Indigrid InvIT: High yield on stable and predictable revenues

I talked to the person for online support-ICICI Direct and after a long wait and getting tossed three times between different persons finally got connected to a person from Demat department. I repeated the story and finally he has taken an offline request for rights issue application which they will be making on my behalf and has given a service request number. I don’t know how it will go through. I will check my bank account tomorrow if corresponding amount is blocked under ASBA then it is fine otherwise I will sell my rights entitlement.

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Yes, tomorrow is last date for trading in my understanding

There is not much arbitrage left. One should consider buying rights @14 or below and subscribe @110 to make it a 10% yielding asset considering the annual distribution of Rs 12.4/unit. That is one reason it is selling off but tomorrow should be the last date for the weakness to end.

If you have sold your rights entitlement how are you still eligible to subscribe for the rights issue? Would appreciate if you can elaborate on this Dhiraj.

I got 2.4 lot entitlement. So got 2 Lot (1701*2=3402) units in Demat and balance fraction would be subscribed me and would get allotment as per priority decided by the management. I sold 2 lot right entitlement in BSE (3402 units). However, still need to try my luck with applying against 0.4 lot fraction. Hope this would assist you

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Very disappointed at the way ASBA is being handled by company / banker. I had to submit offline application for first time ever! The email id given in FAQs for contacting banker is incorrect!

Could you please give a little clarity on how to do this offline from A to Z?

Go to Indigrid website > Choose Investors Section > Choose Rights Issue 2021 > Download "Application Form. Fill it up and submit to nearby ASBA enable bank branch

Thanks @dd1474 & @sumi00 : - Was looking for RE arb, bt didnt seemed mch thr.

BTW, wat r ur views on the upcoming Powergrid InvIT? How does that compare with Indigrid competitively?

Disclosure : - Not invested.

Don’t think they would offer anything more than 9-9.5% yield. Powergrid Invit will be true sovereign AAA and should trade at GoI 10 Y yield +150bp at max. That’s why I mentioned that a 10% yield in IndiGrid is a good deal. I grabbed few lots @14/RE and will subscribe more. Look at RBI how they are hell bent in keeping bond yields low.

For people in the 30% tax bracket, post tax yield of 7% at current levels is just a better option compared to Bank FDs or some AAA bonds.

REITs can provide the same post tax yield with a much stronger element of capital appreciation.

Only those that got in at <=100 levels it makes sense and is a better alternative than REITs with stronger stability in cash flows.

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You think only retail invests here? This will be a favoured investment for insurance and pension funds and retiree’s for semi- perpetual returns. I have personally moved my family’s FDs here. REITs have to spend sometime in the recovery process. They will be a good buy for me if they go below their issue price. Don’t believe their NAVs since some of those calculations are invariably optimistic. I would rather bet on very high probability 10% per tax than speculate on capital appreciation as of now. I would wait for one big correction to invest in REITs.

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for people applying in Indigrid rights entitlement, now kotak bank is showing it and can apply thru the same

Thanks for seeking my view. My disclaimer, I hold IndiaGrid InvIT, IRB InvIT and Embassy REIT (latest addition, with major holding purchased yesterday).

Please also note that I am not expert and my understanding may be completely wrong.

I see InvIT/REIT as structuring of cashflow which changes when the trust purchase new assets which get financed from debt equity mix to provide stable cashflow over a long period to investor. So business wise, Powergrid shall be theoretical similar to India Grid. However, it would also depend on valuation of underlying assets, what price that units are issued to invest and access to new assets in future by Powergrid InvIT. This would be critical input to decide whether to invest or not for me.

In my limited understanding, while InvIT are currently providing higher current yield, over a decade, I find REIT are better than InvIT, other thing being same. REIT has main income (lease rental) which normally increase with inflation.

Transmission assets provide very stable cashflow, but limited (in many case no linkage to inflation). If one go through portfolio of assets of IndiaGrid, except for 1-2 Transmission assets, none have inflation linked increase. Revenue is almost stable over a very long period. Hence, the future growth in distribution can broadly came only from acquisition of new assets and change (mainly decline in interest rate).

In case of Road assets, while IRB InvIT assets has superior on inflation and growth fronts (with toll being linked to inflation and traffic growth linked to economy), it has relatively higher volatile cashflow which can result in cash distribution from toll assets. Second point, life of road toll agreement is generally 15-20 years while that for transmission assets is generally 30 years. On third point, ownership of assets of Road is handed over to Government after completion of concession agreement, while in transmission agreement, revenue would technically terminate on end of agreement, the assets are still owned by Transmission InvIT which would have some terminal value.

In case of REIT, the revenue (lease rental and leasable area), assets are owned by REIT (with average life of around 50 years with maintenance), revenue having inflation linkage and income earning capacity over life of assets (unless Work from home results in major decline in Commercial real assets). So I see relatively lower current distribution, but potential to grow distribution to grow over a long period of time. Also capital value appreciation in Real estate is more likely to benefit over a longer period, to REIT over Transmission InvIT and Road InvIT.

Find enclosed comparison of various infrastructure assets in India, sourced from IndiGrid Letter of Offer in 25 March 2021, Page 168 (in pdf) which I find very useful.

Please note that this is my personal view, may be biased and may be wrong.


Cool insight !!
Agree with so many points…

Online application for Indigrid right has been enabled in ICICI Direct now.

FOr those with ICICI Direct planning to invest in rights issue with atleast 1 lot of entitlements -

ICICI bank as well as ICICIDirect now shows the Apply for rights - you can lock ASBA account and apply through online - no need for offline based application

Also - it is a very good invesment at 12.4% current DPU per annum for a price of 110. (cmp is 127). There is 15% arbitrage too…

asba doesnt allow to apply for more than 1 lot (less than 2 lcs)

Actually i applied for 3 lots in one demat and 2 lots in another demat through ICICI bank - it was accepting

Can I apply for rights issue if I don’t own the invit already.