India Grid Trust is coming in the market with its IPO comprising of fresh issue of shares to raise around Rs 2250 crore in the price band of Rs 98 – Rs 100 per share at the face value of Rs 10 per share. The minimum bid lot size is of 10,205 units which leads to minimum investment of Rs 10 Lacs. The issue will remain open from May 17, 2017 to May 19, 2017.

The company plans to utilise the issue proceeds for providing loan to BDTCL and JTCL for repayment or pre-payment of debt of banks, financial institutions, SGL1, SGL2 and towards repayment of any other long term and short term liabilities and capital expenditure creditors.

India Grid Trust is an infrastructure investment trust established to own inter-state power transmission assets in India. It was established on October 21, 2016 by its sponsor, Sterlite Power Grid Ventures Limited, and is registered with SEBI pursuant to the InvIT Regulations. Its sponsor is one of the leading power transmission companies operating in the private sector, with extensive experience in bidding, designing, financing, constructing and maintaining power transmission projects across India.

Company‘s Sponsor owns 11 inter-state power transmission projects with a total network of 30 power transmission lines of approximately 7733 ckms and 9 substations having 13,890 MVA of transformation capacity. Some of these projects have been fully commissioned, while others are at different stages of development. Out of the 11 inter-state power transmission projects, the company will acquire 2 projects i.e. Bhopal Dhule Transmission Co and Jabalpur Transmission Co with a total network of eight power transmission lines of 1,936 ckms and two substations having 6,000 MVA capacity across four states.

The company intends to distribute at least 90% of their net cash available for distribution to their Unitholders once at least every six months in every financial year. The management believes that its financial position would enable to offer stable distributions to the Unitholders and finance their growth plans in the coming years.

India is the third largest consumer and producer of electricity in the world with a global share of 5.3% and 5% for electricity consumption and production, respectively, in fiscal 2015. In September, 2016 the total installed generation capacity in India was 306 GW and approximately 105 GW of capacity was added in the past four years. With urbanisation and industrialization, demand for power has increased, encouraging private sector participation in the sector. As the per capita electricity consumption closely follows the growth pattern of per capita GDP, it is expected that growth in power demand should continue. The power generation installed capacity is expected to increase to 435 GW in fiscal 2022 (8.2% CAGR) and the share of inter-regional transmission capacity is expected to increase to 20.9% in fiscal 2022 resulting in three times growth of investment in the power transmission sector.

The above financials are based on combined basis. Revenue and EBITDA is increasing but the company is generating losses on account of higher finance costs and depreciation & amortization expenses.

Our View

India Grid Trust is a new entity and has a unique business model. The power transmission sector is still under high pricing pressure for corrective action and we see that the state boards would require 2-3 years to stabilize. Also, the minimum investment of Rs 10 Lacs for retail makes this IPO unattractive. We recommend our investors to avoid subscribing in the IPO.


(With additional inputs from Neelam Bhatia)