Adani Power Struggles on Listing today…saves face by closing at Issue price of Rs 100

I had warned you on July 25,2009 that Adani Power (APL) may not have an exciting Listing…Though the grey market Premium of Rs 10 had indicated listing gains……Check out my take on the APL IPO

IPO of Adani Power at top end Rs 100….Aggressive Pricing makes it an Aggressive Investment

It listed today and struggled right through the day to stay above it’s Issue price of Rs 100…Clearly there was some directed Market Making so that it closed at a face saving Rs 100

If the Sensex seeks 13000 on the downside…It’s at 15000 levels today…. as India grapples with a Drought Situation and Rising Fiscal Deficit and Significant reversal of FII Flows in recent days,you can bet APL too will slide below Rs 90

Now watch out for the NHPC Listing in early September ! It was issued at an expensive Rs 36…Government was greedy….but so are the applicants !…Hoodwinked by the Hype,the Issue was heavily oversubscribed..NIB Portion 57 times !…I have bet you’ll get NHPC below Rs 30 shortly after Listing 

Pity all those who went for Leverage for better allotments…As it looks now,and with even historical evidence supporting,the only people who are laughing their way to the bank,having earned sure interest,are the Financiers.

Valuation Props you up…Hype knocks you down….What should you rationally choose ! ?…Make that Choice when another PSU,Oil India launches it’s IPO in early September…It was to come at Rs 800…Indications are Government wants Rs 1400 !…should be easy to make a rational choice at Rs 1400 ! 

Remember that Merchant Bankers appointed as Lead Managers have the Mandate from the Government  and the Company,not from you !…and Investor Protection and Education is merely Lip Service from the Government when it comes to Pricing  the PSU IPOs !…Aggressive Pricing leaves nothing on the table on Listing for the Investor..only the Risk !

So if you are a Long Term Investor and do like the Company ,but the IPO price is too Aggressive,then it’s safer to skip the issue and take a chance of acquiring the Shares at a lower than IPO Price in the Secondary Markets in the future

Think about It…Think Independently…don’t follow the Herd ! and don’t help in the Heavy Oversubscription of the IPO at an Aggressive Price…Remember Reliance Power in early 2008 !…The Lesson does not appear to have been learnt ! 

NHPC IPO at Top End of Rs 36…It’s a tradeoff of your Greed and that of the Government !

The NHPC IPO : Market Hype and Seduction

The Market is in Love with the Power Sector

Even at Top end of Rs 36 of NHPC’s IPO Pricing Range,  the current grey market premium of Rs 8-Rs 10 is indicating listing gains….The Issue opened this morning and has crossed 3 times oversubscription till afternoon…so clearly the market seems to be screaming at you to apply in the IPO…so should you ? and if you do,then how should you apply?…we’ll discuss this later 

But First a few observations on the NHPC IPO ….let’s do it my favourite ‘P’ way

Pedigree

  • NHPC was incorporated as National Hydro Electric Power Corporation Private Ltd in November 1975,with the ‘Private’ name being dropped in September 1976..It became a Public Company in  April 1986…it was just last year in March 2008 the name was changed to it’s abbreviation NHPC
  • It’s a hydroelectric power generating company owned 100% by the Government of India
  • The Mini Ratna Category-1 Status granted by the Goverment in April 2008 has an important precondition that NHPC will not require any equity funding from the Government of India

Projects

 

  • It currently operates 13 power stations (incl two through it’s subsidiary NHDC for 1520 MW) with an installed aggregate capacity of 5175 MW (downgraded to 5134.2 by the CEA) in eight North and North Eastern States
  • in FY 09,it generated 18951 Million units of Electricity and sold 16933 Million Units at an average Selling Price of Rs 2.03 per unit…Rs 3436 crs or 84.81% of the consolidated total income came from sale to SEBs and their successor entities..The operational efficiency was good with an average capacity index of 93.61%
  • NHPC is currently developing eleven additional projects for an aggregate of 4622 MW at a cost of Rs 14014 crs
  • It is also awaiting government sanction for an additional five projects with an anticipated capacity of 4565 MW
  • A Major Risk Factor is the quantum of Contingent Liabilities not Provided for and therefore not acknowledged as Debt…Rs 8372 crs in respect of Capital Works,Land Compensation ,Tax and Other Disputes
  • The CERC’s Tariff Policy till FY 2009 prescribed that the Equity Component of any Project Cost should not exceed 30%…so NHPC has a total debt of Rs 14931 crs as on March 31,2009 and of the new projects cost of Rs 14014 crs,the debt component is 70% at Rs 9810 crs and the balance will be Equity of 30% of Rs 4204 crs…Government has contributed equity of Rs 2060 crs and so part of the the IPO Proceeds will contribute the balance of Rs 2144 crs…As of June 30,2009 Rs 6699 crs has been deployed

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