Article

POWERGRID Infrastructure Investment Trust IPO Note

29 Apr 2021 Nikita Bhoota

POWERGRID Infrastructure Investment Trust IPO

Issue Opens: April 29, 2021
Issue Closes: May 03, 2021
Price Band: ₹99-100
No. of Units: 773,499,100
Bid lot: 1,100 units
Min. Bid Amount: ₹1,08,900
Issue Type: 100% Book building

Company Background

The POWERGRID Infrastructure Investment Trust (PGInvIT), sponsored by Power Grid Corporation of India Ltd. (PGCIL), was set up with the objective to own, construct, operate, maintain and invest as an infrastructure investment trust. PGCIL is India’s largest power transmission company and is also the project manager for the trust. The Initial Portfolio Assets (IPA) consist of five projects with a total network of 11 power transmission lines of ~3,698.59 ckm and three substations having 6,630 MVA of aggregate transformation capacity, across five states in India. PGInvIT intends to distribute at least 90% of the net cash available for distribution.

Offer Details

The offer consists of fresh issue of ₹4,993 cr and Offer for Sale of units aggregating up to ₹2,742 cr. The proceeds from the fresh issue are proposed to be utilized for providing loans to IPAs for repayment of debt including any accrued interest, availed by the IPAs.
 
Financials:

Particulars

FY18

FY19

FY20

9MFY21

Revenue from Operations (₹cr)

344

977

1,324

992

EBITDA %

97.6

96.6

97.1

96.9

PAT (₹cr)

114

248

379

337

Net Debt

5,330

5,574

5,137

4,945

CF from operations (₹cr)

373

343

1,052

901

Source: Offer Document, 5paisa Research

Key Points:
  • Stable cash flow with long term visibility and low counterparty risk:
    PGInvIT derives revenues from transmission charges under long term Transmission Service Agreements (TSAs, fixed for 35 years from Scheduled COD) resulting in minimal price risk, stability, consistent cash flows and long term visibility. The average remaining term of the TSAs is 32 years and the useful life of the transmission assets can be extended up to 50 years with required renovation works. The annual availability of each IPA has been maintained in excess of 98% from respective COD which gives them incentive revenues as per respective TSAs. Payment securities in the form of letters of credit, a surcharge of 1.50% p.m. on the unpaid amount for late payments, regulation of power supply in the event of non-payment and lack of alternate power infrastructure which deters transmission customers from defaulting on payments lowers the counterparty risk.

  • Strong financial position; significant room to fund future acquisitions: 
    PGInvIT believes that its financial position will help in finance future expansion plans. PGInvIT has been given a provisional rating of AAA by ICRA and CRISIL and AAA by CARE. Following utilization of the Offer Proceeds, the consolidated borrowings and deferred payments net of cash and cash equivalents will be below 49% of the total value of their assets (permissible limit) which can be increased to 70%. PGInvIT believes that there are significant opportunities available for growth from monetization of other TCBC projects/subsidiaries of the sponsors through InvIT route. Other than the IPAs, the sponsor has two operational subsidiaries, seven subsidiaries in the construction phase, and four subsidiaries in intrastate power transmission that are also in the construction phase.

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POWERGRID Infrastructure Investment Trust IPO Note

29 Apr 2021 Nikita Bhoota

POWERGRID Infrastructure Investment Trust IPO

Issue Opens: April 29, 2021
Issue Closes: May 03, 2021
Price Band: ₹99-100
No. of Units: 773,499,100
Bid lot: 1,100 units
Min. Bid Amount: ₹1,08,900
Issue Type: 100% Book building

Company Background

The POWERGRID Infrastructure Investment Trust (PGInvIT), sponsored by Power Grid Corporation of India Ltd. (PGCIL), was set up with the objective to own, construct, operate, maintain and invest as an infrastructure investment trust. PGCIL is India’s largest power transmission company and is also the project manager for the trust. The Initial Portfolio Assets (IPA) consist of five projects with a total network of 11 power transmission lines of ~3,698.59 ckm and three substations having 6,630 MVA of aggregate transformation capacity, across five states in India. PGInvIT intends to distribute at least 90% of the net cash available for distribution.

Offer Details

The offer consists of fresh issue of ₹4,993 cr and Offer for Sale of units aggregating up to ₹2,742 cr. The proceeds from the fresh issue are proposed to be utilized for providing loans to IPAs for repayment of debt including any accrued interest, availed by the IPAs.
 
Financials:

Particulars

FY18

FY19

FY20

9MFY21

Revenue from Operations (₹cr)

344

977

1,324

992

EBITDA %

97.6

96.6

97.1

96.9

PAT (₹cr)

114

248

379

337

Net Debt

5,330

5,574

5,137

4,945

CF from operations (₹cr)

373

343

1,052

901

Source: Offer Document, 5paisa Research

Key Points:
  • Stable cash flow with long term visibility and low counterparty risk:
    PGInvIT derives revenues from transmission charges under long term Transmission Service Agreements (TSAs, fixed for 35 years from Scheduled COD) resulting in minimal price risk, stability, consistent cash flows and long term visibility. The average remaining term of the TSAs is 32 years and the useful life of the transmission assets can be extended up to 50 years with required renovation works. The annual availability of each IPA has been maintained in excess of 98% from respective COD which gives them incentive revenues as per respective TSAs. Payment securities in the form of letters of credit, a surcharge of 1.50% p.m. on the unpaid amount for late payments, regulation of power supply in the event of non-payment and lack of alternate power infrastructure which deters transmission customers from defaulting on payments lowers the counterparty risk.

  • Strong financial position; significant room to fund future acquisitions: 
    PGInvIT believes that its financial position will help in finance future expansion plans. PGInvIT has been given a provisional rating of AAA by ICRA and CRISIL and AAA by CARE. Following utilization of the Offer Proceeds, the consolidated borrowings and deferred payments net of cash and cash equivalents will be below 49% of the total value of their assets (permissible limit) which can be increased to 70%. PGInvIT believes that there are significant opportunities available for growth from monetization of other TCBC projects/subsidiaries of the sponsors through InvIT route. Other than the IPAs, the sponsor has two operational subsidiaries, seven subsidiaries in the construction phase, and four subsidiaries in intrastate power transmission that are also in the construction phase.