Powergrid InvIT IPO that opened for subscription is seeking to raise Rs 7,734 crores from the market. The offer size comprises fresh equities and secondary components from selling unitholders. Following the news of InvIT, Powergrid share prices jumped 4.5 percent, rallying day’s high at Rs 212.90 per share in BSE.
Powergrid InvIT IPO is significant for various reasons. During the Union Budget session, the government announced its plans to promote more InvIT and REIT IPOs in the coming days. A successful listing of Powergrid IPO is critical for that reason.
It is the first PSU unit to introduce InvIT IPO and only the third after IRB InvIT and India Grid Trust; both debuted in 2017. According to reports, another state-owned firm, the National Highway Authority of India (NHAI), may soon explore the possibilities of an InvIT worth Rs 5000 crores. This news comes at the back of the government’s target to achieve a total divestment of Rs 1.75 lakh crore in FY22.
InvIT is a form of investment akin to mutual funds where collective funds are invested in different infrastructure development projects to generate a small income for investors. InvIT stands for infrastructure investment trust, quite similar to a REIT IPO in which investors invest in real estate development projects. An InvIT invests in roads, transmission lines, renewable energy projects, and such.
Regarding The Powergrid InvIT
Have a look at the following details critical for making a decision.
The IPO will open for Rs 7,734 crores in the price band of rs 99-100 per unit. It will contain both fresh issues and offer for sale shares close to the value of Rs 2,741.51 by existing investors.
Investor reservation and minimum lot size
Around 75 percent of the issue size is reserved for institutional buyers, whereas non-institutional buyers can apply for the rest 25 percent in the offered size. Individual investors can bid for a minimum of one lot of 1,100 shares, aggregating to the maximum capital requirement of Rs 1.1 lakh for each investor.
Details of the Infrastructure Investment Trust
The initial asset portfolio of the investment trust has five projects under it, located in five states of India, namely, PowerGrid Vizag Transmission, PowerGrid Kala Amb Transmission Limited, PowerGrid Parli Transmission Limited, PowerGrid Warora Transmission Limited, and PowerGrid Jabalpur Transmission Limited. It is given AAA or stable rating by credit rating agencies like ICRA, CARE Ratings, and CRISIL Ratings.
The InvIT promises 90 percent payout
The InvIT promises a 90% payout for interested investors, creating a stable source of income during an investment horizon of 10-12 years. The transmission charges have contracted in the last thirty-five years, resulting in less price risk from resetting transmission fares. Robust financial performance, year-on-year income and revenue growth further provide stability to the investment trust.
The offer is priced around 3.5 times its book value, but the promise of stability, high yield, and state backing give performance assurance to investors. According to market reports, investors can expect a 9-11 percent yield from their investment.
Powergrid Invit IPO looks like a promising investment for investors once they make an informed decision.
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