Re: Power Grid IPO
POWERGRID (532898) FPO - Structural Analysis
To partly meet its capital expenditure plans, Power Grid has come out with a follow-on public offer (FPO) at a price band of Rs 85-90 per share.
The offer, will help raise Rs 7,575 crore based on the upper price band, and includes an offer for sale worth Rs 3,787 crore by the government.
The issue opened on 9th Nov and lasts till 12th Nov.
The price band is set at 85-90 rs. Retail Investors will get a 5% discount on the issue price.
To partly meet its capital expenditure plans, Power Grid has come out with a follow-on public offer (FPO) at a price band of Rs 85-90 per share.
The offer, will help raise Rs 7,575 crore based on the upper price band, and includes an offer for sale worth Rs 3,787 crore by the government.
The issue opened on 9th Nov and lasts till 12th Nov.
The price band is set at 85-90 rs. Retail Investors will get a 5% discount on the issue price.
How good is it ? - The fundamentals
Power Grid is a giant company in the field of power transmission in india.
It is so big that it is even the 3rd largest power transmission utility company in the whole world.
Powergrid currently trades at 3 times book value and 17 times PE.
Power grid is expected to report 20 percent growth in revenue in the next 3 years.
This means that the Book Value of the stock could move up to 53 - 56 level in next 3 years.
How good is it ? - The technicals
95 is strong support for the stock. Weekly close below this will take the stock down to 80 levels.
On the upper end 110 - 115 is huge resistance. The stock needs a weekly close above 120 for decent run upwards.
Conclusion
The Qualified institution part of the issue is already subscribed 2 times.
So can we expect another coal india ?
Well it depends on the kind of returns one is expecting.
If a retail investor applies for 1000 shares at cutoff price of 90 rs which is the higher end of spectrum,he will probably get 700 shares allocated.
Considering th 5% discount, the retail investor will be issued stocks at 85.50 rs per share.
So one can safely expect a listing gain of 5 - 15%.
At the higher end of spectrum of price movement, if the stock moves to 110, the investor can pocket a gain of 28.6%.
However, one must note that this an FPO unlike Coal India (IPO). Stock has been around for some time.
It is very low beta stock and so taking the gains out, might take time.
A very good fundamental stock with very low beta -- not good for traders, good for long term investors is our conclusion.
This is not my view, but just a copy paste work of what i received in a mail.
Saivenkat
