JSW Energy IPO opens; should you subscribe?

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JSW Energy IPO opens; should you subscribe?

The initial public offering (IPO) of JSW Energy, a part of Sajjan Jindal-led JSW Group, has opened for subscription. The issue is of Rs 2,700 crore. The price band is between Rs 100 and Rs 115 per equity share and the issue will close on December 9, 2009.

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The initial public offering (IPO) of JSW Energy, a part of Sajjan Jindal-led JSW Group, has opened for subscription. The issue is of Rs 2,700 crore. The price band is between Rs 100 and Rs 115 per equity share and the issue will close on December 9, 2009. 

A discount of Rs 5 to the issue price determined pursuant to completion of the book building process will be offered to retail individual bidders.

Moneycontrol conducted a poll on whether to apply the issue or not. SP Tulsian advised applying at upper band while other experts as well as brokerages said the issue was highly priced. Also read : What brokerages say about the issue?

Investment Advisor, SP Tulsian said one could apply in the issue even at the upper band of Rs 115 for listing as well as investment gains. He said, "The interesting part of the company is that, it is already a profit making with sizeable presence in the sector. For the six-months ending September 09, the total income of the company was at Rs 875 crore with PAT of Rs 267 crore." 

"Looking to the aggression and execution capability, which has been exhibited by the group in JSW Steel, the present progress of the power projects of the company, it has good prospects of growing faster than its peers in the energy sector, as an integrated player. Even now, the financials of the company are better placed with its peers. Adani Power, presently has an EV of Rs 7.20 crore/MW with total capacity to become operational by March 12. However, the company  has an EV of close to Rs 7.20 crore/MW by netting off investments and other related power business, as also considering cash flow from early commencement of 2,145 MW by October 2010."

"Considering all these, issue looks good even at the upper band of Rs 115 per share. It is likely that this issue will not disappoint, as happened with earlier 3 energy IPOs, of Adani Power, NHPC and Indiabulls Power. As such O.P. Jindal Group has remained investors friendly and have rewarded the investors well, over last 25 years. One can apply in the issue even at the upper band of Rs 115 for listing as well as investment gains."

Manisha Bhatt of Prabhudas Lilladher said one could subscribe to the issue at lower end of price band at Rs 100.

Amit Dalal of Amit Nalin Securities said he was wary of merchant pricing and power in case of JSW Energy. "I am a little wary of JSW Energy, mainly because I am very wary of merchant pricing and power. I don't believe merchant pricing in power can remain so expensive for the country at large and finally it will settle at lower levels. Today we are discounting uptrend in a very aggressive manner when we price these utilities including JSW, so that is my concern with JSW."

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