Rural Electrification Corporation (REC), one of the leading public financial institutions in Indian power infrastructure, proposes to enter the capital markets on February 19, 2008 with a public issue of 156,120,000 equity shares of Rs 10 each through 100% book building process.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Experts said apply.

Experts/Company	Poll Result	Experts view
R S Iyer (KR Choksey)	Apply	REC is very good company. One should apply for the issue as the price band is reasonable and there good chances of getting allotment in this situation.
Manish Bhatt (Prabhudas Lilladher)	Apply	One should subscribe to Rural Electrification Corporation IPO.
SP Tulsian (Investment Advisor)	Apply	After the recent debacle of many IPOs, Rural Electrification Corporation is one of the mega issues, which intends to mobilize Rs 1,640 crore. It has been seen that PSU IPOs have been reasonably valued. This maybe due to the conservative approach of issuer’s officials, as also, no personal interest is involved, as sailing through the issue is more important than the valuation. This issue falls in this category.   The company is a public financial institution, engaged in the financing and promotion of transmission, distribution and generation projects throughout India. The company, all along has been financing public sector projects, but has been shifting to joint sector and private sector, in view of mega power projects, now being set up by the private sector.   As at 30-09-07, total of Rs 35,050 crore has been financed by the company, of which 96.33% has been to the public sector.   First six months of FY 08 seems to be quite good with topline at Rs 1,792 crore and PAT of Rs 523 crore, which results in an annualized EPS of Rs 13.40. Even on fully diluted equity of Rs 858.66 crore, this would be close to Rs 12.20. The present book value, as at 30-09-07, is at Rs 54, which would rise to Rs 63 to Rs 64, depending on the price discovery, post IPO.   Fresh infusion of Rs 700 crore to Rs 800 crore, into the company would be EPS accretive and 82% government stake, post issue, is also an assuring feature. The funds are mobilized mainly to augment capital base to meet future capital requirement of improved business and to list the shares.   We feel that in this turmoil, when primary market is not at all comforting with any good IPO, this is a better issue, where investors can safely apply for reasonable gains.

The issue comprises a fresh issue of up to 78,060,000 equity shares by REC and an offer for sale of up to 78,060,000 equity shares by the President of India acting through the Ministry of Power. The net issue to the public will be up to 152,217,000 equity shares, after allowing for reservation of up to 3,903,000 equity shares for subscription by eligible employees as defined in the Red Herring Prospectus.

Post issue, the company’s market cap will be of Rs 7727.94 – 9015.93 crore.

The issue shall constitute approximately 18.18% of the fully diluted post-issue capital of REC. The issue closes on February 22, 2008 and the price band has been fixed at Rs 90 to Rs 105 per equity share of Rs 10 each.

IL & FS Investsmart Securities Limited, ICICI Securities Limited and SBI Capital Markets Limited are the book running lead managers for the Issue. The equity shares are proposed to be listed on the NSE and the BSE.
 
The company proposes to utilize the net proceeds from the fresh issue to augment its capital base to meet the future capital requirements arising out of growth in its assets, primarily its loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes including meeting the expenses of the Issue. The company is seeking to strengthen its capital base to improve its borrowing capacity in order to support the future growth in its assets. 

For FY07, the company reported income from operations at Rs 2651.6 crore as against Rs 2058.3 crore and profit after tax before extraordinary items at Rs 684.4 crore versus Rs 577.6 crore. Net profit stood at Rs 683 crore versus Rs 587 crore.