Hem Securities has come out with report on Reliance Power IPO. It has recommended subscribing the issue.

Reliance Power is planning to raise around Rs 10,530-11,700 crore from its initial public offering (IPO) of 26 crore equity shares with a face value of Rs 10, for cash, a price decided through 100% book building process. The price band has been fixed at Rs 405-450 per share.

Hem Securities report on Reliance Power IPO

Business Profile

Reliance Power (RPower), originally incorporated as Bawana Power Private Limited, is part of the Reliance Anil Dhirubhai Ambani Group and is currently developing 13 medium and large sized power projects with a combined planned installed capacity of 28,200 MW. The identified project sites are located in western India (12,220 MW), northern India (9,080 MW), northeastern India (2,900 MW) and southern India (4,000 MW).

The projects include seven coal-fired projects (14,620 MW) to be fuelled by reserves from captive mines and supplies from India and abroad, two gas-fired projects (10,280 MW) to be fueled primarily by reserves from the Krishna Godavari Basin (the “KG Basin”) off the east coast of India, and four hydroelectric projects (3,300 MW), three of them in Arunachal Pradesh and one in Uttarakhand.

Company intends to sell the power generated by these projects under a combination of long-term and short-term PPAs to state-owned and private distribution companies and industrial consumers. In addition to the 28,200 MW of power projects, company intends to develop additional power projects to help meet the huge demand in this sector. Company is considering the development of CBM (Coal Bed Methane) power generation projects based on fuel from CBM blocks being explored by a consortium that includes company’s affiliates.

Company also intends to invest in overseas opportunities that are a strategic fit with company’s business. Company intends to explore the possibility of registering certain of its projects with the Clean Development Mechanism executive board for the issuance of carbon emission reduction certificates that company may sell. The company has subsidiaries viz SPL, CAPL, MPPGL, RPSCL, MEGL, VIPL, USHPPL, THPPL, SHPPL and KPPL. Projects of an aggregate generation capacity of 24,600 MW were bid and secured by the Company in its own name. Of this Dadri Project of 7,480 MW is being developed by the Company and the Projects of 17,120 MW are being developed through subsidiaries.

Valuation
                                                       
The company is the primary vehicle for investments in the power generation in Reliance ADA group. The company has entered and intended to enter into various arrangements with companies of Reliance ADA group, including REL, RNRL and Reliance Energy Transmission. This will help the company in drawing upon the considerable expertise and resources these affiliates have in the energy sector.

As the company is in project implementation phase hence meaningful earnings likely to kick in later years. After commissioning of these proposed projects over next few years the company would be among one of the major power producing company in India. The company enjoys the lower risk due to its well diversified project portfolio comprising of coal , gas and hydro.

The company with its strategies like lower cost of generation, fast completion of projects and efficient operations looks an attractive issue to deploy the funds. Investor can “Subscribe” the issue.

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