IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

PowerGrid Infrastructure Inves / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/powergrid-infrastructure-investment-trust" target="_blank" data-smartkarma-citation="entities:33025:1" rel="noopener">Powergrid Infrastructure Investment Trust (1883964D IN)</a>/PGInvIT is an infrastructure investment trust which will acquire a 74.0% stake in five assets which are Powergrid Vizag Transmission Limited (PVTL), Powergrid Kala Amb Transmission Limited (PKATL), Powergrid Parli Transmission Limited (PPTL), Powergrid Warora Transmission Limited (PWTL) and Powergrid Jabalpur Transmission Limited (PJTL) from <a href="https://www.smartkarma.com/entities/power-grid-corporation-of-india-limited" target="_blank" data-smartkarma-citation="entities:12621:1" rel="noopener">Power Grid Corporation Of India (PWGR IN)</a>, the sponsor.PGInvIT is seeking to raise up to Rs77.3 billion ($1 billion). The offer has a primary/secondary split of 65%/35%. The book-building will run from 29 April to 3 May, with anchor investor allocation to be announced on 28 April. <div class="content-highlight">Infrastructure Investment Trusts (InvITs) essentially aim to create a pool of assets that throw up a stable stream of cash flows for investors. There are relatively rare and PGInvIT will only be the third-listed InvIT after <a href="https://www.smartkarma.com/entities/india-grid-trust" target="_blank" data-smartkarma-citation="entities:23732:1" rel="noopener">India Grid Trust (INDIGRID IN)</a> and <a href="https://www.smartkarma.com/entities/irb-invit-fund" target="_blank" data-smartkarma-citation="entities:23698:1" rel="noopener">IRB InvIT Fund (IRBINVIT IN)</a>. The post-IPO performance of the two listed InvITs are mixed, with India Grid Trust up 28% and IRB InvIT down 46% from the issue price. Overall, we believe that PGInvIT offers an attractive proposition for investors willing to invest in a niche asset class.</div>

Powergrid Infrastructure Investment Trust (1883964D IN)/PGInvIT is an infrastructure investment trust which will acquire a 74.0% stake in five assets which are Powergrid Vizag Transmission Limited (PVTL), Powergrid Kala Amb Transmission Limited (PKATL), Powergrid Parli Transmission Limited (PPTL), Powergrid Warora Transmission Limited (PWTL) and Powergrid Jabalpur Transmission Limited (PJTL) from Power Grid Corporation Of India (PWGR IN), the sponsor.PGInvIT is seeking to raise up to Rs77.3 billion ($1 billion). The offer has a primary/secondary split of 65%/35%. The book-building will run from 29 April to 3 May, with anchor investor allocation to be announced on 28 April. Infrastructure Investment Trusts (InvITs) essentially aim to create a pool of assets that throw up a stable stream of cash flows for investors. There are relatively rare and PGInvIT will only be the third-listed InvIT after India Grid Trust (INDIGRID IN) and IRB InvIT Fund (IRBINVIT IN). The post-IPO performance of the two listed InvITs are mixed, with India Grid Trust up 28% and IRB InvIT down 46% from the issue price. Overall, we believe that PGInvIT offers an attractive proposition for investors willing to invest in a niche asset class.

POWERGRID Infrastructure Investment Trust IPO Initiation: The Art of Power

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Power Grid Corporation Of India / Equity Capital Markets

POWERGRID Infrastructure Investment Trust (PGIT) aims to raise around US$1bn in its India IPO. PGIT is an investment trust setup to own transmission assets of its sponsor Power Grid Corporation of India Limited (PGCIL). PGCIL is a central public sector enterprise which has been listed since 2007. PGIT will initially own five assets with a total network of 11 power transmission lines of approximately 3,698.59 ckm and three substations having 6,630 Megavolt amperes (MVA) of aggregate transformation capacity, as of Sep 2020, across five states in India. The total valuation of the assets was INR105bn (US$1.4bn) as of Sep 2020. These assets were awarded to PGCIL on a  build-own-operate-maintain (BOOM) basis. Therefore, the assets are operated under a long 35 years service agreement with largely pre-fixed revenue based on availability. In that sense, they will provide stable returns. However, its revenue terms are structured in such a way that its yield will continue to decline, while its sponsor’s government ownership will mean that it's unlikely to diversify away from transmission assets with declining yield.

