Indian PowerGrid looks for investment to fund national grid projects

PowerGrid Corporation, India's largest power transmission company, is looking to raise up to Rs 9,000 crore to fund its ambitious national grid projects.
The government-run company will issue bonds worth up to Rs 6,000 crore ($ 1.2 bn) in two instalments, the first of which is expected to hit the market by September. The second tranche of bonds will be issued 4-5 months after the first. The bond will have a tenure of 16 years and is expected to carry a coupon rate of about 9 %.

The company had issued bonds worth Rs 1,000 crore each in February and March this year. Both the issues were over-subscribed by over 150 %.
"Our bond issues early this year have given us the confidence to test the market again with much larger issues of Rs 2,000-3,000 crore," PowerGrid chairman and managing director S.K. Chaturvedi told.

The company is also planning to raise another Rs 3,000 crore through issue of fresh equity, but that will happen only after the capital market stabilises.
"We will approachthe government for our follow-on public offer by the end of this year or the beginning of next year," he said. PowerGrid has already tied up funds for a large part of its Rs 55,000-crore expansion plan that envisages laying of inter-regional transmission capacity of 37,800 mw by 2012.

PowerGrid's decision to tap the stock market may have been prompted by its stock gaining 78 % since the market crash of last October. The corporation first hit the market with its initial public offering (IPO) in 2007 to raise around Rs 3,000 crore.
Mr Chaturvedi said the company will soon approach the board for approval of the twin bond issues that would part finance its mega expansion plans. The company has already invested about Rs 15,000 crore in past two years and intends to make an investment of over Rs 12,000 crore in fiscal 2009-10.

Incidentally, PowerGrid also plans to enter consultancy business in a big way. Till date, the company has been engaged in small-ticket consultancy in South East Asian countries, butis now targeting the big league. It is in advanced stages of talks with companies in the United States and Central Asia for consultancy projects.
In addition to its fund-raising exercise in the domestic market, the company will also mop up an additional $ 1 bn from multilateral organisations such as the Asian Development Bank and the World Bank.

Considering the proposed big-ticket investments in the power sector and PowerGrid's virtual monopoly in power distribution, the proposed bond and public offers are expected to get good response from investors.
Analysts also point to the response to its recent issues.