NHPC oversubscribed 6 times; read brokerages' view

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NHPC, India's biggest hydroelectric power generator, opened for subscription. The issue received good response on the first day itself and was subscribed fully within five minutes. 

Today is the third day - as per the data available on the NSE website, the NHPC IPO has already been subscribed 6.16 times so far. It received bids for more than 1032 crore shares as against the issue size of 167.73 crore shares. The issue closes on August 12, 2009.

Till August 11, qualified institutional investors were the main supporters to the issue with their portion being oversubscribed 9.49 times. Non-institutional and retail investors' portion subscribed 2.43 times and 1.25 times, respectively.

The price band has been fixed at Rs 30-36 per equity share of face value Rs 10 each and the company will garner around Rs 5,032-6,039 crore from the issue. 

Should you subscribe?

Moneycontrol conducted a poll to check if investors must apply for the public issue or not ( see complete poll results on page 2 ). Most brokerages and market analysts believe that this is a good buy. SP Tulsian of sptulsian.com says, "It has always seen that government IPO, leaves enough scope for prospective investors to make money and this can be expected from NHPC IPO as well."

Brokerage house IndiaInfoline agrees and recommends a 'subscribe', "NHPC's operational performance has been amongst the best in the industry with its availability index always beating the benchmark. This coupled with a robust financial performance, with a core RoE of over 20%, places it better than many of its listed peers. India Infoline believes NHPC is in a sweet spot to capitalize on the growth opportunity in the power sector. And expect NHPC's earnings to witness an 18% CAGR over FY09-12, recommend Subscribe."

As for the price, SMC Global says that it is recommended to apply in IPO even at the upper band of Rs 36. (Get all brokerage reports in table 1)

On the other hand, CLSA feels valuations are demanding at Rs 36 per share, reports CNBC-TV18. "We see NTPC as a far better play in the power sector. Return on Equity is inferior to NTPC and Power Grid."

Sanju Verma, CEO- Institutional Business, Proactive Universal Group, also says investors that can avoid NHPC from a valuation perspective. "NHPC at 21 times forward earnings was at Rs 36 per share. Moreover, NTPC's return on equity would always be 7% higher than NHPC".

Table 1: Read All Brokerage Houses' Reports on NHPC IPO

Angel Broking	Reliance Money	Emkay Global
Sharekhan	India Infoline	Bonanza
Networth Capital	SMC Global	SPA Securities