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Sterlite Power Grid files documents for $390 mn infra investment trust issue

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India Grid Trust (IGT), an infrastructure investment trust (InvIT) which owns inter-state power transmission assets, has filed a draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI) for an initial public offering (IPO).

The trust, which is sponsored by Sterlite Power Grid Ventures Ltd (SPGVL), aims to raise Rs 2,650 crore (around $390 million) through a stock exchange listing. Sterlite Infraventures Ltd is the trust’s investment manager and Axis Trustee Services Ltd is its trustee, as per information in the prospectus.

IGT will use the net proceeds towards providing loans worth Rs 2,580 crore to Bhopal Dhule Transmission Company Ltd (BDTCL) and Jabalpur Transmission Company Ltd (JTCL), which in turn will repay or pre-pay debt of banks, financial institutions and towards other long- and short-term liabilities. The remaining part of the net proceeds will be used for general corporate purposes.

The issue will constitute at least 25% of the outstanding units of IndiGrid on a post-issue basis and 75% of the issue shall be available for allocation to institutional investors.

Morgan Stanley India Co Pvt Ltd, Citigroup Global Markets India Pvt. Ltd and Edelweiss Financial Services Ltd are the lead managers to the issue.

The InvIT was incorporated in October 2016 and owns inter-state power transmission assets. IGT’s sponsor SPGVL owns 10 inter-state power transmission projects with a total network of 29 power transmission lines of approximately 6,767 circuit km and seven substations having 12,630 MVA of transformation capacity.

SPGVL recorded consolidated income of Rs 5,060 crore for financial year 2016. Its total consolidated assets were worth Rs 6,624 crore as on the year ended 31 March 2016. 

IGT is the sixth trust seeking to list an InvIT after SEBI released final guidelines for public issue of units of InvITs in May 2016.

Other trusts belong to IRB Infrastructure, MEP Infrastructure, GMR Infrastructure, Reliance Infrastructure and IL&FS Transportation Networks.

The proposed InvIT is fourth-largest such trust in the country. While the InvIT under Reliance Infrastructure is worth Rs 5,000 crore, that of IRB Infra is worth Rs 4,300 crore. These are followed by InvITs belonging to IL&FS Transportation (Rs 3,000 crore) and MEP Infra (Rs1,200 crore).

Securities market regulator SEBI in August 2014 notified regulations for setting up InvITs as well as real estate investment trusts (REIT) to allow the cash-strapped sectors an additional channel to raise fresh capital.

InvITs are proposed to provide a suitable structure for financing/refinancing of infrastructure projects in the country. They are to invest in infrastructure projects, either directly or through SPV. In case of PPP projects, such investments shall only be through SPV.

In May 2016, in its final guideline for public issuance of InvITs, SEBI said that in an issue made through the book building process or otherwise, the allocation in the public issue should be maximum 75% to qualified institutional buyers (QIBs) and at least 25 per cent to other investors.

Investment managers can allocate up to 60% of the portion available for allocation to QIBs to anchor investors, subject to certain conditions. Also, an anchor investor can make an application of a value of at least Rs 10 crore in the public issue, SEBI said.

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