{"id":14986,"date":"2021-04-28T00:00:00","date_gmt":"2021-04-28T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/28-04-2021\/powergrid-infrastructure-investment-trust-pginvit\/"},"modified":"2021-04-28T00:00:00","modified_gmt":"2021-04-28T00:00:00","slug":"powergrid-infrastructure-investment-trust-pginvit","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/28-04-2021\/powergrid-infrastructure-investment-trust-pginvit","title":{"rendered":"PowerGrid Infrastructure Investment Trust (PGInvIT)"},"content":{"rendered":"<p><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">State-owned Power Grid Corporation of India (PGCIL) launched its<\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> infrastructure investment trust (InvIT)<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Background<\/u><\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">\u00a0<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The Union Cabinet in September 2020 approved <\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>monetisation of PGCIL\u2019s assets<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> through the InvIT model.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The InvIT route was proposed by the government as an <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>alternative fundraising route<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> for state-run companies to manage their funding requirements without having to depend on government support.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">This is the<\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> first time PGCIL is monetizing<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> its infrastructure assets through the InvIT route.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">This will be <\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>only the third InvIT<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to be listed in the Indian markets, after IRB InvIT and India Grid Trust, both of which went public in 2017.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Data Analysis:<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">PGInvIT has offered a price band of Rs 99-100 per unit for the public issue.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The InvIT will raise Rs 4,993.5 crore as fresh issuance and PGCIL is also providing an offer for sale (OFS) of Rs 2,742 crore of existing units.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<h2 style=\"text-align:center\"><span style=\"font-size:16pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/cfstatic.nextias.com\/cdn-cgi\/image\/format=auto\/file_library\/mix_content\/614301568298468000_image.jpg\" style=\"height:243px; width:244px\" \/><\/span><\/span><\/span><\/h2>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The net proceeds will be<\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> used to provide loans<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> to the <\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>initial portfolio assets<\/strong><\/span><\/span><\/span><span style=\"font-size:10pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> for repayment or pre-payment of their debt, including any accrued interest, and for general purposes.<\/span><\/span><\/span><\/li>\n<\/ul>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; table-layout:fixed; width:624px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fff2cc; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top\">\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>About Power Grid<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Power Grid Corporation of India Limited (POWERGRID), is a<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> schedule \u2018A\u2019 \u2018Maharatna\u2019 <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Public Sector Enterprise of Govt. of India which was incorporated on 23rd Oct 1989 <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>under the Companies Act, 1956.<\/strong><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>listed Company, with 51.34%<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> holding of Government of India and the balance is held by Institutional Investors and public.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is\u00a0 operating <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>under the Ministry of Power.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>About Infrastructure Investment Trust (InvIT)<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Collective Investment Scheme<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> similar to a mutual fund.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It enables <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>direct investment<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of money from individual and institutional investors in infrastructure projects to <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>earn a small portion<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> of the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>income as return<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">InvITs work like real estate investment trusts (REITs) in features.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">\u00a0InvITs can be treated as the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>modified version of REITs<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> designed to suit the specific circumstances of the infrastructure sector<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The InvITs are regulated by the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>SEBI (Infrastructure Investment Trusts) Regulations, 2014.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">An InvIT consists of <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>four elements<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">:<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Trustee:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> He inspects the performance of an InvIT is certified by Sebi and he cannot be an associate of the sponsor or manager.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Sponsor<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: They are people <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>who promote<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and refer to any organisation or a corporate entity with a capital of <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Rs 100 crore<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, which establishes the InvIT.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">They jointly have to hold a minimum of 25 per cent for three years (at least) in the InvIT, excluding the situations where an administrative requirement or concession agreement needs the sponsor to hold some minimum percent in the special purpose vehicle.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Investment Manager<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: Investment manager is an entity or limited liability partnership (LLP) or organisation that supervises assets and investments of the InvIT and guarantees activities of the InvIT.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Project Manager<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: Project manager refers to the person who acts as the project manager and whose duty is to attain the execution of the project and in case of PPP projects.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Advantages of InvITs<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Diversification<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: InvITs with multiple assets offer individuals an opportunity to diversify their investment portfolio.\u00a0<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Such a feature directly helps lower associated risks and further allows investors to generate steady returns in the long run.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Fixed income<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: The option to redistribute risks and accrue a fixed income serves as a potent alternative for generating fixed income, especially for retirees.\u00a0<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Also, including such an investment tool would help those who intend to plan retirement effectively.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Liquidity<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: Generally, it is easy to enter or exit from infrastructure investment trust, which directly enhances their liquidity aspect.\u00a0<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">However, small investors may find it challenging to sell a high-valued property quickly.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Disadvantages of InvITs<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Regulatory risk<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: Even the slightest change in the regulatory framework like taxation or policies concerning the infrastructure sector would have a ripple effect on InvITs.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Inflation risk<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: A high rate of inflation has a significant impact on the performance of infrastructure investment trusts.<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">\u00a0For instance, inflation may increase the sector\u2019s operating cost. Further, an increase in the toll rates would lower the prospect of generating substantial returns.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Asset risk<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">: Typically, investment in infrastructure has a long gestation period, and hence the process of generating returns is often delayed.\u00a0<\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Such a delay not only takes a toll on the cash flow but further hampers profit projections.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><a href=\"https:\/\/www.google.com\/amp\/s\/wap.business-standard.com\/article-amp\/companies\/power-grid-launches-pginvit-could-offer-18-more-assets-in-future-121042600522_1.html\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#1155cc\"><u>Source :BS<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News State-owned Power Grid Corporation of India (PGCIL) launched its infrastructure investment trust (InvIT). Background\u00a0 The Union Cabinet in September 2020 approved monetisation of PGCIL\u2019s assets through the InvIT model. The InvIT route was proposed by the government as an alternative fundraising route for state-run companies to manage their funding requirements without having to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14987,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[92,26],"class_list":["post-14986","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-energy","tag-gs-3"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/1681953current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14986","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=14986"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14986\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/14987"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=14986"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=14986"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=14986"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}