Ali Hasan
Government-owned electricity transmission company Power Grid Corporation of India has filed a DRHP (draft red herring prospectus) with market regulator SEBI to monetize assets and raise around Rs 8,000 crore or more than a billion dollars via the InvIT (infrastructure investment trust) route.
This is a landmark deal as, if plans fructify, this would be the first initial public offering (IPO) of an InvIT by a state-owned firm and comes at a time when there is an acute shortfall in the government’s Rs 2.1 lakh crores disinvestment target. This is the first attempt at an initial public offering of an InvIT by a state-owned firm. The private sector has seen two InvIT’s so far, namely IndiGrid InvIT & IRB Infra InvIT.
“This is a public InvIT and will help Power Grid to unlock value and secure funds for fresh investment in transmission network expansion. It will also help to reduce debt from the listed company’s books and transfer it to the InvIT. The InvIT will then raise fresh capital in the IPO and trim the debt.” The InvIT will initially comprise of 11 power transmission lines currently owned and operated by Power Grid.
On September 8, 2020, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, had approved the monetization of assets of Power Grid, which falls under the Ministry of Power, through the Infrastructure Investment Trust (InvIT) model.
“This approval would help Power Grid to monetize in the first lot, assets with gross block value of more than Rs 7,000 crore. These assets, which are mainly High Voltage Transmission lines and substations, are held by Power Grid in form of Special Purpose Vehicles (SPVs). The proceeds from the asset monetization would be deployed by Power Grid in their new and under-construction projects,” the government had shared in an official statement.
Budget 2019-20 had emphasized investment-led growth and indicated that new and innovative financial instruments, including lnvITs, would be launched as part of the brownfield asset monetization strategy for augmenting infrastructure investment.
The firm had an m-cap of nearly Rs 1 lakh crore at the end of the day’s trade on January 25, 2021, and it counts GIC and LIC as its investors. An InvIT or Infrastructure Investment Trust is a collective investment scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as a return.
The instrument is designed as a tiered structure with a sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs). The NHAI (National Highway Authority of India) is also looking to monetize assets and raise funds via this route.
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