PowerGrid InvIT IPO: Should you subscribe to the issue?

The initial public offering (IPO) of PowerGrid Infrastructure Investment Trust (InvIT) opened on Thursday. The price band for the share sale has been fixed at Rs 99-100 per unit. The issue received bids for 2,39,25,000 shares by 3:00 pm, compared with the size of 42,54,25,000 shares.

Net proceeds from the offer will be utilised toward providing loans to the initial portfolio assets for repayment or pre-payment of debt, including any accrued interest, and for general purposes.

"Retail investors should not look at this IPO as just a regular company IPO because this IPO will give you a consistent yield of around 8 per cent that is why it is called InvIT. In InvIT trust manages the assets of the company and then whatever they earn while managing the assets will be distributed amongst the unitholders. As in this InvIT assets will be those 5 power transmission projects, so the company will manage these assets and earn revenue and then distribute those revenues among the unitholders," said Yash Gupta Equity Research Associate, Angel Broking Ltd.

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"We suggest those retail investors looking for the safety of their investment and want to earn a regular income and can apply for this IPO by keeping expected yield in between 7-8 per cent per annum," he added.

According to ICICI Direct, 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 experience and expertise of sponsor PGCIL will provide the InvIT with a significant competitive advantage within the Indian power transmission industry. The sponsor has a strong balance sheet with equity investors, including foreign portfolio and institutional investors, mutual funds, and insurance companies. Thus considering the above observations, we assign a 'subscribe for long term' rating for the issue," it added.

The issue will close on May 3, 2021. Anchor book for the issue opened for bidding on April 28. The public issue comprises a fresh issue of Rs 4,993.48 crore and an offer for sale of 2,741.51 crore. Investors can bid for a minimum of 1,100 units in one lot and in multiple of 1,100 units thereafter.

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