News Analysis

IndiGrid InvIT: Revenue visibility lends comfort

Muthukumar K BL Research Bureau | Updated on January 11, 2018 Published on May 16, 2017

power

IPO opens today @ ₹98-100 a unit; company plans to raise ₹2,250 crore

Investors looking to diversify their portfolio, can consider taking limited exposure in India Grid (IndiGrid).

The IndiGrid infrastructure investment trust or InvIT, as it is popularly called, currently owns two inter-State power transmissions assets in India.

Roadblocks, uncertainties

With a stable revenue structure and long-term contracts, it offers good revenue visibility — unlike that from say a road or a construction project. One could expect a pre-tax yield of about 9.5 per cent in the first three years.

While there are plans to transfer eight more assets from the sponsor’s subsidiaries over the span of next three to five years, it is not without roadblocks and uncertainty.

If all goes well, it could give a further 4-5 per cent kicker to yields. However, assuming that only half its new assets actually come on stream, investors, could still look at a potential annual yield of 11-13 per cent, after three years.

IndiGrid will own two assets — Bhopal Dhule Transmission Company Ltd (BDTCL) and JTCL (Jabalpur Transmission Company Ltd). Transmission projects of both these companies were commissioned three year back. These companies earn fixed tariff — giving stability to revenues.

Moreover, these companies have a 35-year contract with Discoms, giving long-term visibility to revenues. Also, the revenue collection is better in these projects as collection and payment is handled by the Power Grid Corporation — and distributed to all transmission service providers on a proportional basis.

Revenue potential

Currently, IndiGrid will own two assets — with a total network of eight power transmission lines of 1,936 km and two substations across four States. Both these assets were initially awarded to the sponsor Sterlite Power Transmission on a build-own-operate-maintain (BOOM) basis. The sponsor is part of the Anil Agarwal group.

BDTCL facilitates the transfer of electricity from coal-fired power generations sources in the States of Odisha and Chhattisgarh to power load centers of Maharashtra and Gujarat. JTCL in turn connects Chhattisgarh to Madhya Pradesh and its interiors. Both these projects have good potential to earn revenues from catering to rising power demand of the North and the West India — by connecting them to the power projects in the East.

Moreover, its investment managers have Right of First Offer (ROFO) in respect of eight more inter-State power transmission projects, with a transmission network of 21 power transmission lines of 4,831 km. Of these eight ROFO assets, three have already been commissioned, one is partially operational and four remain under various stages of development. All are expected to be operational over the next 3-5 years. However, these projects face execution risk, with four of the assets still needing forest clearance, while construction is still under progress for half of these projects.

IndiGrid has an AAA rating by Crisil and India Ratings, indicating a strong financial position.

The issue proceeds of ₹2,250 crore will be used to retire debt that is on the books of BDTCL and JTCL. As of March 2017, it had ₹3,950 crore of debt in its books.

For 2016-17, revenue from operations (two assets) were ₹467 crore, while EBITDA was ₹428 crore and finance cost — ₹367 crore. It made a post tax loss of ₹301 crore. Interest cost will, however, decline post-issue thus increasing profitability.

Anchor Investors

Meanwhile, India Grid Trust alloted 10.12 crore units ₹100 a unit, aggregating to ₹1,012.44 crore to 19 anchor investors, including Deutsche Global Infrastructure Fund, Driehaus and Rreef America LLC funds.

Published on May 16, 2017

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.