India Grid Trust (IndiGrid), an infrastructure investment trust (InvIT) sponsored by Sterlite Power Grid Ventures, plans to raise Rs 2,250 crore through an initial public offer (IPO). IndiGrid’s offer is the second in the space in as many weeks and comes on the heels of the highly successful primary issue by IRB Infra which raised over Rs 5,000 crore through a similar issue.
IndiGrid proposes an initial public issue of its units at a price band of Rs 98-100 per unit, aggregating up to Rs 2,250 crore. The issue opens on May 17 and closes on May 19 and will be listed on the domestic bourses.
IndiGrid owns inter-state power transmission assets in 11 states. The sponsor, Sterlite Power Grid Ventures, is one of the leading independent private sector power transmission companies operating across the country. It owns 11 inter-state transmission projects with a total network of 30 transmission lines of around 7,733 circuit km and nine substations having 13,890 MVA of transmission capacity.
These two assets have a debt burden of over Rs 2,300 crore as per the DRHP, out of which it plans to retire close to Rs 1,000 crore from the IPO proceeds. Some of these projects have been fully commissioned, while others are at different stages of development.
Of the 11 inter-state transmission projects, IndiGrid will initially acquire two projects–Bhopal Dhule Transmission Co and Jabalpur Transmission Co–with a total network of eight transmission lines of around 1,936 circuit kms and two substations having 6,000 MVA capacity across four states, the company said.
In accordance with InvIT regulations, the trust has to distribute at least 90 per cent of net cash available for distribution to unit-holders at least twice a year.
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InvITs are trusts allow infrastructure developers to not only deleverage their balance sheets but also refinance remaining debt at lower interest rates. InvIT structures have robust debt service coverage ratios, and refinancing will further improve the credit profile of InvITs.
Last year, the Sebi released norms for public issue of units of InvITs, the final set of major rules that were awaited before companies could start to market their issues.
Yesterday, domestic rating agency, India Ratings said the first four InvIT IPOs can reduce the overall debt of their sponsor companies by nearly Rs 13,000 crore. These companies are IRB Infra, Sterlite Power Grid Ventures, RInfra and IL&FS Transportation Networks. The last two are expected to the hit market in the next few quarters.
According to the agency, these InvITs would enable their respective sponsors to deleverage their balance sheets and refinance remaining debt, which is about Rs 3,600 crore, at lower costs.
“Deleveraging will provide a fillip to the coverage metrics of SPVs housed under the InvIT structures and refinancing (through bond/bank loans) and will further improve the credit profile of InvITs,” the agency noted.