India Grid Trust (“IndiGrid”) is an irrevocable trust settled by Sterlite Power Transmission Limited on October 21, 2016. It is an Infrastructure Investment Trust.
The principal activity of IndiGrid is to own and invest in power transmission/ solar assets in India with the objective of producing stable and sustainable distributions to unitholders.
I was reading IndiGrid's annual report and noted that the company's main business is to buy and maintain transmission lines. Rather, the company's sole business is to acquire and preserve assets. The annual report focuses on Assets Under Management (AUM) and the expenditures involved with purchasing and maintaining these assets.
Other asset-heavy businesses include the automobile, mining, petroleum, and steel industries. Maruti Suzuki manufactures automobiles. Tata Steel manufactures steel. These businesses have a sales pipeline. There are active opportunities. There are ‘win’, ‘loss’ or ‘dropped’ opportunities.
IndiGrid's assets are not used to create goods or services. Electron enters at one end of the transmission wire and exits at the other.
IndiGrid doesn’t have a sales pipeline. There are no active opportunities. There are no ‘win’, ‘loss’ or ‘dropped’ opportunities.
IndiGrid still makes a profit. Isn’t it strange?
A windfall tax is a tax that is levied on unexpected, often large, profits or gains. It is typically imposed on businesses or individuals when they experience an unusually high income, often due to external factors such as changes in market conditions, government policies, or other unforeseen events.
IndiGrid should face a similar tax because:
- There is no selling activity. It is ~ a monopoly business
- It profits without generating any goods or services