This is a historic deal as this will be the first initial public offering (IPO) of an InvIT by a state-owned company if plans are successful and come at a time when there is an acute shortfall in the 2.1 lakh crore disinvestment goal of the government.
Power Grid Corporation of India is principally engaged in the planning, implementation, operation, and maintenance of the Inter-State Transmission System (ISTS). POWERGRID transmits about 50% of the total power generated in India on its transmission network.
(Source – Annual Report 2019)
Monetizing five such tariff-based competitive biddings (TBCB) assets valued at around ?7,164 crores, held in existing special purpose vehicle (SPVs)
The InvIT was proposed by the government as an alternative fundraising route for state-owned companies to manage their funding requirements without having to depend on government support.
The proceeds for the sale will go towards PowerGrid which will be able to use the money for dividends or CAPEX on more transmission lines.
What is our view?
Power Grid has a monopoly status in power transmission. With the government's focus on renewable energy generation, we expect the transmission volumes to pick up and grow at a 9-10% CAGR over the next 5 years.