AIMCo Acquires Stake in IndiGrid
India Grid Trust (IndiGrid), a power infrastructure investment trust, has launched a preferential issue of shares priced at ₹136.43 (~$1.62) to raise approximately ₹6.95 billion (~$82.7 million).
This move follows the successful conclusion of an Offer-for-Sale managed by its sponsor, KKR, which saw substantial interest from existing and new long-term investors.
The OFS, aimed at reducing KKR’s stake from 21.17% to 3.85%, was oversubscribed nearly two times, reflecting strong investor confidence. This attracted participation from prominent institutional investors such as L&T, HSBC Global Asset Management, SBI Life Insurance, and Aditya Birla Mutual Fund.
Alberta Investment Management Corporation (AIMCo) of Canada and HDFC Life have committed to investing ₹5.67 billion (~$67.5 million) and ₹1 billion (~$11.9 million), respectively.
Harsh Shah, Chief Executive Officer and Whole Time Director of IndiGrid, said, “It is a heartening moment for us to witness such significant confidence from all classes of investors, and we are pleased to welcome multiple marquee investors on the back of the OFS. We are also delighted to welcome AIMCo and HDFC Life, through a preferential issue, in our roster of reputed investors.”
Ahmed Mubashir, Managing Director, Head of EMEA and India, Infrastructure, AIMCo, said, “The growth and decarbonization of India’s electricity sector presents itself as an exciting opportunity for infrastructure investors. IndiGrid is a well-managed, transmission focused platform providing its unit holders exposure to stable, contracted, long-term cash flows. This aligns well with our infrastructure strategy in India. AIMCo is also impressed by IndiGrid‘s track record of enabling accretive growth and are excited to be further supporting and enabling that journey with this equity injection.”
IndiGrid manages 41 power projects, including 49 transmission lines and 15 substations. It also has a solar generation capacity and assets under management exceeding ₹293 billion (~$3.5 billion).
KKR owns 100% of IndiGrid Investment Managers, the trust’s investment manager.
IndiGrid recently operationalized its first greenfield project, Kallam Transmission, in Beed, Maharashtra. The project will evacuate 1 GW of power from renewable energy projects in the state’s Dharashiv area.
In March, IndiGrid won an auction to set up projects of 250 MW/500 MWh standalone battery energy storage systems in Gujarat. The company secured a 180 MW/360 MWh capacity at a tariff of ₹449,996 (~$5,436)/MW/month.
In January, IndiGrid signed a share purchase agreement to acquire ReNew’s 300 MW solar project in Rajasthan at an enterprise valuation of ₹15.5 billion (~$186.5 million).
At the time, NDTV Profit also reported Alberta Investment Management and HDFC Life to invest Rs 667 Crore in India Grid Trust:
India Grid Trust announced on Tuesday that Alberta Investment Management Corporation and HDFC Life will invest Rs 567 crore and Rs 100 crore, respectively.IndiGrid revealed it has initiated a preferential issue process to raise Rs 695 crore following the successful completion of its offer-for-sale, according to the company statement. The new issue will be priced at Rs 136.43 per unit.AIMCo, one of Canada’s largest institutional investment managers, and HDFC Life have committed Rs 567 crore and Rs 100 crore, respectively, with the remaining amount expected from other investors.Ambit Capital and SBI Caps are running a preferential issue process on IndiGrid’s behalf.Harsh Shah, Chief Executive Officer of IndiGrid, said, 'We are also delighted to welcome AIMCo and HDFC Life through a preferential issue to our roster of reputed investors.'Ahmed Mubashir, Managing Director, Head of EMEA and India, Infrastructure from AIMCo, said, "AIMCo is also impressed by IndiGrid's track record of enabling accretive growth and is excited to be further supporting and enabling that journey with this equity injection."Last week, KKR successfully concluded an OFS process to bring their unitholding down from 21.17% to 3.85%.
Today, AIMCo announced on LinkedIn the successful completion of its investment in IndiGrid, India's first and largest listed power sector infrastructure investment trust:
It's worth reiterating what Ahmed Mubashir, Managing Director, Head of EMEA and India, Infrastructure at AIMCo said:
“The growth and decarbonization of India’s electricity sector presents itself as an exciting opportunity for infrastructure investors. IndiGrid is a well-managed, transmission focused platform providing its unit holders exposure to stable, contracted, long-term cash flows. This aligns well with our infrastructure strategy in India. AIMCo is also impressed by IndiGrid‘s track record of enabling accretive growth and are excited to be further supporting and enabling that journey with this equity injection.”
As India's economy keeps growing, demand for power will soar and this will only grow exponentially as the country pivots from edge to hyperscale data centers, driven by a surge in AI demands and government initiatives:
For the longest time, the expansion plan for data centres in India was charted quite simply. Most industry experts pegged ‘edge’ data centres as the way that the industry would grow. Large players in the market would set up large-scale, heavy-investment hyperscale facilities that would work as the main hubs in which India’s data centres would concentrate most of their capacities.
