Electricity transmission company Power system Corporation of India is preparing to launch the primary ever InvIT (infrastructure investment trust) IPO by a state-owned firm, on April 29, marking a landmark deal for the New Delhi markets.
The move comes at a time when the govt has set a disinvestment target of Rs 1.75 lakh crore for FY22 and is betting big on initial public offerings (IPOs) by life assurance Corporation and Air India IPOs, after arising short within the previous fiscal year.
An InvIT may be a collective investment scheme almost like an open-end fund, which enables direct investment of cash from individual and institutional investors in infrastructure projects to earn a little portion of the income as a return.
“ This is often an enormous transaction and therefore the size of the IPO is probably going to be around Rs 7,700 crore, with a primary component of around Rs 4500 crores and therefore the balance making up the secondary component. the worth band is probably going to be announced on April 29,” said one among the persons cited above.
A person said strong interest has been seen from stable yield seekers and a clutch of worldwide pension funds, global long-only funds, domestic infra funds, and leading mutual funds and insurance players are keen on this offering. “The power transmission sector has been insulated from the impact of Covid-19 and therefore the government is looking to unlock value by monetizing 5 assets.”
“This eagerly awaited invIT IPO will help to scale back the debt burden of the firm and can also provide capital for fresh network expansion plans,” said a 3rd person, confirming the launch plans. A fourth individual also confirmed an equivalent.
All four persons spoke to Moneycontrol on the condition of anonymity. Moneycontrol couldn’t immediately contact the power system and has sent an email query. The response is awaited and therefore the story is going to be updated as soon as we hear from the firm.
On January 27, 2021, Moneycontrol was the primary to report the filing of the DRHP ( draft red herring prospectus ) with market regulator Sebi by the power system.
Market view on Power Grid
According to a report dated December 21, 2020, by brokerage Sharekhan, “Power Grid’s regulated RoE model is resilient in current uncertain times and provides strong earnings visibility (19 percent PAT CAGR over FY21E-FY23E) and RoE of 19 percent. Unlike thermal power companies, power system doesn’t have an overhang of ESG. Potential monetization of 5 TBCB assets worth Rs 7,164 crore and normalisation of outstanding dues from discoms (Rs 6,477 crore as of September 2020) are key near-term catalysts.”ESG refers to environmental, social and governance factors.“Likely proceeds from InvIT provide room for higher dividends. India’s aim to expand renewable energy capacity to ~445 GW (vs 87GW in FY20) would entail a CAPEX of Rs 2.86 lakh crore during a decade for transmission lines, providing growth opportunity of 8-9 percent per annum for power system,” the report added.