$1.1 Billion INvIT IPO filed by power grid here's everything you should know

IPO News 10 February 2021 11:53:AM

One more IPO is added in the line and racing towards becoming the best IPO in 2021. This is the first attempt by a state-owned company at an initial public offering of an InvIT. Two InvITs have been seen by the private sector so far, namely IndiGrid InvIT & IRB Infra InvIT. Power Grid, a state-run electricity transmission firm, has made an application with the SEBI to monetize its properties and to raise via the InvIT route about Rs. 8000 crore (which amounts to more than $1.1 billion). If successful, the plan would allow the government to amass funds at a time when the center is still short of its FY21 divestiture goal of Rs. 2.1 trillion.

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 Company Profile –

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)

What to expect from the InvIT?

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.

When can we expect this to roll out?

March 2021

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.

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