In data centre vocabulary, ‘edge’ facilities make for data centre infrastructure that is small and regional. Inherently, data centres are large facilities that host thousands of racks and consume power in megawatts of server load. Edge data centres, on this note, are much smaller—hosting fewer racks and cabinets and consuming power in kilowatts. As a result, they came to be known as ‘hubs’. In turn, the established model for the data centre industry became a hub and spoke model.
Significantly, the expansion of India’s data centre industry is no longer reliant on edge facilities. Instead, it’s pivoting towards scaling up hyperscale units or integrating managed cloud platforms and services within existing data centre operations. This strategic shift, driven by industry dynamics, is set to redefine the trajectory of India’s data centre market.
CB Velayuthan, CEO of Reliance Jio and Brookfield-backed data centre firm Digital Connexion, said, “As enterprises and consumers accelerate AI adoption, the latter is driving demand for data centres by increasing the need for storage, computational power, and real-time processing capabilities.”
Back to the IndiGrid deal.
AIMCo's strategic partner, KKR, was instrumental in setting up India Grid Trust (IndiGrid) and its affiliate, Esoteric, sold a 17.3% stake back in August for $213.6 million.
Esoteric, a sponsor of IndiGrid, is also a majority unitholder of IndiGrid Investment Managers, holding a 100% stake. The latter is responsible for IndiGrid's operations, including cash flows, acquisitions, and divestments.
All this to say even though it's not a huge deal, it's the type of smart infrastructure deals AIMCo is investing in and I expect it to acquire more shares down the road if another opportunity arises.
Electricity transmission whether here or in India is a long-term secular theme worth investing in.
Lastly, Daniel Johnson of BNN Bloomberg reports Mark Wiseman sees a ‘disconnect’ in the market, expects earnings to be subdued:
A former Canada Pension Plan Investment Board (CPPIB) CEO and Chair at AIMCo said there is a disconnect in the market regarding the prospect of a soft landing, saying bonds could be a good option for investors given the current cycle.
Mark Wiseman said in an interview with BNN Bloomberg Monday that the U.S. economy has exceeded his expectations when it comes to soft landing hopes and is performing “remarkably well.” However, he added that there is currently a “bit of a disconnect in the markets.”
“I believe that one of two things have to be true. Either we’re going to see earnings expectations lower as the economy softens, or we’re going to see rates being stickier than maybe the market expects, but you can’t have both things,” Wiseman said.
“You can’t have rates coming down and earnings going up and strong economic growth both happening at the same time.”
In a soft-landing scenario, he said he expects rate cuts and corporate earnings to come in a bit lower than expectations.
Despite the U.S. Federal Reserve’s half-point rate cut last month, Wiseman said he thinks the Fed will be cautious going forward in order to avoid reigniting inflationary pressures amid a job market that remains tight.
Given the current easing cycle, he added investors may want to re-evaluate their portfolios.
“If we’re into an easing cycle, I do think you have to think tactically about your portfolio. I think if you want to look at bonds, they suddenly become more attractive in an easing cycle and equities become relatively less attractive potentially in an easing cycle depending on what you think is going to happen and the reason for it in terms of earnings,” Wiseman said.
“So, I think that smart investors tactically are looking at these signals and readjusting their portfolios.”
Well, today the Dow, S&P 500 jumped to fresh records as key CPI report looms and bonds kept selling off as stocks surged:
The US 10-year Treasury note yield went from a low of 3.34% in mid-September to almost 4.1% in three short weeks.
What's driving the backup in yields? The US economy is (seemingly) performing better leading many to conclude the Fed will not ease as much but I think the market has gotten way ahead of itself.
Having said this, fiscal profligacy isn't helping bonds this year, that's for sure.
Still, I agree with Mark, earnings aren't going to be great, the market is disconnected from reality led once again by Nvidia and a few large cap tech socks du jour (Broadcom, etc).
Anyways, I'll reserve my market talk for Friday.
Below, Harsh Shah, CEO of IndiGrid, gives insights into the world of InvITs and their role in the sector. Discover how IndiGrid is navigating a robust bidding pipeline of Rs 96,000 crore. Harsh also shares his perspective on maintaining growth in distribution per unit and the company's stance on debt, with expectations of keeping it at 60-70% of asset value. Tune in to understand the strategic outlook and future plans for IndiGrid in the evolving infrastructure landscape.
Next, India’s first and largest operational hyperscale data center park in Chandivali, Mumbai.
Lastly, Mark Wiseman, former chair of AIMCo and former CEO of CPPIB, joins BNN Bloomberg to talk about the 'disconnect' and investing in real estate and alternative assets in the market.
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