Attractive income yielding investment opportunity from a PSU `MAHARATNA’
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OFFER AT A GLANCE |
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|
Metrics |
Particulars |
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Issuer |
POWERGRID Infrastructure Investment Trust |
|
Symbol |
PGINVIT |
|
Tenure of the Trust |
Perpetual |
|
Sponsor |
Powergrid Corporation of India Ltd (PCIL) |
|
Project Manager |
Powergrid Corporation of India Ltd (PCIL) |
|
Investment Manager |
Powergrid Unchahar Transmission Ltd (wholly owned subsidiary of PCIL |
|
Trustee |
IDBI Trusteeship Services Ltd |
|
Issue size |
Fresh issue of Units for Rs.4993.48 cr and Offer for sale of Units for Rs.2741.51 cr |
|
Issue Period |
29.04.2021 to 03.05.2021 |
|
Security Type |
Infrastructure Investment Trust (InvIT) |
|
Price Range |
Rs.99 to Rs.100 |
|
Tick Size |
Re.1 |
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Bid Lot |
1,100 Units and in multiples thereof |
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Maximum Bid quantity |
42,54,25,000 Units |
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Book Running Lead Managers |
ICICI Securities, Axis Capital, Edelweiss Financial Services and HSBC Securities |
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Registrar |
KFin Technologies P Ltd |
POWERGRID Infrastructure Investment Trust (PGINVIT) is registered with SEBI as Infrastructure Investment Trust under Regulation 3(1) of InvIT Regulations. PGINVIT is sponsored by Powergrid Corporation of India Ltd (PCIL), a central PSU Maharatna.
Being a critical link in the Power sector value chain, Transmission sector was opened to competition in 2006. Accordingly, Tariff Based Competitive Bidding (TBCB) norms specify that projects in the Transmission sector are bid for under the Build-Own-Operate-Maintain (BOOM) model, as per bidding guidelines issued by the Ministry of Power. The successful bidder is required to ensconce the TBCB asset in a special purpose vehicle (SPV).
Accordingly, PCIL presently holds, inter alia, the following TBCB asset SPVs as wholly owned subsidiaries, having won them through competitive bidding route. These companies are independent of each other and having their own cashflow streams arising from long term Transmission Service Agreements.
1.POWERGRID Vizag Transmission Ltd
2.POWERGRID Kala Amb Transmission Ltd
3.POWERGRID Parli Transmission Ltd
4.POWERGRID Warora Transmission Ltd
5.POWERGRID Jabalpur Transmission Ltd
As envisaged in the IPO document, the above companies are collectively referred to as ‘Initial Portfolio Assets’ (IPA). Seventy Four percent (74%) equity held by PCIL in the IPA is proposed to be transferred to PGINVIT immediately, in exchange for Units to be issued by PGINVIT to PCIL.
Since the TBCB terms mandate that the successful bidder does not dilute its holding in the SPV below 51% in the first 2 years and below 26% beyond 2 years and upto 5 years, the balance holding of 26% held by PCIL in the Initial Portfolio Assets can only be transferred to the Trust when this threshold is reached with respect to each asset.
The Initial Portfolio Assets account for a network of 11 Transmission lines of 3,698.59 km approx., 3 substations having 6,630 MVA aggregate transformation capacity and 1956 km of optical ground wire, as of Dec 31, 2020, spread over 5 states of India.
Each of the Initial Portfolio Assets has a Transmission Service Agreement (TSA) of 35 years on expiry of which it can apply to CERC for renewal. At the time of this offer, the unexpired tenor of the TSA is about 32 years.
The combined Profit & Loss Account for FY 2019-20 and the 9-month period ended 31.12.2020 as well as the Balance Sheet as on 31.03.2020 and 31.12.2020 of the Initial Portfolio Assets, furnished below, underscore profitable operations and a healthy Balance sheet structure.
