India Grid Trust, the country’s first power sector investment trust (InvIT), hopes a rise in interest rates and cost of capital will moderate the pricing of future projects it intends to add to its portfolio.
Over the last couple of years, valuations had risen due to stiff competition in the sector, but “we hope that reasonable valuations are out again,” IndiGrid Chief Executive Officer, Harsh Shah, told businessline in an interaction.
The InvIT has signed a memorandum of understanding with GR Infraprojects, to bid for Rs 5,000-crore worth of transmission projects, which the trust will subsequently acquire from GR Infra.
In the current quarter, the KKR-sponsored trust expects to close transactions of Rs 2,000 crore. The largest of these is the Rs 1,500-crore acquisition of Khargone Transmission Project from Sterlite Power.
The InvIT’s pipeline consists of third-party assets owned by private developers (such as the ones with GR Infra), projects for which it intends to bid on its own, solar and storage projects, and public asset monetisation under the acquire, operate, maintain and transfer guidelines.
The InvIT had assets under management of Rs 21,200 crore at the end of December, which would touch close to Rs 23,000 crore with the acquisition of the asset from Sterlite Power and some other smaller assets.
Shah said the company aimed to maintain steady distributions to unitholders, rather than rapid asset growth. While AUM was important to the extent of giving it scale and size, it was more important to ensure shareholder returns in terms of distribution per unit (DPU).
“Our focus is always on the right value for the asset that fits our bill. For the unitholders - looking at it the other way around, what we do is grow our DPU year-on-year in a way that even if we don’t acquire any assets for the next 5-7 years, we will still be able to deliver that DPU ... we don’t necessarily need to run on a treadmill to meet DPU requirements,” Shah said.
In the December quarter the trust paid out Rs 3.30 per unit, up 3.5 per cent on year. Since its inception over five years ago, it has maintained a 3-4 per cent growth in payouts to its unitholders.