Hem Securities has come out with report on Reliance Power IPO. It has recommended subscribing the issue.
Reliance Power is planning to raise around Rs 10,530-11,700 crore from its initial public offering (IPO) of 26 crore equity shares with a face value of Rs 10, for cash, a price decided through 100% book building process. The price band has been fixed at Rs 405-450 per share.
Hem Securities report on Reliance Power IPO
Business Profile
Reliance Power (RPower), originally incorporated as Bawana Power Private Limited, is part of the Reliance Anil Dhirubhai Ambani Group and is currently developing 13 medium and large sized power projects with a combined planned installed capacity of 28,200 MW. The identified project sites are located in western India (12,220 MW), northern India (9,080 MW), northeastern India (2,900 MW) and southern India (4,000 MW).
The projects include seven coal-fired projects (14,620 MW) to be fuelled by reserves from captive mines and supplies from India and abroad, two gas-fired projects (10,280 MW) to be fueled primarily by reserves from the Krishna Godavari Basin (the “KG Basin”) off the east coast of India, and four hydroelectric projects (3,300 MW), three of them in Arunachal Pradesh and one in Uttarakhand.
Company intends to sell the power generated by these projects under a combination of long-term and short-term PPAs to state-owned and private distribution companies and industrial consumers. In addition to the 28,200 MW of power projects, company intends to develop additional power projects to help meet the huge demand in this sector. Company is considering the development of CBM (Coal Bed Methane) power generation projects based on fuel from CBM blocks being explored by a consortium that includes company’s affiliates.
Company also intends to invest in overseas opportunities that are a strategic fit with company’s business. Company intends to explore the possibility of registering certain of its projects with the Clean Development Mechanism executive board for the issuance of carbon emission reduction certificates that company may sell. The company has subsidiaries viz SPL, CAPL, MPPGL, RPSCL, MEGL, VIPL, USHPPL, THPPL, SHPPL and KPPL. Projects of an aggregate generation capacity of 24,600 MW were bid and secured by the Company in its own name. Of this Dadri Project of 7,480 MW is being developed by the Company and the Projects of 17,120 MW are being developed through subsidiaries.
Valuation
The company is the primary vehicle for investments in the power generation in Reliance ADA group. The company has entered and intended to enter into various arrangements with companies of Reliance ADA group, including REL, RNRL and Reliance Energy Transmission. This will help the company in drawing upon the considerable expertise and resources these affiliates have in the energy sector.
As the company is in project implementation phase hence meaningful earnings likely to kick in later years. After commissioning of these proposed projects over next few years the company would be among one of the major power producing company in India. The company enjoys the lower risk due to its well diversified project portfolio comprising of coal , gas and hydro.
The company with its strategies like lower cost of generation, fast completion of projects and efficient operations looks an attractive issue to deploy the funds. Investor can “Subscribe” the issue.
Source: Moneycontrol.com
Showing posts with label Reliance IPO. Show all posts
Showing posts with label Reliance IPO. Show all posts
Wednesday, January 9, 2008
Monday, January 7, 2008
Reliance Power will oversubscribe hopelessly
Q: The space everyone will talk about from now up until when the IPO kicks off its power. What’s a good way to approach Reliance Power?
A: I don’t think everybody will get much allotment in the Reliance Power IPO, because it will be hopelessly oversubscribed. So you need to now focus your eyes on what happens post-listing and when you take a look at the grey market then you worry a little bit, not a little bit more than a little bit because the grey market price is somewhere around Rs 900 that’s double of the IPO price. Whatever good to that one is heard from the management on the Reliance Power IPO and there were many positives, which came through from the media conference at Rs 900 its very difficult unless the market remains in this very frothy frame of mind on the sector its extremely difficult to justify that price because at Rs 900 you are talking about 2 lakh crore marketcap for Reliance Power, you got to look four-five years out and still you will be scratching your heads to justify that.
Reliance Industries one-year back in February 2007 was at 2 lakh crores marketcap and not even a year has passed since Reliance crossed over that 2 lakh crore marketcap. But that’s apples and oranges just look at Reliance Power at Rs 900 our estimates are that in FY11 we are sitting in FY08 right now, so straight away you take a leap of three-years for generation and you may find that they have 6,000 megawatts in FY11 that’s three-years down the line assuming faultless execution.
You want to look at sales and earnings you take a bigger leap go to FY13 that’s five-years from now, FY13 what the pre-multiple would be on our expected delivery - 90. We are talking about 90-times FY13 earnings if all goes well on execution for Reliance Power at Rs 900. If you look at four-years out FY012 and attribute some sales number to the kind of generation that they have, you are almost talking about 30-times sales for FY012 that’s four-years down the line. It’s a good space and probably this company will do lots of exciting things down the line but sitting out here to justify Rs 900 per share on Reliance Power even if you have that perspective of three-four years, five-years down the line seems like a big leap of faith.
Source: Moneycontrol.com
A: I don’t think everybody will get much allotment in the Reliance Power IPO, because it will be hopelessly oversubscribed. So you need to now focus your eyes on what happens post-listing and when you take a look at the grey market then you worry a little bit, not a little bit more than a little bit because the grey market price is somewhere around Rs 900 that’s double of the IPO price. Whatever good to that one is heard from the management on the Reliance Power IPO and there were many positives, which came through from the media conference at Rs 900 its very difficult unless the market remains in this very frothy frame of mind on the sector its extremely difficult to justify that price because at Rs 900 you are talking about 2 lakh crore marketcap for Reliance Power, you got to look four-five years out and still you will be scratching your heads to justify that.
Reliance Industries one-year back in February 2007 was at 2 lakh crores marketcap and not even a year has passed since Reliance crossed over that 2 lakh crore marketcap. But that’s apples and oranges just look at Reliance Power at Rs 900 our estimates are that in FY11 we are sitting in FY08 right now, so straight away you take a leap of three-years for generation and you may find that they have 6,000 megawatts in FY11 that’s three-years down the line assuming faultless execution.
You want to look at sales and earnings you take a bigger leap go to FY13 that’s five-years from now, FY13 what the pre-multiple would be on our expected delivery - 90. We are talking about 90-times FY13 earnings if all goes well on execution for Reliance Power at Rs 900. If you look at four-years out FY012 and attribute some sales number to the kind of generation that they have, you are almost talking about 30-times sales for FY012 that’s four-years down the line. It’s a good space and probably this company will do lots of exciting things down the line but sitting out here to justify Rs 900 per share on Reliance Power even if you have that perspective of three-four years, five-years down the line seems like a big leap of faith.
Source: Moneycontrol.com
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