COMBINED BALANCE SHEET OF INITIAL PORTFOLIO ASSETS
|
S. No. |
ASSETS |
As on 31.12.2020 |
As on 31.03.2020 |
|
|
|
Rs. Cr |
Rs. Cr |
|
D |
NON CURRENT LIABILITIES |
6,375.25 |
6,441.53 |
|
A1. |
Property, Plant and Equipment |
6,199.35 |
6,321.89 |
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A2. |
Capital Work in Progress |
2.24 |
N/A |
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A3. |
Other tangible assets |
111.67 |
115.52 |
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A4. |
Other non current assets |
61.99 |
4.12 |
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B. |
CURRENT ASSETS |
443.25 |
379.69 |
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B1. |
Inventory |
31.02 |
31.02 |
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B2. |
Trade Receivables |
188.11 |
173.72 |
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B3. |
Cash and Cash equivalents |
54.07 |
39.93 |
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B4. |
Other current financial assets |
140.48 |
125.95 |
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B5. |
Other current assets |
29.57 |
9.07 |
|
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TOTAL ASSETS |
6,818.50 |
6,821.22 |
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C. |
NET WORTH |
1,488.13 |
1,533.70 |
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C1. |
Equity Share Capital |
1,213.04 |
1,200.68 |
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C2. |
Other Equity |
275.09 |
333.02 |
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D. |
NON CURRENT LIABILITIES |
5,018.46 |
4,458.03 |
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D1. |
Financial liabilities |
4,750.73 |
4,429.32 |
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D2. |
Deferred Tax Liabilities |
267.73 |
28.71 |
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E. |
CURRENT LIABILITIES |
311.91 |
829.49 |
|
|
EQUITY AND LIABILITIES |
6,818.50 |
6,821.22 |
COMBINED PROFIT AND LOSS ACCOUNT OF INITIAL PORTFOLIO ASSETS
|
S. No. |
PARTICULARS |
For the 9 month |
For the year |
|
|
|
Rs. Cr |
Rs. Cr |
|
A1. |
Revenue from operations |
992.28 |
1,324.29 |
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A2. |
Other Income |
16.80 |
9.80 |
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A. |
TOTAL INCOME |
1,009.08 |
1,334.09 |
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B1. |
Finance Costs |
291.00 |
429.07 |
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B2. |
Depreciation and other amortisation expenses |
139.24 |
379.43 |
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B3. |
Other expenses |
31.19 |
38.16 |
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B. |
TOTAL EXPENSES |
461.43 |
846.66 |
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|
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|
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C. |
PROFIT BEFORE TAX |
547.65 |
487.43 |
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D1. |
Current Tax |
28.51 |
85.18 |
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D2. |
Deferred Tax |
239.02 |
23.42 |
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D. |
TAX EXPENSES |
210.51 |
108.60 |
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|
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|
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E. |
PROFIT AFTER TAX |
337.14 |
378.83 |
THE ISSUE
PGINVIT IPO comprises of a fresh issue of Units amounting to Rs.4,993.48 cr by the Trust along with an Offer for Sale of Units amounting to Rs.2,741.51 cr by the Sponsor, viz., PCIL.
While the amount of Rs.4,993.48 cr raised by the Trust would be on-lent to Initial Portfolio Assets to enable the latter to repay the outstanding principal borrowings to PCIL, the amount raised by PCIL through the Offer for Sale represents the consideration for transferring to the Trust 74% equity holding held by PCIL.
