IPO Note - Power Grid Corporation of India Ltd By Choice Broking
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Salient features of the IPO:
* POWERGRID Infrastructure Investment Trust (PGInvIT), is India’s first InvIT sponsored by Maharatna PSU i.e. Power Grid Corporation of India Ltd. The trust is planning to raise Rs. 7,735cr through an InvIT IPO, which will open on 29th Apr. and close on 3rd May 2021. The price band is Rs. 99 - 100 per unit.
* The issue is a combination of fresh issue and OFS. PGInvIT will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 4,993.5cr will be utilized for the repayment/prepayment of existing debt availed by its asset SPVs
* PGInvIT been given a credit rating of AAA/Stable by ICRA Ltd., CARE Ratings Ltd. and CRISIL Ratings Ltd.
Key competitive strengths:
* Strong lineage and support from the Sponsor and Project Manager
* Consistent and stable cash flows from assets with long term visibility and low counter party risks
* Strong financial position
* Government support and an established regulatory framework
* Strategic and critical nature of power transmission infrastructure with low risk of emergence of alternate transmission infrastructure
* Skilled and experienced Investment Manager having strong corporate governance philosophy
Risk and concerns:
* Unfavorable change in government policies & regulations
* Poor availability of transmission assets
* Delay or difficulty in expanding the asset base
* Poor financial position of its customers
* Unfavorable interest/finance costs
Peer comparison and valuation:
PGInvIT has not disclosed the NAV, thus the valuation and its benchmarking with the listed peer cannot be ascertained.
Below are a few key observations of the issue:
* PGInvIT - an infrastructure investment trust is set-up to own, construct, operate, maintain and invest in power transmission assets in India. The trust is sponsored and managed by Maharatna PSU (i.e. Power Grid Corporation of India Ltd., PGCIL).
* PGCIL is the largest power transmission company in India in terms of length of transmission lines measured in circuit kilometers (ckm). As of 31st Aug. 2020, PGCIL’s share in India’s cumulative inter-regional power transfer capacity and transmission charges were more than 85%. Moreover, according to the World Bank, the sponsor was internationally the third largest transmission utility in Oct. 2019.
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