NHPC IPO Subscription which starts on August 7th 2009 with a price band of Rs 30 to 36 per share has generated good responses from the Analysts. NHPC IPO Review carried by the Analyst firms and brokerage companies have recommended to subscribe to the IPO. Below is what majority of the Analysts firms have to say about NHPC IPO Review.
SMC Global’s report on NHPC IPO : The healthy track record of power generation from operational projects arising out of favourable hydrology of the rivers on which these projects are located as well as the high Capacity Index of its operational plants enables NHPC to recover full Annual Fixed Charges (AFC). NHPC owing to its project locations has a highly concentrated customer profile, which largely includes North and North-East based State Electricity Utilities (SEUs). While these SEUs have relatively weak financial profiles, however NHPC has been able to realise 100% of its billings in last 6 years. The company will be a significant player in Hydro Power and would be PSU like NTPC in this sector. Going by the financials, the stock is trading at a P/BV of Rs.2 for its book value of Rs.16.45 for FY09, which is lower when compared with the peers. Further, looking at the fundamentals and track record, it is recommended to apply in IPO even at the upper band of Rs.36.
SPA Securities report on NHPC IPO : At upper price band of Rs 36, the company is valued at a P/E of 32.4x and P/BV of 1.8x its FY09 post-issue earnings of Rs 1.1 per share. On P/E basis, it may appear expensive. However, it is due to many of its projects being under construction and hence they do not contribute to earnings currently. Based on post issue P/BV it is available at a discount compared to its peers, which are trading at > 3x compared with 1.8x for NHPC on upper band. We therefore recommend ‘Subscribe’ to the issue.
Bonanza’s report on NHPC IPO : The business model of NHPC is robust. There is visibility in Power sector and significant expansion at NHPC. The long term investors can apply for the shares. The response for Adani Power indicates that there is potential for listing gains also.
We recommend applying in the following way for Retail clients applying upto Rs.1 Lakhs-fill all 3 options at Rs.36, Rs.35 and Rs.33, with different No. of Shares Bid for. If Govt. decides to allot at price lower than upper band, Number of shares allotted will be higher.
More information and reviews on NHPC IPO will be posted soon. For more details refer to NHPC IPO Subscription .
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
3 comments ↓
NHPC IPO ON 7 AUGUST TO WHAT DATE ?
GOI is proposing to offload 9.5% of its 100% holding in NHPC and issue a further 4.7% of new shares in the company. (The percentages have been calculated after considering issue of new shares). The Govt is looking to raise INR 4,000 cr from this issue, which values the 100% equity of the company at roughly INR 28,000 cr.
What does NHPC do? National Hydro Power Corporation has the biggest portfolio of hydro generation assets in India (13 projects, Installed capacity of 5175 MW). The organization has the experience, expertise and organizational setup to finance, build, own and operate large hydro generation plants. The company has plans to develop another 11 projects of 4600MW by 2014.
Valuation of existing assets:
The company generated 16580 MU (million KWhr) of power in FY 2008-09. The average tariff at which it is currently selling this power is INR 1.62 per unit, which is on the lower side as compared to Power Purchase Agreements being signed today. Also, this generation translates into a current PLF (Plant Load Factor) of 40%, which is again on the lower side as compared to other commissioned large hydro plants like Baspa-II (JP Hydro)
Using 2009 numbers, total available cashflow to debt plus equity was INR 2,150 cr. Taking a EV/CF multiple of 12, which corresponds to a 8.5% WACC (weighted average cost of capital), the total valuation of existing assets is INR 26,000. Taking out current debt of 12,600 cr gives an equity valuation of INR 13,400 cr for the existing generation capacity.
For the planned capacity, let us take an aggressive 3-4 year completion of the planned 4600MW. Even if we put an equity valuation of 2 cr for this (on the higher side), the total equity valuation looks to be closer to the INR 23,000 cr mark than the implied INR 28,000 cr as per the offer.
Power tariffs and the upside: At the moment, large hydro generators get into PPAs with power distributors in the INR 3 to 4.25 per unit price range. For projects completed after 2011, they can sell 40% of the power generated as “merchant power plants”, i.e using short-term purchase agreements. Considering the shortage of power in India, the realized price from this route will be much higher than the price realizable from long-term PPAs. This will certainly add to the above valuation and participating in this IPO is a way for investors to take a view of short-term power prices in the future.
Weighing all the above considerations, we find the IPO to be marginally overpriced, though we find this IPO to be far more attractive than companies like JP Hydro. However, investors who have the ablity to invest privately into large hydro plants being planned by private developers in states like HP, Uttaranchal, Arunachal and Sikkim, would be better advised to stay away from this IPO, as these private side investments would be more attractive than the NHPC IPO.
i want to know this company is on or off
Leave a Comment