The InvIT will help India’s monopoly power transmission infrastructure operator to reduce its debt burden while increasing the dividend payout to the shareholders.
Power Grid Corporation of India (PGCIL) plans to set up an Infrastructure Investment Trust (InvIT) by the end of FY20 to unlock value in some of its transmission assets.The company took an in-principle board approval to set up the InvIT on October 1.
Sources close to the development told Financial Express that the company was in the process of appointing a consultant to advise on the InvIT. “To begin with, the company will look at monetisation of transmission assets of Rs 10,000 crore, and depending on the initial response, they will decide on the future course of action,” sources said.
The InvIT will help India’s monopoly power transmission infrastructure operator to reduce its debt burden while increasing the dividend payout to the shareholders. The nature of the InvIT, whether it will be a public listed or private InvIT, will be decided after discussions with the consultants, the sources added.
While the operation and management will stay with the company, PGCIL will have to retain certain stake in the assets, as per the market regulator Sebi guidelines on InvIT.
The government had been looking to monetise the power transmission assets of PGCIL through InvIT for long, however, it was not able to find a suitable time as the company was not desperately in need of cash and could easily raise funds in the market.
The InvIT will help government increase its dividend receivables as otherwise it would have taken 20-25 years for the long gestation transmission projects to accrue returns.
Rupesh Sankhe, senior vice president and power sector analyst at Elara Capital, said, normally company does invIT for capital expenditure or debt repayment, but given the regulated nature of business of power grid, debt repayment is not an issue. “Also further capex requirement is less due to strong operating cashflows of projects in operation, so InvIT would help the company only to the extent that shareholders will get higher dividends,” Sankhe said.
At present, there is only one operational InvIT in India run by Sterlite Power, that is, India Grid Trust (IndiGrid). If successful, Power Grid will be the second such InvIT.
PGCIL has a total asset size of over Rs 2 lakh crore and investments of about Rs 1 lakh crore in setting up transmission infrastructure.