POWERGRID Infrastructure Investment Trust (PGIT) aims to raise around US$1bn in its India IPO. PGIT is an investment trust setup to own transmission assets of its sponsor Power Grid Corporation of India Limited (PGCIL). PGCIL is a central public sector enterprise which has been listed since 2007. PGIT will initially own five assets with a total network of 11 power transmission lines of approximately 3,698.59 ckm and three substations having 6,630 Megavolt amperes (MVA) of aggregate transformation capacity, as of Sep 2020, across five states in India. The total valuation of the assets was INR105bn (US$1.4bn) as of Sep 2020. These assets were awarded to PGCIL on a  build-own-operate-maintain (BOOM) basis. Therefore, the assets are operated under a long 35 years service agreement with largely pre-fixed revenue based on availability. In that sense, they will provide stable returns. However, its revenue terms are structured in such a way that its yield will continue to decline, while its sponsor’s government ownership will mean that it's unlikely to diversify away from transmission assets with declining yield.

POWERGRID InvIT Pre-IPO - Always Going to Be Tricky with a Declining Yield

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Management Call Doesn’t Allay Fears: FY 2Q21 results were significantly driven a loan loss provision decline of INR 18.1 bn (16.0%) despite much weaker credit metrics.  We find that reserves were light in the neighborbood of INR 1.1 tn  - nearly four years of pre-tax results or 61% of market-cap. The recent virtual call held by a competitor unfortunately did not allay our concern; and*Other Items Discussed: State Bank of India (SBIN.IN) [SBI] did reiterate its guidance for problem loan formation (slippages and restructuring) at 2.5% of loans outstanding in FY21. While SBI’s CET 1 ratio stood at 10.5% as of FY 2Q21,our calculated loss reserve shortfall would suggest that SBI has further wood to chop in this area.In addition, SBI is confident that it will be able to enhance its digital platform YONO into a more robust and scalable platform.

*Management Call Doesn’t Allay Fears: FY 2Q21 results were significantly driven a loan loss provision decline of INR 18.1 bn (16.0%) despite much weaker credit metrics.  We find that reserves were light in the neighborbood of INR 1.1 tn  - nearly four years of pre-tax results or 61% of market-cap. The recent virtual call held by a competitor unfortunately did not allay our concern; and*Other Items Discussed: State Bank of India (SBIN.IN) [SBI] did reiterate its guidance for problem loan formation (slippages and restructuring) at 2.5% of loans outstanding in FY21. While SBI’s CET 1 ratio stood at 10.5% as of FY 2Q21,our calculated loss reserve shortfall would suggest that SBI has further wood to chop in this area.In addition, SBI is confident that it will be able to enhance its digital platform YONO into a more robust and scalable platform.

State Bank of India – Reserve Shortfall Needs To Be Addressed

*In-Line Results: Bajaj Finance (BAF.IN) [Bajaj] reported FY 2Q21 results of INR 9.6 bn - essentially in-line with FY 1Q21 results. While in line on a linked quarter basis, we do note improvement in the NIM by 70 bp to 9.9% which drove the INR 1.1 bn (3.3%) increase in net interest income;*Credit Risk Increasing: On a linked quarter basis, we found that gross NPAs actually declined INR 5.2 bn (26.9%)  - primarily on account of FY 2Q21 NCOs of INR 20.5 bn which appear to have accelerated again. Credit remains weak with net new NPAs of INR 15.3 or an alarming 434.1% annualized increase. Loss reserves also remain light in the neighbourhood of INR 66.4 bn by our calculation or over five quarter of pre-tax results; and*Lowered Guidance: For AUM, Bajaj expects AUM growth during FY 2021 of just between 6%-7% - well below previous guidance of 10-12%. Several other headwinds over the near-term are also worrisome, including: 1) the elevated payment-bounce rate; and 2) the lack of clarity surrounding the flexi loan book.

*In-Line Results: Bajaj Finance (BAF.IN) [Bajaj] reported FY 2Q21 results of INR 9.6 bn - essentially in-line with FY 1Q21 results. While in line on a linked quarter basis, we do note improvement in the NIM by 70 bp to 9.9% which drove the INR 1.1 bn (3.3%) increase in net interest income;*Credit Risk Increasing: On a linked quarter basis, we found that gross NPAs actually declined INR 5.2 bn (26.9%)  - primarily on account of FY 2Q21 NCOs of INR 20.5 bn which appear to have accelerated again. Credit remains weak with net new NPAs of INR 15.3 or an alarming 434.1% annualized increase. Loss reserves also remain light in the neighbourhood of INR 66.4 bn by our calculation or over five quarter of pre-tax results; and*Lowered Guidance: For AUM, Bajaj expects AUM growth during FY 2021 of just between 6%-7% - well below previous guidance of 10-12%. Several other headwinds over the near-term are also worrisome, including: 1) the elevated payment-bounce rate; and 2) the lack of clarity surrounding the flexi loan book.

