Nov 11, 2010, 09.43 AM | Source:

Power Grid FPO subscribed 3.61 times: Should you invest?

The follow-on public offer (FPO) of India's biggest inter-state transmission company Power Grid Corp has opened for subscription. The issue has been subscribed 3.61 times so far, as per NSE website.

Power Grid FPO subscribed 3.61 times: Should you invest?
The follow-on public offer (FPO) of India's biggest inter-state transmission company Power Grid Corp has opened for subscription. The issue has been subscribed 3.61 times so far, as per NSE website.

The issue has received bids for 303.7 crore equity shares as against issue size of 84,17,68,246 shares.

The reserved portion of qualified institutional investors (QIB) got subscribed 7.03 times while non institutional investors and retail investors' portion remained undersubscribed.

A price band is at Rs 85-90 per share. The issue will close on November 11 for qualified institutional buyers and November 12 for non-institutional and retail investors.

Retail investors and employees will get equity shares at 5% discount to final issue price. Bids can be made for a minimum of 65 equity shares and in multiple of 65 shares thereafter.

The issue comprises a fresh issue of 42,08,84,123 shares and an offer for sale of 42,08,84,123 shares by the President of India acting through the Ministry of Power, Government of India, which is 20% offer in total.

The company has current capacity of 75,000 circuit kms and plans to add 8,000 circuit kms in FY11.

India's state-run Power Grid Corp has earmarked capital expenditure of USD 27 billion for 2012-2017, more than double its capex budget in its current five-year plan, its chairman and managing director SK Chaturvedi said on Monday.

The FPO proceeds will be used for 13 transmission projects costing Rs 22,600 crore.

What experts say?

Experts feel the price band of the issue is attractive for investment.

Investment Advisor, SP Tulsian said, "Our advise to retail investors is to go for this issue by applying at upper band of Rs 90 per share. If one applies for 1,105 shares, he is likely to get allotment of about 700 shares, which can give a profit of Rs 15,000 in a month’s time. So, those who missed on Coal India can try their luck here. Those who have tasted profit in Coal, are advised to go for Power Grid, to experience some action replay!"

Manish Bhatt of Prabhudas Lilladher also advised subscribing the issue at cut-off. "The issue looks good and even pricing looks attractive. The government has left money for investors," he explained.

A share, ahead of issue opening, closed at Rs 98.35, down 3.58% on huge volumes. However, Tulsian does not expect the share to fall below Rs 95 till closure of FPO. He said, "It can move to Rs 110 by end of November, by the time we will see allotment of FPO, getting completed. Even if we expect the book to get discovered at Rs 90 and considering a discount of 5% to retail investors, net acquisition cost to them will be Rs 85.50 per share. Hence, this is likely to give a good opportunity to earn, between Rs 15 to Rs 25 per share in next one month."

Hitul Gutka, research analyst at PINC said he feels the FPO is attractively priced. “The price band of Rs 85-90 is a fantastic price and investors can definitely look to invest at the upper price band,” he advised.

Gutka also has a target on the stock of Rs 115 with a one-year perspective.

Samir Arora of Helios Capital feels the Power Grid FPO is very good. "Pricing is very good for Power Grid. We may apply. But I'm saying from a macro point of view you will not get this kind of size again, application sizes from everybody because this is a listed company. And in a listed company many people have the choice of just buying it in the market and pay 3-4% higher," he reasoned.

Motilal Oswal Financial Services: Subscribe to Power Grid FPO with an upside of 37% at FPO price.

Aditya Birla Money Equity Research: Subscribe to Power Grid FPO at the higher band of Rs 90.

Gupta Equities Pvt. Ltd: Subscribe to Power Grid Corporation of India Ltd FPO for long term.

Nirmal Bang: Subscribe to Power Grid Corporation of India FPO.

Unicon Research: The research firm recommend investors to subscribe to the Power Grid FPO issue with a long term horizon and a target price of Rs 115.

READ MORE ON  Power Grid Corp FPO
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