What brokerages say about Orient Green IPO?

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What brokerages say about Orient Green IPO?

Indian renewable energy-based power generation company Orient Green Power Company (OGPL) entered capital market with a Rs 900 crore public issue on Tuesday.

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Indian renewable energy-based power generation company Orient Green Power Company (OGPL) entered the capital market with a Rs 900 crore public issue on Tuesday. It has set a price band of Rs 47-55 a share.

Promoter Shriram EPC holds 35.8% stake in Orient Green Power, while the remaining stake in the company is held by two private equity firms - Bessemer Venture Partners and Olympus Capital.

Manish Bhatt of Prabhudas Lilladher advised subscribing the issue with 10% listing gains while brokerage houses recommend the issue with a long-term perspective.

Angel Broking says, "The renewable energy sector is set for healthy growth due to its vast unexplored potential and supportive government policies. Leader OGPL has also charted out aggressive expansion plans to capitalise on the emerging opportunities in this nascent but growing industry. The IPO is available at a premium to its private sector peer Indowind Energy (1.3x FY2012E P/BV), which has lesser operational assets at 44MW. For OGPL, the EV/MW works out to Rs 6.3 crore and Rs 6 crore on FY2012E capacity at both ends of the price band, which is at 10% and 7% premium to its replacement cost, which limits further upside considering the return ratios. Hence, we recommend a neutral view on the IPO."

KR Choksey has recommended this issue to the investors with an investment horizon of 2-3 years. "Fundamentals of the sector are very strong given the fast growing energy demands of an economy growing at a rate of 8-9%.OGPL doesn't have any direct comparable. Its returns are heavily dependent on government policy and regulations, thus, the company is more comparable to regulated power utilities. The company's issue is priced at 1.6-1.7 times of its book value; while its peer regulated power utilities are priced at 2 times of book value. Discount is justified for the company as it has limited operating history and might experience lower load factors than estimated. Aggressive capacity expansion will fuel the topline growth for the company. While, preferential tariffs, tax incentives and regulatory purchase obligations will aid the margin expansion for the company, going forward."