Embassy Office Parks REIT / Equity Capital Markets

Blackstone aims to raise around US$260m via selling 7.2% of <a href="https://www.smartkarma.com/entities/embassy-office-parks-reit" target="_blank" data-smartkarma-citation="entities:27925:1" rel="noopener">Embassy Office Parks REIT (EOP IN)</a>. The stock was listed in Apr 2019 and had covered the listing extensively. Links to the IPO insights: <div>
<ul>
<li><a href="https://www.smartkarma.com/insights/embassy-office-parks-reit-good-assets-but-projections-might-be-a-tad-too-bullish" target="_blank" rel="noopener">Embassy Office Parks REIT - Good Assets but Projections Might Be a Tad Too Bullish</a></li>
<li>
<a href="https://www.smartkarma.com/insights/embassy-office-parks-reit-comparison-with-ait-and-a-look-at-the-required-yield" target="_blank" rel="noopener">Embassy Office Parks REIT - Comparison with AIT and a Look at the Required Yield</a>, and</li>
<li><a href="https://www.smartkarma.com/insights/embassy-office-parks-reit-ipo-fy19-revised-down-yield-propped-up-by-zero-coupon-bond" target="_blank" rel="noopener">Embassy Office Parks REIT IPO - FY19 Revised Down, Yield Propped up by Zero Coupon Bond</a></li>
<li><a href="https://www.smartkarma.com/insights/embassy-office-parks-reit-trading-update-lowest-volume-traded-for-any-indian-listing-since-2018" target="_blank" rel="noopener">Embassy Office Parks REIT Trading Update - Lowest Volume Traded for Any Indian Listing Since 2018</a></li>
</ul>
In this insight, I'll talk about the deal dynamics and run the deal through our ECM framework.
</div>

Blackstone aims to raise around US$260m via selling 7.2% of Embassy Office Parks REIT (EOP IN). The stock was listed in Apr 2019 and had covered the listing extensively. Links to the IPO insights: 

Embassy Office Parks REIT - Good Assets but Projections Might Be a Tad Too Bullish

Embassy Office Parks REIT - Comparison with AIT and a Look at the Required Yield, and
Embassy Office Parks REIT IPO - FY19 Revised Down, Yield Propped up by Zero Coupon Bond
Embassy Office Parks REIT Trading Update - Lowest Volume Traded for Any Indian Listing Since 2018

In this insight, I'll talk about the deal dynamics and run the deal through our ECM framework.


Embassy Office Parks REIT Placement - To Big to Swallow if Its Not a Reverse Enquiry

India

India Grid Trust operates as an infrastructure investment trust. The Company invests, designs, finances, constructs, and maintains power transmission projects. India Grid Trust serves customers in India.

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India Grid Trust (INDIGRID IN)

POWERGRID Infrastructure Investment Trust IPO Initiation: The Art of Power

PGInvIT is seeking to raise up to Rs77.3 billion ($1 billion). Overall, we believe that PGInvIT offers an attractive proposition for investors...

Arun George

POWERGRID InvIT Pre-IPO - Always Going to Be Tricky with a Declining Yield

POWERGRID Infrastructure Invt Trust aims to raise around US$1bn in its India IPO. PGIT is an investment trust setup to own transmission assets of...

Sumeet Singh

State Bank of India – Reserve Shortfall Needs To Be Addressed

STATE BANK OF INDIA: Recent Call Suggests No Real Progress On Significant Reserve Shortfall, And That Another Capital Raise Not Out Of Question

Thomas J. Monaco

Bajaj Finance – Removing The Lipstick

BAJAJ FINANCE: Results Would Suggest That Credit Portfolio Risk Has Significantly Deteriorated, and That Reserves Need Buttressing By Over Five...

Thomas J. Monaco

Embassy Office Parks REIT Placement - To Big to Swallow if Its Not a Reverse Enquiry

Blackstone aims to raise around US$260m via selling 7.2% of Embassy Office Parks REIT (EOP IN). The stock was listed in Apr 2019 and had covered...

Sumeet Singh

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