Posts Tagged ‘NHPC Ltd’

As IPO Market Falters,Companies Eye New Funds !!

Market falters

The post-listing dismal performance of the initial public offering ( IPO) of public sector power major NHPC Ltd is set to force many companies to rework their fund- raising strategies in the coming months.

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Qualified institutional placements (QIPs), global depository receipts (GDRs) or those shares issued to overseas investors and listed on exchanges abroad are likely to be the most favoured means for these purposes, leading investment bankers said.

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Some of the companies are already planning to revise their issue prices downwards to ensure that offerings will not fall through.

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Oil India Ltd (OIL), which is open for subscription now, is the first to draw lessons from the NHPC episode and revise its issue price.

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OIL has revised their price band to Rs 950- 1,050 per share, from Rs 1,250- 1,400, after the NHPC episode as per few bankers.

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NHPC fixed the price of its IPO at Rs 36 per share last month.

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Though the stock listed on September 1 at eight per cent premium to the issue price, at Rs 39, it closed just 70 paise or 1.94 per cent above the issue price.

Over the last two days, the premium further narrowed to just 10 paise.

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Jagannadham Thunuguntla, equity head of SMC Capitals Ltd, cites heavy selling, coupled with no follow- up buying as the reasons for the lacklustre listing of NHPC.

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NHPC’s IPO price was 30 times its earnings per share (EPS).

“In fact, well- established companies like NTPC are available at much lower valuations. Hence, there was no follow- up buying from the investors on NHPC listing,” Thunuguntla explained.

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Further, majority of the oversubscription is not due to genuine investor interest but is due to the borrowed funding through ‘IPO financing“.

Naturally, all such investors were forced to sell on the day of listing as these involve a lot of interest cost. This resulted in heavy selling on the day of the listing,” he added.

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After the market rebound since March 2009, fundstarved companies started tapping the market.

And when the elections gave a more convincing victory to the UPA combine, the market gathered greater strength.

Since March, companies were able to raise funds to the extent of Rs 21,191 crore through 22 QIPs; and $ 1.88 billion through four GDRs/ ADRs (funds raised from US- based investors and listed in the US).

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However experts maintained that these are the sources of funds for which few institutional investors are to be convinced, rather than working on creating confidence among the whole investor community.

At the same time such companies should have a high corporate governance track- record as well.

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price band

Indian Govt. disinvestment plans to kick off soon !

Indian Govt. disinvestment plans to kick off soon !

Indian Power Firm NHPC Ltd will kick off a $1.25 billion IPO next week in the first share sale by a state company.

Since the congress party’s unexpectedly strong re-election in May spurred investors hopes for pro market reforms. πŸ™‚

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Despite opposition from labour groups and leftist parties, the government is forecast by some watchers to offload roughly $5 billion a year in state shares.


This could hearten a bond market worried about fiscal responsibility, but do little to address a yawning deficit and $90 billion borrowing plan.

Investors are expected to lap up shares in government firms, given :

a) attractive pricing,

b) a record of outperformance relative to IPOs by private firms,

c) and a roaring stock market run since March. πŸ™‚

NHPC opens its IPO on August 7 in what would be the first for a state firm in India since Feb. 2008.

Oil India is expected to follow with a $500 to $600 million issue in September.

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Also in the works could be a multi-billion-dollar IPO by telecoms firm Bharat Sanchar Nigam Ltd.

Secondary offerings by power equipment maker Bharat Heavy Electricals, Rural Electrification Corp, trading firm MMTC Ltd and mining firm NMDC Ltd. are also in queue.


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The pipeline of equity from state firms promises to top the record $6 billion raised from government asset sales between 1999 and 2004 when the pro-business Bharatya Janata Party (BJP) was in power.

During that period, shares were sold in firms such as Oil and Natural Gas Corp and Maruti Suzuki.

Since then, the government raised just $1.4 billion as allies of the ruling coalition and labour unions thwarted plans for stake sales.

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Indian state companies that listed between 2004 and 2009 have shown share price gains on average of 140 percent compared with just 3.5 percent for their private sector peers, according to a study by SMC Capitals, a deal tracking firm.