IndiGrid InvIT Fund IPO is going to be the second InvIT Fund IPO to hit the exchange in a couple of days. In this post I will discuss the IndiGrid InvIT Fund IPO review as well as will check if there is some good investment opportunity for the retail investors. If you do not know what is an InvIT Fund IPO then you may read my post on What Is InvIT Fund.
Issue Date: May 17, 2017 – May 19, 2017
Offer Price: Rs. 98 – Rs. 100 per equity share
Minimum Application: Not available
Sterlite Power Power Grid Ventures Limited is the main sponsor of this trust fund. They are looking at putting two projects consisting of 8 lines and 2 substations. In this IndiGrid InvIT the trust is looking to raise around Rs. 2250 crores through this issue and they hope that they can reduce the debt by 1600 crores in the asset level and the balance fund will go to the sponsor for investing in projects.
The 2 projects that the trust will put on are both for transmission lines one is Bhopal Dhule transmission line and other one is Jabalpur transmission line and both are extra high voltage transmission lines apread accross 4 states in the country and the lines will start operating within 1-2 years. These lines have a residual life of as much as 33 years and they will have predictable cash flow for next 33 years.
The sponsor has a good pipeline of projects, currently has 9 more projects in hand and the trust will have the first on them too. The weighted average cost of capital of IndiGrid, the debt is around 7.85%. The equity will be traded so it can fetch new yield from the market.
IndiGrid InvIT Fund IPO Review: Return in the IPO = Debt part (7.85%) + Equity Part (dynamic returns). Overall these InvIT funds are likely to offer fair return that will handsomely beat FD returns and due to long term projects the returns are secured over long period.