The initial public offering (IPO) of PowerGrid Infrastructure Investment Trust (PowerGrid InvIT) will open for subscription on April 29. Sponsored by Power Grid Corporation of India, this will the first InvIT to be launched by the government company.

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An infrastructure investment trust (InvIT) is an investment vehicle that allows retail investors and institutions to invest in infrastructure assets like roads, power transmission lines, etc to earn a small portion of the income as a return over a period of time.

PowerGrid InvIT has been set up to own, construct, operate, maintain and invest in power transmission assets in India.

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PowerGrid InvIT IPO to open on April 29 at a price band of Rs 99-100 per unit

Here are key details you need to know before investing in PowerGrid InvIT:

- The public issue will open for subscription on April 29 and close on May 3.

- The price band for the offer has been fixed at Rs 99-100 per unit. The company plans to raise Rs 7,735 crore through its public issue.

- The offer comprises a fresh issue of Rs 4,993.48 crore and an offer for sale of Rs 2,741.51 crore by the selling unitholder.

- Around 75 percent of the offer is reserved for institutional investors, of which 60 percent is reserved for anchor investors. Balance 25 percent portion will be available for allocation to non-institutional investors on a proportionate basis.

- Investors (except anchor investors) can bid for a minimum of 1,100 units and in multiples of 1,100 units thereafter.

- The company proposes to utilise the net proceeds from the fresh issue offer for providing loans to the Initial Portfolio Assets for repayment or pre-payment of debt, including any accrued interest, availed by the Initial Portfolio Assets; and for general corporate purposes.

- The units are proposed to be listed on the BSE and National Stock Exchange of India.

- The lead managers to the offer are ICICI Securities, Axis Capital, Edelweiss Financial Services, and HSBC Securities and Capital Markets (India).

- IDBI Trusteeship Services Ltd is the Trustee, while Power Grid Corporation of India Ltd is the sponsor. POWERGRID Unchahar Transmission Ltd is the Investment Manager.

What brokerages say

PowerGrid InVIT is a good option for investors looking for a 10-12 percent yield arising from stable cash flow, says Elara Capital.

"Given that the PowerGrid InVit will start out as debt-free, provided more room for the growth from the future acquisition of PWGR TBCB portfolio of Rs 210 billion currently under construction," it said.

Listed companies, such as Sterlite Power-sponsored Indigrid is trading at a 9% yield with a 9% premium to its NAV value while PG InVIT is available at 11% yield and a 1% premium to its NAV value at the upper price band, the brokerage house noted.

"The offer is priced at around a 3.5x multiple on the book value. Investors can expect a pre-tax yield of 9 to 11 percent based on the utilisation of funds to repay the SPV level debt," GEPL Capital said.

An important feature of the InvIT is its ability to produce consistent cash flows owing to long tenure contracts, and headroom for growth given potential to lever the balance sheet and acquire more assets from PowerGrid, it added.