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Update on Power Grid InvIT IPO

Power grid InvIT has several pluses like strong sponsor, demand for power transmission assets expected to remain very strong etc.

But it should be noted that IRR over the life of the existing contracts is approximately 8.5% pre-tax. (Yield of 11-12 % which is being marketed by some distributors is only for first 3 years)

Leverage is low. Hence there is scope of adding new projects. This can take overall IRR to say 10% with addition of new projects

Conclusion: Given lack of fixed income and related opportunities this IPO could be considered as part of an overall portfolio of fixed income. It should be borne in mind that the best way to evaluate InvITs is IRR over life (like we do for bonds) and not yield in initial years

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