Reliance Infratel: What to expect from this IPO?

Reliance Infratel is coming out with issue of nearly 9 crore shares, the second IPO from the ADAG Group. The company is basically into passive infrastructure in the telecom space. The issue size is around 8.9 crore shares which constitutes only 10% of the post issued equity. It has part payment option for retailers and HNI as was the case in Reliance Power IPO as well. But if you look at the business of this company, it plans to have roughly around 36,849 towers by the end of March 2008. It currently owns nearly 23400 towers as of now, so the remaining ones are in the process of being built and is expected to be completed by March 2008.

Currently these towers are operating at nearly 1/3rd occupancy because the anchored tenant in these towers is Reliance Communications and its subsidiaries. Comparing it with its other competitors, like Indus towers which is a joint venture between Bharti, Vodafone and Idea where they have nearly 70,000 towers to begin with and their occupancy rate is likely to be much higher going forward for them as well. 42% of these towers are situated in metros, and in A cities, and the remaining are in B and C cities.

The company has a firm roll out order of 16,000 towers for which it’s going to come to the market and these have to be delivered by March 2009 at an estimated cost of Rs 4,623 crore. So we expect this IPO to be in the range of Rs 5,000 to Rs 5,500 crore which gives the valuation of USD 12.5 to USD 13.7 billion. Just 6-8 months back, they made a private placement of 5% to various investors, that came into a valuation of nearly USD 6.75 billion and it was done at a price of Rs 334. So based on the current capital that it wants to raise, we are looking at a price range of Rs 550 to Rs 610 for this IPO which is much higher.

As per the financials, it has Rs 900 crore for the 9-month period of FY08 and Rs 150 crore in bottom line, so by the end of FY 08, revenues of Rs 12,000 crore and nearly Rs 200 crore worth of profit can be expected for the company.

Source: Moneycontrol.com

Reliance Power a long term call

Amitabh Chakraborty, President Equity at Religare Securities feels that Reliance Power is a stock that is to be held for a longer period of time purely to play the power sector and the up side in the power sectors in India. To that extent, it’s a long term call.

Chakraborty told CNBC-TV18, “I haven’t seen the grey market premium figures for Reliance Power but I was told, as on Friday, it came down quite drastically. Again it’s too early, everything depends on the market. This is a not something for today or tomorrow. It’s a stock that is to be held for a longer period of time purely to play the power sector and the up side in the power sectors in India and to that extent, it’s along term call. “

He further added, “The listings, grey market calls, those are the sentiments driven by the market. We believe the market will be strong going forward in February ahead of the budget and the listing would be sometime in the middle of that month of February. Obviously the stock would be quite decently listed.

Source: Moneycontrol.com

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

Rel Power IPO gets final Sebi nod, to open Jan 15-18

Reliance Power IPO has obtained the final Sebi nod and will open between January 15-18, reports CNBC-TV18. Reliance Power will raise Rs 10,500- 11,500 crore via IPO. Reliance Power offers staggered payment option to retail investors.

Source: Moneycontrol.com