I find it puzzling that PG InvIT trades at a 25% premium to NAV. The reasoning usually provided is that it has an extremely low leverage at less than 1% LTV and it can undertake fully debt funded NAV-accretive acquisitions at highly competitive cost of debt due to its sponsor pedigree.
But the sponsor, Power Grid has itself indicated that they are looking at securitizing cash flows of their existing assets for monetization rather than an outright transfer to the InvIT. Also, PG InvIT’s management has indicated that there aren’t enough third party transmission assets available for them to expand their portfolio. Even IndiGrid has had to diversify by acquiring generation assets to expand their portfolio. PG InvIT isn’t keen on acquiring non-transmission assets. In this scenario, what use is its balance sheet if there are not enough opportunities to deploy it?
Are there any other factors that I’m missing which would justify the significant premium to NAV that it enjoys?
Apologies for posting here as there’s no separate thread for PG InvIT
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