Thanks @sambandham82 for sharing the email. It’s really valuable.
Now, The moot question is : Why and how IndiGrid is able to garner assets after assets in the same ecosystem ?
Is it because IndiGrid is managed by KKR (PE giant) which are more agile and dynamic vs sloppy PGInvit management?
Also, it should be very helpful, if someone can enlighten as to which state governments and private parties PGinvit is actively talking to and how close they are in closing the deal?
So was doing some digging on valuation report - Noticed that almost 300 cr drop in cashflows (NOPAT) from FY 28 and onwards (100 cr in two SPVs, 80 cr in 3rd and some 20-30 cr odd in 4th).
Currently at Rs 12 DPU - total distribution is appx 1,100 cr. So with drop of above 300 cr, estimated distribution will become appx 800 cr in FY 28 (may have some impact in FY 27 as well). So it seems that they may maintain 12 DPU for FY 25 and FY 26 but may drop to Rs 2.5 per quarter / Rs 10 for FY 27 and later Rs 2 per quarter / Rs 8 to FY 28.
Am I missing something here?
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I share the same understanding and its a matter of time when DPU gets reduced. Market is not appreciating responses from Management who don’t have any plan for any new additional assets. Hence the downfall from 120 levels to 90 and may be to 75 levels by 2028.
Even after considering reduced DPUs… the current price is giving us very high yield for next 1.5 years and moderate yield thereafter, however if something changes on asset acquisition side, the upside could be bonus. Little to lose with optionality to gain! Looks like a no brainer to me in falling interest rates scenario that is being projected in coming years.
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But yield is combination of returns + principal (as terminal value is zero). I was thinking more like 11-12% stable yield to assuming HTM model.
Also, their published NAV is abt 86/-. fair value I feel shd be like 80-85 (extra DPU in first 2 years to reduce capital cost and thereafter 11-12% stable yield). Any further acq (surprise factor) can be alpha.
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It is best to stay away from Powergrid INVIT because of capital depreciation with low transparency in growth and whats next.
Though dividend yield is attractive, you may end up losing capital.
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Any view on what will be the DPU trajectory for the remaining life (~28+ yrs) of the existing assets? Assuming no further acquisitions.
Is this info available or possible to compute basis the contracted tarrif rates of their existing contracts?
@All @kkronline @amit.thakkar.007
I was thinking to average down my investment but sounds like everyone here are too cautious of future cashflow / DPU and book value / unit price
Disc. Invested and sitting on ~40% capital loss
I took full exit at 92.
Would revert only if it is available discount to its value (nav / bv).
Uncertainties and opaquenes must lead to more discounting.
Regards
Karthik
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I don’t know whether it will slip that low. Once RBI does a rate cut I’m confident that this will spring back up. Without asset addition, this is essentially a bond and rate cuts are favourable for bonds.
Disc: 10% of pf
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There are no uncertainties. They have a contract for next 28 years (guaranteed earnings). Its just due to market perception, there is less demand even at 13.5% yield for FY25 & FY26 and 11% for next 5 years and even in the last 5 years, yield is as good as 6%. The interest rate will not be 8% in FY50 but may be <5%.
All stocks go through up cycle and down cycle in terms of share price irrespective of earnings. All PSUs went through down cycle between 2018 and 2021. Everyone was pessimistic but next 3 yrs had been phenomenal for those stocks.
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I did my own valuation which includes projection of future cash flows. Sharing the details below. Key assumptions:
(i) Non-interest expenses overall (blended) will escalate at ~5%.
(ii) Assumptions pertaining to discount rate and terminal value are indicated in the calculations below.
My PGINVIT valuation.pdf (76.4 KB)
Look forward to other views. DM me if you want the excel sheet in order to redo the calculation as per your own assumptions.
Disclosure: Invested. Possibly biased.
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As per the estimation done by @sheekhuj, at a discount rate of 8.8%, we get Net present value of Rs 88/share which is the current price. So this means, we get 8.8% return p.a. for the next 30 yrs. Asset addition is a bonus. PGinvit will surely get assets and is not going to be idle for 30 yrs.
Is it not 8.8% a good return ? (if average interest rate for 30 yrs is expected to be much lesser in the next 30 yrs).
Can some one clarify…
It depends on one’s opportunity cost… If your alternatives are giving you say - 7%, then 8.8% is a good option…but if your alternates are giving you more than 8.8% ( say 10%)- then its not recommended…
Will the current yield of Rs:3/share will be consistent ?
Please read complete thread and you will have all answers.
Current yield of 3rs is not consistent and will have a declining trend as can be checked in the Third Party Valuation Report showing the projected revenues for concession periods.
Thank u… I am new to this thread.i will do.
Latest half-yearly report from PGInVIT has a note about the acquisition of remaining 26% equity shareholding in the 4 SPVs.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/8353d6b2-1c92-488b-a076-5733201854cf.pdf
Same has been noted in Power Grid Q2 Results as well:
Proposal to sell, assign, transfer 26% residual equity shareholding in four associate companies viz. POWERGRID Kala Amb Transmission Ltd., POWERGRID Parli Transmission Ltd., POWERGRID Warora Transmission Ltd. and POWERGRID Jabalpur Transmission Ltd., held by the Company to POWERGRID Infrastructure Investment Trust (PGInvIT).
https://www.bseindia.com/xml-data/corpfiling/AttachHis/096b8986-ff2e-4a89-a0f5-00f3f88897ff.pdf
This would result in a slight increase in DPU right?
As per PowerGrid Q2 report, 260.86 crore was mentioned as “Assets Classified as Held for Sale” under Current Assets. I think that may be for the 26% sale of the four SPVs to PGInVIT. I interpret that as PGInVIT has to pay that amount. Hence, not sure if DPU increase would be possible, requesting others/experts to share their thoughts.
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