IndiGrid to raise Rs 27.5 billion for acquisition, refinancing old debt

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India Grid Trust (IndiGrid) backed by global investment firm KKR plans to raise Rs 1,250 crore via bonds to refinance old debt and takeover.

IndiGrid, which manages power transmission and power generation assets, will raise up to Rs 1,500 crore in equity to bring its debt-to-asset ratio down to 60 per cent from 65 per cent for prudent financial management.

In May 2023, IndiGrid announced the acquisition of 100 percent of the Virescent Renewable Energy Trust (VRET), along with an investment manager and project manager. The deal is expected to be valued at Rs 4,000 crore, subject to regulatory approvals and closing amendments.

Crisil Ratings has assigned ‘AAA/Stable’ rating to IndiGrid’s Rs 1,250 crore non-convertible notes (NCDs), an infrastructure investment fund (InvIT). The rating continues to reflect the stable earnings of the trust.

The entity has a proven track record of maintaining above-bench transmission line availability and 35-year Transmission Service Agreements (TSAs) that ensure steady cash flow.

IndiGrid was incorporated on October 21, 2016, and had operating assets of Rs. 22,800 crore on March 31, 2023. Backed by US private equity firm KKR, VRET has 16 operating solar assets with a combined capacity of approximately 538 MW. After the acquisition of VRET, solar AUM will account for approximately 15 percent of IndiGrid’s total assets under management.

A debt-financed acquisition would bring the ratio of net debt to assets under management (AUM) to about 65 percent from about 60 percent currently. After the equity injection, debt to assets under management is expected to drop to 60 percent. Thus, the ratio will remain within the 70 percent cap set by the Securities and Exchange Board of India (SEBI).

CRISIL Ratings said that while IndiGrid has entered the renewable project development spaces, InVIT will remain largely specialized in the field of operational energy transmission. The renewable energy sector is more risky than the highly stable energy transmission sector. The ratings agency added that it will continue to closely monitor any further diversification and its impact on IndiGrid’s credit profile.