IndiGrid InvIT to buy 100% stake in NER II from Sterlite Power in largest single asset deal

IndiGrid InvIT has announced the largest single asset deal in the Indian transmission sector. They have signed a share purchase agreement to acquire NER-II transmission project from Sterlite Power for Rs 4,625 crore.

Harsh Shah, CEO of IndiGrid spoke about this transaction and how it impacts the company as well as the shareholder incentive of this InvIT.

“This project is towards strengthening the transmission lines in the north-eastern region of the country. This is going to be transacted with Sterlite Power with whom we had signed an agreement to acquire approximately Rs 11,000 crore asset,” he said.

This acquisition is going to be funded by key proceeds – equity capital that was raised last year from KRR, GIC and other investors, internal accruals, incremental debt as well as the rights issue proceeds which the company is planning to raise in the subsequent timeframe.

“After this acquisition, our debt to AUM – the leverage that we cap - will be approximately 64 percent and after the rights issue, this leverage will come down lesser than 60 percent, which would keep additional Rs 7,000 crore acquisition headroom for ourselves in the balance sheet,” he added.

When asked how the company will grow through acquisitions, he replied, “About the target, we have achieved a critical mass, so we do not have specific targets but our focus remains in shareholder returns, the asset that we buy needs to be accretive to our investors and keep our balancesheet robust. We do see Rs 6,000-7,000 crore of asset pipeline in front of us and that will come from both transmission as well as solar sector.”

“The regulation which the government has made in the budget to enable InvITs as part of investment vehicle, we are expecting IRDAI to follow suit once the budget is signed and issue circular which allows us to also borrow long-term, reduce the cost of capital and diversify our sources of borrowing,” he stated.