The Infrastructure Investment Trusts (InvITs) are in focus. After IRB Infra, Sterlite Power Grid Ventures' initial public offering (IPO) of its India Grid IndiGrid InvIT will open from May 17 to 19 and is open for anchor investors today.
They are expected to raise up to Rs 2,250 crores and has an issue price of Rs 98 to 100 per InVIT.
Throwing more light on the outlook for the InvIT, Pratik Agarwal, CEO, Sterlite Power said the returns for this InvIT will be compelling. However, the total returns will comprise of a cash yield, which is compulsorily payable to investors as per Sebi requirements, he said, adding that they also expect growth coming in from capital gains from the growth assets embedded into the product.
He said IndiGrid will start with owning 2 assets comprising of 8 transmission line and two sub-stations, across four states. These assets will have rights on other 21 lines and seven sub-stations, which IndiGrid will acquire over 2-3 years. This will then results in capital growth for investors.
Moreover, IndiGrid has the 'right of first offer' as well as a price protection clause which is embedded and so there is a high probability of these assets coming into IndiGrid.
So far the anchor response for the InvIT has been good, said Agarwal, and they will announce the names later today.
He said the assets as per the RHP will earn Rs 440 crore of EBITDA in FY18. However, to arrive at the cash distribution, one will have to deduct the interest expense. The EBITDA over the next two years will be on similar lines, he said.
On a rough calculation, the cash available for distribution could be around Rs 290 crore, said Agarwal.
When asked if the company would require fresh equity or debt for future acquisitions, Agarwal said since Sebi requires IndiGrid to distribute at least 90 percent of all cash available to investors, so the investors get to keep the cash and decide how they want to spend the cash. Therefore, for future acquisition there will be a need to raise debt or fresh equity and depending on the market at that time of the two options will be decided on, he added.
He clarified that acquisitions will always be EPS accretive or distribution accretive.
According to him, India offers an unprecedented opportunity in power transmission because the country needs around Rs 40,000-60,000 crore per year investment in power transmission and for the very first time that opportunity is available for private sector participation.
Moreover, with government’s big plans for renewable energy and the power for all (PFA) scheme, there is be huge amount of investments required in transmission space and so platforms like ours would be good opportunities.
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