Power IPOs a hit with investors

PowerGrid IPO subscribed 64 times

The initial public offer (IPO) of power transmission company, Power Grid Corporation of India (PGCIL), joined the long list of power sector IPOs that were heavily oversubscribed thanks to huge buying interest from qualified institutional buyers (QIBs). In the last three weeks, Reliance Energy (up 26 per cent), NTPC (up 20.24 per cent),

Torrent Power (up 19.25 per cent) and GVK Power and Infrastructure (up 12.22 per cent) have seen a dramatic rise in the run up to PGCIL issue.

PGCIL's IPO that ended today was subscribed by 64.23 times, according to the NSE website at 6 pm, reflecting strong investor demand for the issue. The QIB portion was subscribed by 74.51 times at 2 pm, with the retail portion attracting 3.23 times.

The issue constitutes approximately 13.64 per cent of the fully diluted post-issue capital of the company. Post the issue, the Government of India will continue to hold 86.36 per cent of the diluted post-issue paid-up equity capital of the company through the power ministry.

"The QIB portion has seen heavy buying interest because the company will have a low floating stock. So the more allotment QIBs get at the IPO stage, the better it is. The shares are a quasi-bond, since the company has huge expansion plans lined up," said Mehul Mukati, research analyst, power and power equipment, Emkay Share and Stock Brokers. The NTPC issue has been the only public sector power IPO apart from PGCIL.

With two other power sector companies set to tap the capital market (Rural Electrification Corporation and BGR Energy Systems), a lot of action can be expected in this space. Suryachakra Power was the latest power sector IPO that hit the market in June 2007.

The issue picked up on the last day, getting subscribed by 1.95 times. With the government aiming to increase the power transmission capacity by 1.6 times to 37,150 mw in the eleventh five year plan, the growth prospects of the power sector look robust.

"Recent PSU IPOs such as NTPC were not aggressively priced and that was the main reason why they could attract a good investor response."said S P Tulsian, independent equity advisor.