By Research Desk
about 11 years ago

Power Grid Corporation of India is entering the capital market on 9th November, 2010, with its FPO of 84.18 crore equity shares of Rs.10 each, in the price band of Rs. 85 to Rs. 90 per share.FPO is comprising of a fresh issue of 42.09 crore shares and offer for sale of 42.09 crore shares. A 5% discount shall be offered to retail investors and employees, on the price discovered.


It seems that the government has given one more opportunity to the retail investors to make money, this time in a more liberal way. This is after tasting the success of Coal India IPO and having realized that, if pricing of the issue is made reasonable, it can really attract large number of retail investors to the issue. Incidentally, Coal India has seen over 15 lakh retail investors, which is a record for any PSU IPO, after about 11 lakh investors, came  in NHPC IPO.


This share, of late, has been a non-performer on the bourses, with its 52 week high at 121 and low at 95. Now, the share is ruling at 99. It may be noted that, due to expected FPO, that too of large size of about Rs. 8,000 crores, share was ruling subdued and has not moved up, inspite of all the good performance and positive fundamentals. This stock is likely to perform much better, post FPO, as we have seen in the cases of EIL and REC.


We don't expect the share to fall below 95 till closure of FPO and it can move to 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 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, which is likely to be quite huge, considering a maximum of 1,105 shares, one can apply in retail category, by paying 99,450. Limit in retail category is still at Rs. 1 lakh only.


The company, a Mini Ratna category I PSU, owns and operates more than 95% of country's inter state and inter state and inter regional electric power transmission systems and is the 3rd largest power transmission company in the world. In FY10, the company maintained a system availability rate of 99.77%. As at 30-09-10, the company owned and operated 79,556 circuit kilometers of electrical transmission lines and 132 electrical sub-stations. The company also diversified in telecommunication business since 2001, utilizing its nationwide transmission system to create an overhead fibre optic, telecommunication cable network, using optical ground wire on power transmission lines. It has network of 20,733 kms and connected 129 Indian cities, which includes all major metropolitan areas.


The company has been posting consistent performance and had a total income of Rs. 7,127 crores for year ending March 10, with PAT of Rs. 2,041 crores, resulting in an EPS of Rs. 4.85 on equity base of Rs. 4,209 crores. For 6 months ending September, 10, the company had total income of Rs. 4,126 crores with PAT at Rs. 1,355 crores, resulting in an EPS of Rs. 3.22 for the period.


The company is developing 13 transmission projects for about 18,711 circuit kms. with total project cost of Rs. 22,650 crores, which is being financed with debt equity ratio of 70:30 in accordance with CERC norms. Equity component of about Rs. 7,000 crores will be partly met from fresh issue of about Rs. 3,700 crores and balance from internal accruals.


Our advise to retail investors are 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!

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