India Grid Trust (IGT), an infrastructure investment trust (InvIT) sponsored by power transmission asset operator Sterlite Power Grid Ventures Ltd (SPGVL), has trimmed the size of its initial public offering (IPO) and is now seeking to raise Rs 2,250 crore (around $350 million) through the public issue that opens next week.
IGT was earlier looking to raise Rs 2,650 crore (around $390 million) through the listing.
The offer comprises sale of at least 225 million fresh units, according to the draft red herring prospectus (DRHP) filed by the company.
This will result in at least 25% dilution on a post-issue basis and trim IGT’s valuation to Rs 9,000 crore (around $1.4 billion) compared with Rs 10,600 crore ($1.64 billion) it was looking at when it filed the draft prospectus with The Securities and Exchange Board of India (SEBI).
The trust, which owns inter-state power transmission assets, has fixed the price band of the public issue at Rs 98-100 per unit, it said in a public notice on Tuesday.
The issue will open on 17 May and close two days later. The anchor allotment—where institutional investors can bid for a large quantity of units for a one-month lock-in period—will open on May 16.
IGT plans to use the proceeds of the issue for repaying loans worth Rs 2,250 crore to Bhopal Dhule Transmission Company Ltd (BDTCL) and Jabalpur Transmission Company Ltd (JTCL)—which, in turn, will repay or prepay debt of banks and financial institutions—as well as for other long- and short-term liabilities. The remaining part of the proceeds will be used for general corporate purposes.
Sterlite Infraventures Ltd is the trust’s investment manager and Axis Trustee Services Ltd is its trustee, according to the draft prospectus.
SPGVL is the subsidiary of d Sterlite Power Transmission, which was de-merged from Sterlite Technologies Ltd with the latter retaining its telecom business in the listed entity. These entities are owned by billionaire Anil Agarwal-led Vedanta Group.
Morgan Stanley India Company Pvt. Ltd, Citigroup Global Markets India Pvt. Ltd and Edelweiss Financial Services Ltd are the lead managers to SPGVL’s InvIT issue.
IGT 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 around 6,767 circuit km and seven substations having 12,630 MVA of transformation capacity.
SPGVL recorded consolidated revenues (from operations) of Rs 497.52 crore for FY2015-16, compared with Rs 133.72 crore in the previous year.
Its total consolidated assets were worth Rs 6,627.24 crore for the year ended 31 March 2016 compared with Rs 5,405.45 crore a year ago.
IGT is the second infrastructure investment trust which has either filed documents for a public issue or has already floated an IPO in the last month.
Last week, IRB InvIT Fund, which is sponsored by listed road developer IRB Infrastructure Developers Ltd, saw a strong investors’ response to its public offering as the issue was subscribed 8.5 times.
A week ago, Reliance Infrastructure InvIT Fund, which is operated by Anil Ambani-led Reliance Infrastructure, filed a revised draft prospectus with SEBI for a public issue.
IGT is also among the six trusts that seek to list an InvIT after SEBI released final guidelines for public issue of units of InvITs in May 2016. The InvIT is fourth-largest such trust in the country.
Other such trusts belong to IRB Infrastructure, MEP Infrastructure, GMR Infrastructure, Reliance Infrastructure and IL&FS Transportation Networks.
The InvIT under Reliance Infrastructure is worth Rs 5,000 crore, followed by InvITs belonging to IL&FS Transportation (Rs 3,000 crore) and MEP Infra (Rs 1,200 crore).
IRB Infrastructure became the first company to launch an InvIT last week. It raised Rs 4,655 crore ($725 million) through its public issue that ended on 5 May. Its units will list on stock exchanges within 12 business days from the close of issue.
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 expected to invest in infrastructure projects, either directly or through SPVs.
In May 2016, in its final guideline for public issuance of InvITs, SEBI said in an issue made through the book-building process or otherwise, up to 75% allocation should be made to qualified institutional buyers (QIBs) and at least 25% 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.
Retail investors are not permitted to participate in the issue as InvITs are a new financial concept in India and are yet to be tested in the market.
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