Betting on power: Insurers line up to invest in PGCIL and IndiGrid InvITs

The first power transmission InvIT of the country, IndiGrid, came out with a public issue of NCDs to raise up to Rs 1,000 crore last week

Within days of Indian insurance companies getting approval to invest in debt securities of infrastructure and real estate investment trusts, many have lined up to invest in the infrastructure investment trust (InvIT) launched by state-owned Power Grid Corporation of India ltd (PGCIL) and the NCD issuance by IndiGrid — both power transmission assets platform.
 
The first power transmission InvIT of the country – IndiGrid, (sponsored by private power transmission company Sterlite Power) came out with a public issue of non-convertible debentures (NCDs) to raise up to Rs 1,000 crore last week.
 
The issuance was oversubscribed nearly 25 times, on the back of HNI, retail and insurance sector investors.
 
“We had different categories of investors participating including insurance companies, corporates, QIB, HNIs and retail. Out of a total demand of Rs 2,500 crore, Rs 300 crore was from QIBs and corporates while almost Rs 2,200 crore came from HNIs and retail investors,’’ Harsh Shah, managing director and CEO, IndiGrid, told Business Standard.
 
Importantly, around 10 per cent of the total book came from insurance companies, Shah pointed out.
 

IndiGrid was launched in 2017 and currently has 12 operating assets across 15 states. It recently also did its first rights issue through which it raised Rs 1,200 crore.
 
On April 26, 2021, the Insurance Regulatory and Development Authority of India (IRDAI) gave its nod to insurance firms to invest in debt securities of infrastructure and real estate investment trusts.
 
Shah said, “Insurance companies prefer long-term cash flow which is predictable and stable, less volatile because of their long liabilities. Currently, there are limited investment options with predictable returns for 30-35 years. Transmission definitely ranks higher among all and is attracting good interest.” There are nine insurance companies that own 9 per cent of IndiGrid units. In the same week, PGInvIT, after its launch, raised close to Rs 3,480 crore from 47 anchor investors which included insurance companies such as Tata AIA Life Insurance Company, Tata AIG General Insurance Company, SBI Life Insurance Company.
 
Global pension funds such as CPP Investment Board Private Holdings and mutual funds (MF) of SBI, HDFC, Tata, UTI, ICICI Prudential were among the other anchor investors The PGInvIT IPO closed on May 3 and was subscribed 4.83 times, said a company executive.
 

PGInvIT had offered a price band of Rs 99-100 per unit for the public issue, which opened on April 29.
 
PGInvIT planned to raise Rs 4,993.5 crore as fresh issuance and PGCIL is also providing an offer for sale (OFS) of Rs 2,742 crore of the existing units. The company has offered five “initial portfolio assets” at an enterprise value of Rs 10,384 crore for the PGInvIT.
 
ICICI Securities in its initial note on the PGInvIT IPO said the assets offered had stable cash flows with long-term visibility.
 
“The long residual life of the initial portfolio assets provides long and stable visibility of cash flows. Since the initial portfolio assets are on a BOOM (build own operate manage) basis, the InvIT will be in possession of these assets perpetually, which further ensures stability of cash flows,” said the note.