Why are experts bullish on Power Grid Corp FPO?

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Why are experts bullish on Power Grid Corp FPO?

The follow-on public offer (FPO) of India's biggest inter-state transmission company Power Grid Corp is set to open for subscription on November 09, 2010.

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The follow-on public offer (FPO) of India's biggest inter-state transmission company Power Grid Corp is set to open for subscription on November 09, 2010. It is offering 84,17,68,246 equity shares through FPO at a price band of Rs 85-90/share. The company aims to raise more than Rs 7500 crore via this FPO.

Experts feel the price band of the issue is attractive for investment. Investment Advisor, SP Tulsian said, "Our advise to retail investors is to go for this issue by applying at upper band of Rs. 90 per share. If one applies for 1,105 shares, he is likely to get allotment of about 700 shares, which can give a profit of Rs 15,000 in a month's time. So, those who missed on Coal India can try their luck here. Those who have tasted profit in Coal, are advised to go for Power Grid, to experience some action replay!"

Manish Bhatt of Prabhudas Lilladher also advised subscribing the issue at cut-off. "The issue looks good and even pricing looks attractive. The government has left money for investors," he explained.

A share, ahead of issue opening, closed at Rs 98.35, down 3.58% on huge volumes. However, Tulsian does not expect the share to fall below Rs 95 till closure of FPO. He said, "It can move to Rs 110 by end of November, by the time we will see allotment of FPO, getting completed. Even if we expect the book to get discovered at Rs 90 and considering a discount of 5% to retail investors, net acquisition cost to them will be Rs 85.50 per share. Hence, this is likely to give a good opportunity to earn, between Rs 15 to Rs 25 per share in next one month."

Hitul Gutka, research analyst at PINC said he feels the FPO is attractively priced. "The price band of Rs 85-90 is a fantastic price and investors can definitely look to invest at the upper price band," he advised.

He also has a target on the stock of Rs 115 with a one-year perspective.

Samir Arora of Helios Capital feels the Power Grid FPO is very good. "Pricing is very good for Power Grid. We may apply. But I'm saying from a macro point of view you will not get this kind of size again, application sizes from everybody because this is a listed company. And in a listed company many people have the choice of just buying it in the market and pay 3-4% higher," he reasoned.