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Private equity firm KKR withdraws intention to sponsor India Grid Trust


MUMBAI: Private equity firm KKR has backed off a plan to become a sponsor of India Grid Trust, or IndiGrid, an infrastructure investment trust (InvIT).

In May 2019, KKR – in a first of its kind transaction – had invested Rs 1,084 crore in the InvIT set up by Sterlite Power Transmission. GIC Infra Holdings had chipped in Rs 980 crore.

According to the deal terms, KKR affiliate Esoteric II Pte got 23% units of the trust with an option to buy a further 15% by July 15 this year.

However, KKR has not purchased the additional stake before the agreed upon deadline, IndiGrid said in a disclosure to the bourses.

“KKR has withdrawn its intention to be designated as a sponsor of IndiGrid. A sponsor has the right to acquire more than 25% units, which meant that if IndiGrid went for capital raising, there would have been a large financial investor to put, say, 50% of the money; capital is far more secure. Now we need far more people to invest,” IndiGrid CEO Harsh Shah told ET.

KKR continues to be the single largest unit holder in the InvIT and owns a majority stake of 60% in Sterlite Investment Managers, the manager of the trust.

“We are grappling with what will be the impact of this. Right now, we don’t need money because we are already capitalised from the last fundraising,” Shah said.

The company is assessing the impact on growth plans following KKR’s withdrawal, he said.

“KKR is still the manager to the trust and people see them as a good money manager. So, getting investors should not be a challenge. We will only have to go to a larger number of investors to raise the funds, that’s the impact,” he said.

IndiGrid was the first InvIT in the Indian power sector, set up by Sterlite Power to house its operational projects. It owns nine operating projects consisting of 20 transmission lines with more than 5,800 circuit kms length and four substations. The assets under management are worth Rs 12,200 crore.

Experts tracking the sector said that the unexpected termination of the agreement will not have any significant impact on the business given IndiGrid’s robust portfolio.

“The uncertainty around the shareholding pattern and Sterlite Power Grid Ventures’ 100% pledge of its 15% stake is likely to create near-term pressure on the stock. We remain comfortable with demand/volume at minimal risk, visible and predictable cash flows and solid track record. IndiGrid continues to present a structural long-term bet,” brokerage Edelweiss said in a note.

Edelweiss has a ‘buy’ rating on the units with a target price of Rs 115.

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