Thursday, April 29, 2021 and closes on Monday, May 3, 2021. Here are the IPO issue details.
|IPO Opening Date||29-Apr-21|
|IPO Closing Date||03-May-21|
|Issue Type||Book Built Issue IPO|
|IPO Price band||Rs 99 to Rs 100 per share|
|Market Lot||1100 Shares|
|Min Order Quantity||1100 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total – Rs 7,734.99 Crores
Fresh issue – Rs 4,993.48 Crores
OFS – Rs 2,741.51 Crores
PowerGrid InvIT IPO DRHP SEBI Link
Objects of Powergrid Infrastructure Investment Trust InvIT IPO
Here are the objects of the IPO issue.
1) Offer for Sale (OFS) – Under OFS, the selling unitholder will be entitled to the proceeds of the Offer for Sale and Trust will not receive any proceeds from the Offer for Sale.
2) Fresh Issue – The proceeds of the fresh issue will be utilised towards the following objects:
i) providing loans to the Initial Portfolio Assets for repayment or pre-payment of debt, including any accrued interest, availed by the Initial Portfolio Assets; and
ii) General purposes.
What is the credit rating of Power Grid InvIT?
Below are the credit ratings of Power Grid InvIT.
1) Provisional [ICRA] AAA (Stable) – ICRA Limited
2) CARE AAA (Is) – CARE Ratings Limited
3) Stable and Provisional CCR AAA/Stable – CRISIL Ratings Limited
Company Financial Performance
Since this InvIT is newly formed in Jan-2021, there is no historical financial performance.
Why to invest in this PGCIL InvIT IPO?
1) PowerGrid InvIT owns, constructs, operates, maintains and invests in power transmission assets in India. Investors can expect a regular income by investing such assets by investing in these shares.
2) Company intend to distribute at least 90% of the net cash available for distribution to its Unitholders once at least every quarter in every financial year. Means investors can get regular income, every quarter.
Risk Factors of investing in this IPO
1) This trust is new settled trust and does not have any operating history. This will make it difficult to accurately assess its future growth prospects
2) The company may be unable to operate and maintain its power transmission projects to achieve the prescribed availability which may adversely affect its cash flows and results of operations.
3) Its revenues are derived from payments received from DICs (Designated Inter State Transmission System Customers) and any delay in payments of such billed transmission charges can affect cash flows and results of operations.
4) Transmission charges under the TSAs are generally fixed. They may not be able to offset the increase in costs (incl. operation and maintenance costs). This may impact its business and financial condition.
5) Company intends to distribute at least 90% of the net cash available for distribution to its Unitholders once at least every quarter in every financial year. However, there is no guaranteed income and such income can fluctuate with various risk factors indicated in the prospectus.
6) Retail investors need to invest Rs 1.1 Lakhs minimum in this InvIT IPO.
7) For complete internal and external risk factors, you can refer the RHP of the company
PowerGrid InvIT IPO Dates / Time Table / IPO Schedule
|Finalization of Allotment||10-May-21|
|Initiation of Refunds||11-May-21|
|Credit to Demat Account||11-May-21|
|IPO Shares Listing Date||17-May-21|
How to apply this IPO?
You can login to your demat account, visit IPO section and click on the IPO link of PowerGrid InvIT Limited. You can then enter minimum lot quantity and price band and then submit.
Powergrid InvIT IPO GMP – Grey Market Premium
Powergrid InvIT GMP Chanayka – Not available
Powergrid InvIT GMP IPOwatch – Not available
Powergrid InvIT GMP IPO Central – Not available
Powergrid InvIT GMP IPO Guru – Not available
IPO Price Valuations – Powergrid Infrastructure Investment Trust InvIT
PowerGrid InvIT IPO Issue Price band is Rs 99 to Rs 100.
Since there is no previous operating history of the company, we cannot check whether the issue price is under priced or overpriced.
How is listed InvIT companies share price performance?
There are few listed companies, let us check their historical share price performance.
1) IRB InvIT
In the last 3 years – 46% negative returns
In the last 1 year – 59%
2) IndiGrid Trust InvIT
In the last 3 years – 39%
In the last 1 year – 39%
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PowerGrid InvIT IPO Review – Should you invest?
Now, let me conclude whether one should invest or avoid (buy or not) such IPOs.
PowerGrid InvIT owns, constructs, operates, maintains and invests in power transmission assets in India
The company does not have operating history.
Since there is no operating history, we do not know whether the issue price is under priced or over priced.
Two InvIT companies listed earlier have given negative or zero returns in the last 3 years.
While we cannot say anything about listing gains, in the short term, investors may or may not see gains. High risk investors with medium to long term perspective can invest in such IPOs can provide regular income by way of distribution of available surplus. Alternatively, one can wait for share price correction and invest.
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Why there is no subscription under RII.
It is not fair to compare InvITs with equity shares as it is not meant for investment for capital appreciation but for regular returns. In that context, IndiGrid InvIT is performing well as it is consistently giving 12% returns since inception. In that context, how do you asses Powergrid InvIT?
Indigrid InvIT share price has fallen by almost 40% till an year back (2018 to Mar-2020). If someone would have purchased at that time, they would have got higher returns compared to the one who bought during IPO in 2018). Pls see my last sentence in the article. If such companies are available at lesser price or price falls during stock market corrections, one can gun for such InvITs to get regular income. Many of our readers bought Indigrid InvIT and they say 9% to 10% annualised dividends is what they are getting. PowerGrid InvIT also one can expect similar returns, but not guaranteed. Investors who already know whether it is 9% or 12% and happy with such dividends would invest in Indigrid InvIT compared to Powergrid InvIT where we are yet to know what kind of dividends we may get.
The only problem with market purchase is that there is an additional 0.8 to 1.00% expenses involved in the form of brokerages and other expenses which are not there when you buy through IPO/FPO directly.
Hello Suresh thanks for sharing this insightful article.
(1) what is the book value of the proposed unit at a price of Rs. 99-100.
(2) Is there/should there be any connection/link between book value and the market price.
I have read it some where that the market/issue price is 3.5 times the book value/NAV of this Powergrid Invit. I have no recourse available to cross check or verify it from any other source because the Company has not declared the book value/NAV in its prospectus which in my opinion, they must do it.
And therefore, SEBI should direct such companies to compulsorily declare their book value/NAV at the time of NFO and at the time of every quarterly results to bring transparency and better informed investor decision.
Hello Kamal, There is DRHP (draft version) and RHP (final version) of prospectus which company files before IPO dates open. PowerGrid InvIt RHP is on all SEBI / BSE / NSE websites and NAV is already there in RHP. In page no. 91, there is NAV of Rs 113.46 indicated. Here is the link .
Does it mean, Suresh Sir, that against the depreciated book value , of the underlying assets, of around Rs. 30, the fair market value (FMV) assigned is Rs. 113.49. And by this way, PGCIL has made a decent 3.5 times return on its transfer of assets to InvIt.
Thank you SV Subrahmanyam