Indian IPO

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Tuesday, January 02, 2007

Four IPOs all set to power bourses in January

Four public sector power companies plan to mop up Rs 6,500 crore through initial public offers, IPOs in the next three months, reports Business Standard.

The first - Power Finance Corporation, PFC - is set to hit the market in the next couple of weeks. It will be followed by National Hydroelectric Power Corporation, NHPC, Rural Electrification Corporation, REC and Power Grid Corporation of India, PGCIL.

Analysts and market watchers expect the IPOs to sail through smoothly since these companies are profit-making and leaders in their domain.

According to IPO tracker Prithvi Haldea, managing director of Prime Database, the response to these IPOs would be “phenomenal,” with participation from all categories of investors - including qualified institutional buyers, high networth individuals and retail investors.

The IPO market is hot and there is a huge appetite for quality Indian paper, especially from the infrastructure sector. And power is one of the better-performing areas in the sector.

Also, with so many projects on anvil, both by government and private players, there is renewed interest, according to Arvind Mahajan, executive director and national industry director-infrastructure and government, KPMG.

“The current market has substantial interest from investors in power, as seen in ultra mega power projects, which had 8-10 private bidders,” says Shubhranshu Patnaik, associate director, PwC. He adds PE funds with focus on power and energy are on the lookout for assets in India.

There is, of course, significant growth potential in India’s power sector. The generation capacity is poised to double in the next 10 years, with concomitant growth in transmission and distribution sectors.

The main propeller for these issues is, however, going to be the price, which is widely expected to be a “PSU price,” meaning enough will be left on the table for the investors.

“Whenever a leading PSU has come up with an issue, the market has lapped up that opportunity,” says Anjani Agarwal, partner and industry leader, utilities, Ernst & Young.

Given the conservative pricing that typical PSUs follow, the offer price will be attractive, agrees Haldea. Investors can take exposure in the power financing through PFC or REC, in transmission through PGCIL, or hydropower generation through NHPC.

Key FII accounts are said to be “very interested” in these power IPOs, according to analysts, who expect NHPC and PGCIL to perform better than REC and PFC. Experts are, in fact, bracketing these IPOs with NTPC’s IPO, which is widely seen as a success.

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