Experts/Company

Poll Result

Experts view

R S Iyer

(KR Choksey)

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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)

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One should subscribe to Rural Electrification Corporation IPO.

SP Tulsian

(Investment Advisor)

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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.