NHPC IPO Closing on August 12, Views, Analysis, Opinions

National Hydroelectric Power Corporation (NHPC) IPO will be open for subscription today and is one of the most awaited IPOs in recent days. NHPC operates mainly in North and North-Eastern states and This miniratna is expected to get orders from countries like Bhutan and Nepal. This is a first PSU IPO after 17 months (REC is the last IPO – February, 2008). Indian government will get Rs. 2,000 crore by divesting its 5% stake in NHPC while company will get around 4,000 crore from this IPO.



NHPC had earlier filled a draft red herring prospectus in April 2007, but it was turned down by market regulator Sebi, as the company did not have the required strength of independent directors on its board then. Later, the company again filed the IPO papers on August 6, 2008, but scrapped the plan due to poor market conditions.


The real story behind the NHPC IPO is one about expansion and growth. NHPC is currently engaged in the construction of 11 hydroelectric projects, which will increase its capacity by 4,622 MW. Further, 8 projects with an anticipated capacity of 5,751 MW are awaiting sanctions from the CCEA. Survey and Investigation works are being carried out to prepare project proposal reports for nine additional projects for 7,255 MW.



Details of the IPO are as under:



  • Books Open : Friday, 7th August 2009
  • Books Close : Wednesday, 12th August 2009
  • Price Band : Rs.30- Rs.36.
  • Lot Size : 175 x multiples of 175 Equity Shares
  • Issue Size : Primary offering of 1,67,73,74,015 Equity shares (Rs.5032.12 Crs.)
  • Employee Reservation : 4,19,34,350 shares
  • Net Issue Size : 1,63,54,39,665 shares
  • QIB Book : 98,12,63,799 shares
  • Non Institutional Portion : Up to 16,35,43,966 shares
  • Retail Book : Up to 49,06,31,900 shares
  • Book Running lead managers Enam, Kotak Mah Capital, SBI Caps.

NHPC IPO on its first day of opening, received an overwhelming response, and the issue was subscribed over 3.54 times on first day, till 5 PM as per data from NSE.

ICRA, rating agency, has given an IPO Grade 3 to the issue, which will close on August 12, 2009.

Analysis:



The company profile look good. It has developed and constructed 13 hydroelectric power stations and its total installed capacity is 5,175 MW.




The demand for Power is going to increase leaps and bounds. With the scarcity of Alternative Energy sources being identified and implemented in countries like India, the Power companies are expected to be benefiting if they can generate good business. Also since that it is a government backed company, it can have project delays but yes approvals on most of the fronts might be faster.




The nearest comparison to NHPC is NTPC. Both are the largest players from respected stable in power generation. NHPC is planning the price band of 36 and NTPC is presently trading at around 217.




The EV per megawatt for NHPC is 10.9 as compared to NTPCs 6.4 considering the installed capacity that both these players have.




In terms of dividend yield NHPC is at 0.8 and NTPC is at 1.7 which is significantly higher. The installed capacity of NHPC will be 5000 mega watt and at the upper price band of 36 the market capitalization of the company will be around $ 10 billion compared to NTPC capacity which is 6 times more than NHPC but market cap of just 3 times more than NHPC. This actually shows that NHPC is slightly cheap in terms of valuations. But yes, here we need to take into consideration that Hydro power has long gestation period than thermal.




NHPC has a comfortable capital structure and the ability of the company to attract long-term debt mitigates capital risk.




Overall a good IPO to put the money for long term.




Keep Investing.


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