India Grid To Repay Debt, Fund Future Growth Using Preferential Issue Proceeds

India Grid Trust plans to use the Rs 695 crore from preferential issues to fund acquisitions for future growth and debt repayment, according to Chief Executive Officer Harsh Shah. "This capital's immediate use will be to repay some of the debt. That is going to add to our acquisition headroom for future growth assets,” Shah told NDTV Profit. 

IndiGrid said last week that Alberta Investment Management Corp. and HDFC Life Insurance Co. will invest Rs 567 crore and Rs 100 crore, respectively, through its preferential issue. The new issue has been priced at Rs 136.43 per unit, according to an stock exchange filing.

India Grid Trust is one of the largest power sector infrastructure investment trusts (InvITs). For the current financial year, IndiGrid’s distribution per unit guidance stands at Rs 15. 

The launch of the preferential issue followed KKR's recent offer-for-sale stake sale at IndiGrid. Last month, KKR successfully concluded the OFS process, reducing its unitholding to 3.85% from 21.17%. KKR has been an investor in IndiGrid since 2019. 

Shah said that the share sale issue was oversubscribed two times, and strategic investors also expressed interest.

“Therefore we decided to do a specific preferential issue to accommodate for strategic investors who could not participate in the OFS and raise Rs 695 crore between largely AIMCO and HDFC Life,” he said. 

However, IndiGrid will not become debt-free in the future because the company wants to maintain optimal leverage, which, according to Shah, is important for any infrastructure player.

“That number for us is 60-70% of our asset value, and 70% is the cap provided by SEBI that one cannot grow beyond. We are currently at 61%, and probably after this preferential issue we will come in the 60% range of debt to AUM,” the IndiGrid Chief Executive said. 

This value is most optimal in terms of tax, leveraging returns for unit holders, and compliance with SEBI regulations to maintain IndiGrid’s rating, Shah said.

InvITs, including IndiGrid, are mandated to follow a far more stringent regulatory framework prescribed by SEBI in comparison to equity companies, Shah said. 

The company has five projects in hand, which will be completed in two years, and it is already looking to invest more in new projects, especially in the transmission, battery energy storage, and solar battery energy storage sectors. “We are looking at these three core segments to expand and grow, and all of them are looking at tremendous amounts of pipeline and capex that the country is undertaking right now,” said the IndiGrid CEO. 

IndiGrid is also identifying bidding pipelines of almost Rs 96,000 crore in just state transmission assets and battery storage projects. Shah is hopeful of IndiGrid securing 5-10% of the total bidding pipeline.