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Govt looks at InvIT model to monetise power sector PSUs assets
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SME Times News Bureau | 12 Aug, 2019
The government asset monetisation programme may take the trust route
with central transmission utility Power Grid Corporation of India Ltd
(PGCIL) looking to float an infrastructure investment trust (InvIT) - a
first by a PSU entity - to unlock value from its operational
transmission assets and free up long-term capital for further
investments.
Government sources said that the company will
shortly appoint a consultant to advice on the modus operandi for
floating of the trust and suggest a roadmap for its proposed asset
monetisation programme.
"The InvIT route will help the company to
get current value of its assets and unlock capital that could be used
for further investment and faster development of projects," said a PGCIL
official, who was not willing to be identified.
He, however,
said that the PSU was not in a hurry to monetise its assets and would
wait for the right market conditions to undertake such exercise. The
company also has over Rs 4,000 crore of surplus cash and a Rs 10,000
crore fund raising programme through bonds that is considered adequate
for meeting its entire capital expenditure of about Rs 15,000 crore in
FY21 and other greenfield investments.
"Moreover, government may
not directly benefit from this asset monetisation, as the money from
sale of assets may fall into the books of the PGCIL. However, the Centre
can always recoup some benefits by seeking higher dividend payout from
the PSU," said the source quoted earlier.
The proposed InvIT will
be on the lines of a real estate investment trust (REIT) for which the
market regulator, the Securities and Exchange Board of India (Sebi), has
already finalised detailed norms for trading of trust units.
Already,
India Grid Trust (IndiGrid), an infrastructure investment trust (InvIT)
sponsored by Sterlite Power Grid Ventures Ltd, is operational.
With
a total asset size of over Rs 2 lakh crore and investment of about Rs 1
lakh crore in putting up transmission infrastructure, the proposed
monetisation programme of PGCIL could provide it the necessary boost
required to push up investments.
As per the plan that is still
being discussed with Department of Investment and Public Asset
Management (DIPAM), the PGCIL would set up the InvIT and transfer or
sell some of its operational transmission assets to the proposed trust.
In return for such transfers, the company would get tradeable units from
the trust that could be used in the market to mobilise funds.
This
would allow the company to monetise its existing assets that in normal
circumstances would have given it returns only after years of operation.
Transmission projects are long gestation projects where returns start
accruing only after a period of 20-25 years.
"The concept of
InvITs is good. But it is not as much beneficial for Indians as it is
for external people, say, for FIIs," said executive of an infrastructure
company that is also looking at floating an InvIT.
In order to
make InvIT a monetisation tool for the sector, the PGCIL may also also
rope in more power companies that are looking to free up their capital
to raise resources for fresh investments. This would help it attract
investors into the trust that would be crucial to build a large corpus.
The
PGCIL has a big investment plan for enhancing transmission network in
the country. Annually, the company is making capital expenditure of
between Rs 15,000-20,000 crore to expand its network. It already has
close to 1,58,000 circuit kms of inter state transmission lines.
Sebi
has allowed Indian firms to launch investment trusts to help
cash-strapped developers get easier access to funds, while also creating
a new investment avenue for institutions and high net worth
individuals.
PSUs are working on asset monetisation programme in
wake of the government's decision that companies would have to mobilise
resources for new investments through that route as normal channels of
financing were under pressure.
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