As per the Valuation Report furnished in the IPO document, the valuer has valued the Enterprise Value of the respective Initial Portfolio Assets as under:
ENTERPRISE VALUE OF INITIAL PORTFOLIO ASSETS AS PER VALUATION REPORT
|
S. No. |
Initial Portfolio Asset |
Enterprise Value |
|
|
|
Rs. Cr |
|
1 |
Powergrid Vizag Transmission Ltd |
2,313.6 |
|
2 |
Powergrid Kala Amb Transmission Ltd |
453.5 |
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3 |
Powergrid Parli Transmission Ltd |
2,597.6 |
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4 |
Powergrid Warora Transmission Ltd |
2,903.7 |
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5 |
Powergrid Jabalpur Transmission Ltd |
2,116.3 |
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TOTAL |
10,384.7 |
Considering the Valuation aforesaid, the IPO is being made on favourable terms to the prospective Unitholders as set out in the below table:
IMPLIED EV AS PER IPO TERMS Vs. EV AS PER VALUATION REPORT
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S. No. |
Particulars |
Amount |
Amount |
|
|
|
Rs. Cr |
Rs. Cr |
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A. |
Issue of Units by PGINVIT – to be lent by PGINVIT to IPA |
|
4,993.48 |
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B. |
Offer for sale of Units by PCIL for 74% stake in IPA |
2,741.51 |
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C. |
Imputed value of 100% stake in IPA |
|
3,704.74 |
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D. |
Implied Enterprise Value of IPA as per IPO terms |
|
8,698.22 |
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E. |
Valuation of IPA certified by the Valuer |
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10,384.70 |
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F. |
Valuation buffer available to IPO investors |
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16.2% |
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RETURNS TO UNITHOLDERS
In terms of InvIT guidelines, the InvIT assets shall distribute not less than 90% of their net distributable cash flows to the Trust in proportion of its holding in the InvIT asset. Further, the Trust shall distribute at least 90% of its Distributable Income to the Unitholders. Such declaration has to be made by the Trust at least once in a quarter.
The Trust has projected the Revenue and Cashflow from operations of underlying Initial Portfolio Assets for the next 3 years, as under:
PROJECTED REVENUE/CASHFLOW FROM INITIAL PORTFOLIO ASSETS FOR NEXT THREE YEARS
|
S. No. |
Initial Portfolio Asset |
Year ended 31.03.2022 |
Year ended 31.03.2023 |
Year ended 31.03.2024 |
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Revenue |
Cashflow |
Revenue |
Cashflow |
Revenue |
Cashflow |
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|
|
Rs. Cr |
Rs. Cr |
Rs. Cr |
Rs. Cr |
Rs. Cr |
Rs. Cr |
|
1 |
Powergrid Vizag Transmission Ltd |
295.65 |
260.70 |
242.62 |
225.96 |
220.17 |
201.14 |
|
2 |
Powergrid Kala Amb Transmission Ltd |
73.05 |
65.05 |
71.06 |
61.47 |
69.16 |
56.55 |
|
3 |
Powergrid Parli Transmission Ltd |
328.48 |
308.50 |
328.48 |
308.11 |
328.48 |
307.79 |
|
4 |
Powergrid Warora Transmission Ltd |
364.39 |
343.53 |
364.39 |
343.17 |
364.39 |
342.91 |
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5 |
Powergrid Jabalpur Transmission Ltd |
252.21 |
242.44 |
252.21 |
242.13 |
252.21 |
242.13 |
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COMBINED REVENUE/CASHFLOW |
1,313.78 |
1,220.22 |
1,258.76 |
1,180.84 |
1,234.41 |
1,150.52 |
While the Trust structure does not take away or mitigate the business risks associated with the power transmission business the IPA companies are engaged in, it helps bring about focus and transparency in operations.
Considering the consistent cash flow generation seen from stable Transmission assets of the Initial Portfolio Assets, PGInvIT may be in a position to offer decent returns in excess of 6% to the Unit holders
TAXABILITY OF INCOME DISTRIBUTED BY THE TRUST:
As per sec 10(23FD) of Income Tax Act, any income referred to in sec 115UA of the Act and distributed by the Trust to unitholders (except for that proportion of income referred to in sec 10 (23FC) (a) or (b)), shall not be included in the total income of Unit holders. In other words, income distributed by the Trust is tax-exempt in the hands of the Unit holders, except in certain special situations.
However, income arising on transfer of Units of the Trust shall be subject to capital gains tax at the applicable rates. The Units of the Trust will have to be held for a period of 36 months in order to qualify for Long Term Capital Gains.
SUMMARY
The Units proposed to be issued by PGINVIT are expected to be listed on NSE and BSE and as such, provides liquidity to investors.
Considering PGINVIT is sponsored by a pedigreed PSU Maharatna and the stable income generating Power Transmission assets ensconced in the Trust, long term investors looking for safe income generating options may consider investing in the issue.