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PowerGrid InvIT IPO opens: Strong financials, power transmission biz make it attractive; should you subscribe?

he units of PowerGrid InvIT are proposed to be listed on BSE and NSE. Image: Reuters

PowerGrid Infrastructure Investment Trust (InvIT) IPO opened for subscription on Thursday, April 29, 2021, in the price band of Rs 99-100 per unit. The units of PowerGrid InvIT are proposed to be listed on BSE and NSE. Through this IPO, the company plans to raise Rs 7,735 crore comprising a fresh issue of Rs 4,993.48 crore and offer for sale of up to Rs 2,741.51 crore of existing units. Upon successful listing, it will become the third InvIT to be listed on the bourses after IndiaGrid Trust and IRB InvIT.

Power Grid being Maharatna of the GOI and being a dominant player in the transmission of power (around 85% market share) the prospects are expected to be bright. “As the operations are critical it can be expected to see great interest from the Street (both retail and institutional), The firm has stable cash flow and the Industry is capital intensive with long gestation period thereby reducing the threat of competitors,” Vishal Balabhadruni, Senior Research Analyst at CapitalVia Global Research, told Financial Express Online.

Any investor subscribing to the issue would require a minimum investment of Rs 1.1 lakh per lot. The issue has been reserved 75 per cent for institutional investors and the remaining 25 per cent for non-institutional investors. As per management projections, Powergrid InvIT is likely to generate cash flow from operations at an average of Rs 11.7 billion over the next three years, which implies a 10 per cent cash flow yield. Powergrid InvIT’s Sponsor, Power Grid Corporation of India Limited (PGCIL), also acting in the capacity of Project Manager, is a CPSE under the Ministry of Power. The sponsor also provides transmission and distribution consultancy services in India and other jurisdictions, with footprints in 21 countries (including India). “We recommend to subscribe to this IPO as the sponsor is the mega player with so many ongoing projects along with the strong financial performance and stable cash flows,” said Saurabh Joshi and Ridhima Goyal, research analysts, Marwadi Shares and Finance Ltd.

PGInVIT is an infrastructure investment trust (InVIT) established to own, construct, operate, maintain and invest in power transmission assets. Analysts at Prabhudas Lilladher said that PGInvIT is well positioned to take advantage of the growth potential of India’s power transmission industry given their financial position, support from sponsors and robust regulatory framework for power transmission in India. It is also focused on providing stable and sustainable distributions to their unitholders. “We recommend subscribing to the IPO given its competitive advantage of its sponsors, consistent and stable cash flow, strategic and critical nature of power transmission business and strong financial positioning,” they said.

Analysts at ICICI direct Research said that a strong financial position, government support and an established regulatory framework will enable the InvIT to finance future growth without substantial dilution to the unitholders. Furthermore, consistent and stable cash flows from assets provide long-term sustenance and visibility.

(The views in this story are expressed by the respective experts of research and brokerage firm. Financial Express Online does not bear any responsibility for their advice. Please consult your investment advisor before investing.)

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