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A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

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August 7, 2009

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


  • 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



  • 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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    R Ravimohan, Chairman of CRISIL resigns….brought back a lovely memory

    Just read that R Ravimohan resigned as the Managing Director and Region Head of South and SouthEast Asia of Standard & Poor’s and as Chairman of Crisil to pursue another very good opportunity in India, which he will disclose in due course

    Brought back a lovely Memory of a few years ago… It was a Function where Certificates were to be awarded to a Batch of the CPCM Students at the BSE Training Institute (BTI).

    R Ravimohan was the Chief Guest…. The GM of BTI asked the Class, whether there was anything anyone wanted to say about the three month CPCM Course that they had passed… A CPCM participant had got up and said “What I learnt from Gaurav Parikh’s three sessions, I have not learnt in my three years of pursuing the Commerce Degree !”

    I used to take the CPCM sessions on Time Value of Money and Valuation of Equity

    R Ravimohan had then asked for me, but I was not present that day… This was immediately relayed to me by the BSE BTI Course Coordinators… It is indeed such appreciation that serves as a motivating factor…. Later Crisil had invited me to deliver sessions at their Wealth Management Workshops… but it was more probably because a BSE BTI Coordinator had moved to Crisil !

    Wish R Ravimohan all the very best in his pursuit of another ‘very good opportunity’

    Cheers !

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