Powergrid InvIT Opened Today: Is It Good for Investing

Powergrid InvIT shares launched in the price range of Rs 99-100 apiece today as one of the largest IPO ever to hit Indian primary market. The offer size of Rs 7734 crores comprised primary and secondary components of Rs 4,993.5 and Rs 2,741.5 crore respectively. According to market researchers the InvIT is a good opportunity for risk averse investors to invest in an annuity-like, risk-free investment that can generate 11-12 percent return over a period of time. Most brokerages have given a thumbs up to the offer based on the trust’s solid financial condition, critical market presence, stable flow of income, and the strategic role of power transmission.

Three-fourth of the offer size was reserved for institutional buyers. Non-institutional investors can bid for 25 percent of the offer size. The issuer has fixed  the minimum bidding size for individuals to one lot containing 1,100 shares.  At the upper price band the maximum investment amount aggregates to Rs 1.1 lakh. Anchor investors 60 percent of the reserved portion for institutional investors and also don’t have the restriction of minimum lot size.

Anchor investor bidding started on April 28, 2021. Bidding window for other investors opened on April 29, will remain available until May 3, 2021. It will take almost nineteen days for the entire listing process of Powergrid Invit IPO to get completed. The shares will list in the BSE and NSE exchanges on May 17, 2021.

Powergrid investment trust currently has five projects, situated in five Indian states and 11 power transmission lines in its existing portfolio. It proposes to utilise the funds received for fresh issues to lend Initial Portfolio Asset for repayment and prepayment of debt including acquired interest and general corporate purposes.

The purpose of the invest trust is to own, built, operate, maintain and invest in power transmission infrastructure projects permissible under the InvIT Regulations. It enjoys strong financials and stable growth in income. It generates revenue from power transmission changes, which includes non-escalable charges and partly, exclabale changes.

Power transmission charges had remained unchanged for the last 35 years. It minimises price risk, guaranteeing stability, consistent cash flow, and long term visibility. Powergrid InvIT promises a 90 percent payout yield for investors over a long investment horizon of 10-12 years. Investors can consider it as an annuity investment that will generate long term benefits.

On the risk segment, it is a newly formed trust with no operation history, making it difficult to gain long term visibility over its growth.

The trust agrees to a 90 percent payout of its yield but this income can fluctuate depending on the performance of projects, project management, and risk factors associated with economic cycles.

Conclusion

Comparing all aspects, Powergrid InvIT IPO seems to be a good investment option for risk-averse investors seeking a steady income from investment. As a result, most brokerages have assigned subscribe status to the IPO.