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
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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
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It’s a hydroelectric power generating company owned 100% by the Government of India
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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
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