Power grid - a superior alternative to Invits

@harsh.beria93 few questions regarding powergrid and InvITs.

  1. When you say the contracts are TBCB, what is the metric on which the bidding happens? Is it cost charged per Circuit KM, or does even the amount of power transmitted also comes into play?
  2. With the introduction of InvIT structure, I am getting the feeling that slowly PowerGrid will become a EPC player of sorts operating on the BOT model, which sets-up the towers (builds), operates it for sometime and then transfers the towers to the InvIT. This way, isnt PowerGrid’s cashflows actually come under more stress say two three years down the line, when the towers and its profits are out of its balance sheet, and all the profits and cashflows are sitting with the InvIT
  3. Any idea on how the transfer of the tower assets happens between Powergrid and the InvIT, is it on book value or its like some discounted cashflows

From what I have gathered through the thread, it seems the InvIT might be a better instrument to buy due to the following:

  • Assets are created, with contracts in place, so no execution risk

  • Optionalities of possible other monetizations are with the InvIT (eg. putting telecom towers on the power towers and earning more income)

  • No/limited downside vis-a-vis Powergrid, as it gets the experience of the Powergrid mgmt. with powergrid sorting all the setup related activities (eg. land-acquisition, getting the power agreements, bidding for it etc.)

Its like PowerGrid finds a golden goose, feeds its, sees it grow and then one day sell it off to some-one for money right now compared to golden egg coming in month-over-month like annuity.

It would be great if you can shed some light on the questions and also let me know if I am missing on . PowerGrid vs PowerGrid InvIT view


Hi Divyansh,

In my understanding, InvIT is just a monetization route where Powergrid can get back their invested equity along with their returns and then decide whether to give it back to shareholders, pay down debt or bid for more projects. Its important to note that Powergrid only monetizes TBCB assets which are acquired via competitive bidding (where ROEs are lower) compared to regulated assets where they make 15.5% ROE + incentive income.

About the bidding details, please refer to the Motilal report on this thread. I dont have enough expertise to give an informed answer.

The main reason for me buying Powergrid was that they had large CWIP which was supposed to come onstream and lead to improved freecashflow which should be returned as dividends. This thesis actually played out and I exited last year. You can see my thoughts below.

The reason for my exit was mainly around growth concerns as most of their large assets already got commissioned. Hope this is of some help :slight_smile:

Disclosure: Not invested (no transactions in last-1 year)


Hi Divyansh

To add to what Harsh mentioned, pl see below news on pginvit for additional tranches from power grid. Power grid has found InvIT route to be expensive and they are looking at securitisation of cash flow route. I think they also mentioned it in latest concall. Pginvit will be impacted significantly by this move


Can someone highlight the impact of transfer of these 6 assets SPVs from REC to power grid ? Will the cashflow if PGINVIT has anything to do with this ?

These are new project won by Power Grid through competitive bidding - they will have to build these assets first.

Bids are floated by either PFC or REC’s consulting arm with SPV incorporated and Transmission Services Agreement signed with counterparties by the SPV. After Reverse auction, the SPV is transferred to the Successful bidder

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I do not think there is absence of operational assets to handover for Power Grid. That is why they had asset monetisation targets for FY23. They have mentioned in their concall about evaluating InvIT route due to costs involved.

The level of governance in PSUs is really pathetic. The board and management of of such an important PSU are completely helpless and can only ask the ministry to make an appointment of an independent director


Dividends are right now paid from reserves, I am trying to estimate the worst case dividend that can be paid using CF alone.

How is Total CF (Pg Invit) more than CF of SPVs, since the only income source will be SPVs.


The Sum of interest income and dividend income is less then 90% SPV NDCF

Total SPV NDCF: 2619

90% SPV NDCF: 2357.1

interest income:1850

dividend income: 440.48

interest + dividend income = 2290.48

Repayment of SPV Debt is not add to NDCF at SPV level

Similar question had come during Con Call of IndiGrid, looks like the receivables are not evenly distributed thru the year, some quarters get higher cash flows, hence may have to dip in reserves.
Nothing alarming


I find it puzzling that PG InvIT trades at a 25% premium to NAV. The reasoning usually provided is that it has an extremely low leverage at less than 1% LTV and it can undertake fully debt funded NAV-accretive acquisitions at highly competitive cost of debt due to its sponsor pedigree.

But the sponsor, Power Grid has itself indicated that they are looking at securitizing cash flows of their existing assets for monetization rather than an outright transfer to the InvIT. Also, PG InvIT’s management has indicated that there aren’t enough third party transmission assets available for them to expand their portfolio. Even IndiGrid has had to diversify by acquiring generation assets to expand their portfolio. PG InvIT isn’t keen on acquiring non-transmission assets. In this scenario, what use is its balance sheet if there are not enough opportunities to deploy it?

Are there any other factors that I’m missing which would justify the significant premium to NAV that it enjoys?

Apologies for posting here as there’s no separate thread for PG InvIT


This is the reason why PGinvit is stinking and has fallen from 140 plus to 106…if there is no addition of new project, eventually maintenance costs will eat cash flow and you can keep dipping into reserves so much, so as to keep paying the DPU. Market is expecting DPU to fall in this invit…and even the venerable Indigrid is not in its usual form these days but in much better shape than PGinvit…all my 2 cents…take it with a pinch of salt


I fully agree on the current scenario and keeping an eye on its movement. 11.3 per cent yield on a Triple AAA government rated instrument is too tempting to ignore. My view is that Market is not liking the idea of Power Grid Invit dipping into reserves last quarter for maintaining DPU guidance and their future commentary is also currently not encouraging.

I stil may get tempted to enter below 100 mark as 12 percent yield and long runaway will give enough margiin of safety and a postive management commentary can trigger rally to 140 levels.

Keeping in watchlist.


Pointing it out here, that the current 11.3 percent yield might not sustain beyond FY 24.

In their Aug 7 concal, the PGINVIT management did say that maintaining INR 12 per share distribution for the year will not be possible for next year (32:30 PGInvIT).

Disclosure: invested, tracking closely as I invested mainly for the passive income :expressionless:


When will we receive the bonus share? I haven’t received them as on today.


Dear Sir,

Thank you for pointing out the issue with exact timing.

If i may request , Could you provide the a brief summary of the audio concoll ? It may help everyone in reading the script.

This would mean a really large capex. It may though take a long time.
Disclosure: I have some investment.

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