Power Grid may see Rs 65 on listing day

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Q: Bad day or not, Power Grid should not have a problem for itself today?

A: People will start wondering now because many of these IPO investors start looking at what happens in the secondary market in the next four-six weeks whenever Power Grid finally will list. So if the mood gets vitiated a bit because of the global cues then people might just become a bit hesitant because many people played not just to sell on day one but they like to see the stock list well and the stock lists around this issue price then they say we would rather wait and see how the secondary markets doing and then buy it later.

So Power Grid should not have a problem. It comes from a good stabled, typically some of the large government companies in the space have made a lot of money and the best thing which is going for Power Grid is the erstwhile NTPC experience. They are different companies this is a transmission monopoly that was a large generation company.

But even so just look at both their models are similar in the sense that both are regulated return entities, and once Power Grid goes to the next couple of year's maybe their return on equity profile will slowly move towards NTPC's ROE profile.

So given that our NTPC did this issue in late 2004 at Rs 62 and I remember lot of people talking about it being a very stable stayed kind of company with regulated returns and therefore will be that old-widowed stock with 15% return a year.

Guess what that stock comes from Rs 62 to Rs 187 in less than three years, its tripled in less than three years that's not a boring performance at all.

So that experience will draw a lot of people into the Power Grid IPO as well. It's a reasonable company with reasonable returns they need to do a little bit more work on their return on equity because its quite low at 10-11%, is the stock expensive, not quite price to book of 1.6, PE ratio of about 16-17x compared to some of its peers which traded well above 20 PE multiple nowadays.

So it's not an expensive IPO, they have left 20-25% on the table and unless something goes really toss in the secondary market. If the issue gets done at Rs 52 then you have got a safe or a fair chance at least of seeing close to Rs 65 on listing day.

So that much is on the table unless the market goes for a toss and that should be good enough for people to go ahead and invest in this one.