India Grid Trust rights issue review - (May apply)

•    India's first power sector InvITs that has shown growth in top lines.
•    It has a prudent distribution policy with rising disbursements.
•    Based on track record since listing, the issue appears fully priced.
•    Minimum investment is Rs. 187110 per lot. (1701*110)
•    Investors may consider an investment with a long term perspective.

PREFACE:
India Grid InvITs came with its maiden issue in the month of May 2017 and raised Rs. 2249.96 cr. At that time the price per unit was Rs. 100 and the minimum lot was 10206 units and in multiples of 5103 units thereon, thereafter. Sterlite Investment Managers Ltd. (now known as Indigrid Investment Managers Ltd.) were the investment manager and Sterlite Power Grid Ventures Ltd. were the sponsors for the said issue. Now it is coming out with a rights issue in the ratio of one lot of 1701 units for every five lots of 1701 units each, at a price of Rs. 110 per unit.

ABOUT COMPANY:
India Grid Trust (IndiGrid) is India's first listed power sector infrastructure investment trust and is sponsored by the KKR Sponsor and Sterlite Sponsor. It owns twelve operating projects consisting of 34 EHV overhead power transmission lines comprising 7765 KV transmission lines and 27, 400 KV transmission lines with a total circuit length of approx. 6740 ckms and 9 substations with approx. 12290 MVA of transformation capacity across 15 states and 1 union territory in India.

As of December 31, 2020, the total asset under management (AUM) was worth Rs. 14200 cr. The trust has consistently received a corporate credit rating of 'CCA AAA/Stable' by CRISIL, 'IND AAA/Stable' by India Ratings and 'ICRA AAA/Stable' by ICRA.

While infrastructure investment trusts are required to distribute at least 90% of their net distributable cash flows to unitholders once at least every six months in every financial year, according to InvIT regulations, it has adopted a quarterly distribution policy.

ISSUE DETAILS:
To part finance its plans to acquire 26% stake in the share capital of NER (Rs. 487.50 cr.), partial repayment of external debt (Rs. 475.50 cr.) and general corporate fund needs (Rs. 311.38 cr.), IndiGrid is coming out with a rights issue of 116695404 units of Rs. 100 each at a price of Rs. 110 per unit to mobilize Rs. 1283.65 cr. The company is offering one lot (1701 units) for every five Lots (1701 units each) to those stakeholders whose names were appearing in the register of the company as on record date of March 30, 2021. The issue opens for subscription on April 06, 2021, and will close on April 13, 2021. Post allotment, units will be listed on BSE and NSE.

This issue is lead managed by Axis Capital Ltd., and KFin Technologies Pvt. Ltd. is the registrar to the issue. Trust will be spending approx. Rs. 9.27 cr., for this issue process.

Post rights issue, IndiGrids current outstanding unit value of Rs. 5834.83 cr., will stand enhanced to Rs. 7001.78 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, IndiGrid has (on a consolidated basis) posted a total income/net profit of Rs. 460.50 cr. / Rs. 210.35 cr. (FY18), Rs. 673.91 cr. / Rs. 153.91 cr. (FY19), Rs. 1278.59 cr. / Rs. 505.72 cr. (FY20). For the first nine months ended on December 31, 2020, it has earned a net profit of Rs. 265.71 cr., on a total income of Rs. 1200.06 cr. Though its top line has shown growth, its bottom line has shown inconsistency.  Management attributes this to higher finance cost and depreciation and impairment contingencies provisions. IndiGrid was able to maintain EBITDA margins on an average of around 89.5% for all these periods.

DISTRIBUTION POLICY:
IndiGrid has started with a distribution of Rs. 0.92 per unit in August 2017 that kept growing and the last distribution per unit was Rs. 3.10 per unit in the month of January 2021. Thus it has kept pace with the distribution policy. (Refer to page 225 of the offer document).

INDIGRID UNITS PERFORMANCE:
The units turned ex-right at Rs. 134.44 on March 26, 2021. It closed at Rs. 138.42 on cum-right basis on March 25, 2021. The last traded price of this unit is Rs. 136.25 as of April 01, 2021. Last 52 weeks high / low is Rs.  144.00 / Rs. 85.59.

After making a debut at par in 2017, these units have marked the low of Rs. 80.85 and the high of Rs. 144 till April 01, 2021 (on ex-rights basis).

At the issue price, IndiGrid is looking for a market cap of Rs. 7701.96 cr., while on the basis of its last traded price, the market cap comes to Rs. 9539.93 cr.