InvestorQ : Why is Power Grid planning to float an INVIT structure for its projects? When will this plan be through?
Mitali Bhutta made post

Why is Power Grid planning to float an INVIT structure for its projects? When will this plan be through?

1 year ago

Power Grid Corp plans to launch its first tranche of projects through an INVIT or an infrastructure investment trust. These are vehicles to hold a portfolio of infrastructure projects. The draft offer document for this tranche of projects is already filed with SEBI. It will help to monetise 5 tariff-based competitive bidding or TBCB assets worth Rs.7000 crore. The SEBI registration for an INVIT was just received by Power Grid.

INVITs are interesting structures that manage income-generating infrastructure assets and offer the pass-through investors regular yield and a liquid asset class to participate in the infrastructure projects. INVITs were proposed as an alternative fund-raising route for many state-run companies to automatically manage their funding requirements without relying on government support time and again. It is also tax efficient for the investor.

The Power Grid INVIT plan is expected to attract domestic and global investors including some of the marquee sovereign wealth funds. Once this Rs.7000 crore is successfully through, Power Grid is also planning another tranche of Rs.10,000 crore. As the draft offer document, the INVIT will have to acquire 5 projects with a network of 11 power transmission lines of 3,699 ckm and 3 substations having 6,630 MVA transformation.

This will form part of the asset monetization plan that the finance minister had announced as part of the Union Budget on 01-Feb 2021. The prime minister has already hinted at investment opportunities worth Rs250,000 crore in the asset monetisation pipeline and added that nearly 100 such assets will go under the monetization hammer. It will allow these companies to raise funds without diluting stake.

What could be of interest and also favourable to Power Grid in its INVIT plan is that the Union Budget had already announced regarding exempting dividend payments made to real estate investment trusts or REITs and to INVITs from TDS liability. This will enable easier debt financing of INVITs by foreign portfolio investors and could be a boost for this case too.