PowerGrid InvIT IPO subscribed 1.51 times on day 3

powergrid ipo

The IPO of Power Grid InvIT sailed through on the third day of the bidding process on Monday. The issue was subscribed 1.51 times by 12:30 pm.

The issue drew bids for 64,31,18,300 units against 42,54,25,000 units on offer for subscription. The quota for HNIs was subscribed 2 times and for QIBs 1 time. The issue had been subscribed only 61 percent till the end of Day 2.

Most analysts maintain investors should subscribe to the issue as it offers possibilities of profitable and steady yields. The issue is a good option for investors eyeing a 9-12 percent yield from steady cash flow, they said. 

The management tells the InvIT is expected to give distributable cash flow at an average of Rs 1,150 crore over the next three years, which suggests an 11 percent cash flow yield, according to analysts.

Speaking about the IPO, Rupesh Sankhe of Edelweiss Securities said, “The product offers stability in cash flow, low counterparty risks, a strong lineage of Power Grid Corporation and growth from the future acquisition of projects. This coupled with replacement of Power Grid Corporation debt via IPO proceeds implies the InvIT will start as debt-free.”

The consistency in cash flows arises from transmission charges being determined for a period of 35 years. There is minimal price risk stemming from transmission charge resetting, which offers stability and long-term visibility. Power transmission projects are identified by low levels of operating risk. Once a transmission project has been approved, it requires low levels of expenditure for O&M.

The infrastructure trust is a first of its kind offering by a state-owned Indian entity and is priced at Rs. 99-100 per unit. Power Grid InvIT is expecting to raise Rs 7,735 crore through the issue which comprises a fresh issue as well as an offer for sale from the sponsor.

The infrastructure trust has stated it intends to take over five projects initially from Power Grid with a total network of 11 power transmission lines of 3,698 km and three substations having 6,630 MVA of aggregate transformation capacity across 5 Indian states.

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