Adani Power is entering the capital market on 28th July, 09 with a public issue of 30.17 crore equity shares of Rs. 10 each, in the price band of Rs. 90 – Rs. 100 per share.
Though the company claims to be setting up power projects of 9,900 MW at 4 locations viz. Mundra, Tiroda, Dahej and Kawai, but, only projects of 6,600 MW are under advanced stage of implementation. Its financial closure, equity contribution, fuel linkage and PPA are all in place and is expected to start by March 2012. This will happen in phases - phase I of 330 MW to be operational in July 09. Balance 3,300 MW, with 1980 MW at Dahej and 1320 MW at Kawai is yet to take shape. This has total project cost of Rs. 14,770 crores, of which Rs. 11,816 crores would get raised via debt and balance of Rs. 2,954 crores from equity. So at later stage, this equity component, would either get raised from internal accruals or by further equity dilution, at a later date.
Mundra project is having total generation capacity of 4,620 MW and this is being put up in four phases with first two phases of 660 MW each; 1,320 MW in Phase III and 1,980 MW in Phase IV. Total Project cost of all these four phases is at Rs. 19,160 crores, of which, debt of Rs. 15,266 crores is being raised while Rs. 3,840 would come via equity. Tiroda Project has 1,980 MW with project cost of Rs. 9,263 crores to be financed by debt of Rs. 7,410 crores and equity of Rs. 1,853 crores. The company is presently having 77.38% stake in this project, which may eventually be at 74 %.
The present equity of the company is at Rs. 1,878 crores which is largely used to finance three phases of Mundra. The proposed IPO is being made to mobilize the funds for Phase IV- Mundra and Tiroda project, which is estimated at Rs. 3,163 crores (Considering 74% for Tiroda). The proposed issue would be able to mobilize close to Rs. 3,000 crores, considering price discovery at Rs.100 per share.
The company has Power Purchase Agreement(PPA) in place for 4,744 MW, which is about 72% of the capacity under implementation, of 6,600 MW. Balance will be sold on spot basis. Due to assured returns available to power projects and with gearing of about 4:1, the company will be having advantage to post a return of close to 35% on shareholders funds.
Post issue equity of the company will rise to Rs. 2,180 which would translate into market capitalization of close to Rs. 22,000 crores, considering issue price of Rs. 100 and shall have Net Worth of close to Rs. 5,700 crores. This would result in a PBV of close to 3.85.
The closest contenders for Adani, based on the size of the project are Sterlite Energy, GMR Energy, Jindal Steel Power, JSW Energy, J. P. Power, Reliance Power. And we compare these with Adani, then, it can be seen that the execution capability will be the key for success of all these companies. This has been established by the promoters of the company, after implementing 32,000 acres sea-port project being Mundra Port. Also, strength of the promoters in coal procurement will be to the advantage of the company.
Considering all this, issue looks good and recommended even at the upper band of Rs. 100, as power sector holds good long term potentials to reward the shareholders.
Sunday, July 26, 2009
Adani Power: It has the POWER!
Grey Market Premium Dt. 24-7-2009
Latest Grey Market Premium Dt. 24-7-2009
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac Application) | Subject to Sauda |
| Excel Infoways Ltd. | 85 | 5 to 7 | -- | -- |
| Raj Oil Mills Ltd. | 100 to 120 | Discount | -- | |
| Adani Power | 90 to 100 | 12 to 13 | 2500 to 2700 | -- |
| NHPC | 28 to 33 (Approximate) | 10 to 11 | 3500 to 3700 | -- |
Saturday, July 18, 2009
Raj Oil: Oils not well
Raj Oil Mills is entering the capital market on 20th July 09 with a public issue of 95 lakhs equity shares of Rs. 10 each, in the price band of Rs. 100 to Rs. 120 per share.
The company is marketing Coconut Oil, Groundnut Oil, Soya bean Oil and Cotton Seeds Oil under three umbrella brands of Cocoraj, Guniea and Raj. The company is presently having 5,000 TPA of crushing and 30,000 TPA of Oil filtration. The company now proposes to set up 2 units viz. one at Manor in Maharashtra and second at Bagru in Jaipur and total fund requirement is estimated at Rs. 110 crore, which would largely be met by the proposed issue.
If we see the present operations and scale of the company, these are having a very low tangible value with very low level of operations. Gross block of the fixed assets are less than Rs. 25 crore while major value of the assets are intangibles being three umbrella brands, which were valued at Rs. 293 crore, and process of transfer of these brands to the company are pending, with the Registrar of Trade Marks and are being opposed by the third parties.
Post IPO, the equity of the company would rise to Rs. 36 crore, which is considered very high with the existing listed peers like KS Oils, Ruchi Soya or Gokul Refoils. All these companies have topline in excess of Rs. 2,000 crore annually, with strong brand presence in Oil and Vanaspati. As this company is Mumbai based, we are more familiar with the brands of the company and hence may recognize it more.
For year ending December 08, the total income of the company was at Rs. 321 crore with PAT of Rs. 29.60 crore translating into an EPS of Rs. 11.15 on pre-issue equity of Rs. 26.50 crore. As against this, K.S. Qil had topline of Rs. 3,150 crore with PAT of Rs. 175 crore for FY09 giving an EPS of Rs. 5 on equity base of Rs. 35.63 crore. This share is ruling at Rs. 52 implying a PE multiple of 10 times.
Solvent extraction companies are enjoying very low PE multiple and topline over Rs. 1,000 crore is considered and ideal level to operate and exist. Gokul Refoil has topline of Rs. 2,000 crore plus, Sanwaria Agro Rs. 1,100 crore plus, Ruchi Soya Rs. 12,000 crore plus and Agro Tech at Rs. 1,000 crore plus. So this company, post listing would get placed in middle or lower ring in the sector and would enjoy lower PE multiple.
At Rs.100, the company is being valued at Rs. 360 crore while at upper band, it is being valued at Rs. 432 crore. This exceeds much more than its total assets valuations of the tangibles and intangible. Even on PE basis, it is issued close to a PE multiple of 10 times, considering an average of Rs. 110 per share.
Hence, issue has nothing exciting and many listed peers are available at much better valuations. Fate of this issue would also be on the lines of Mahindra Holidays, where one may be able to see meager gain, which may exist during initial days of listing.
Sunday, July 12, 2009
Grey Market Premium Dt. 10-7-2009
Latest Grey Market Premium Dt. 10-7-2009
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Application of Rs. 1 Lac. (Kostak Price Rs.) | Subject to Sauda |
| Mahindra Holidays | 300 | 25 to 27 | -- | -- |
| Excel Infoways Ltd. | 80 to 85 | Discount | -- | -- |
| Adani Power | 110 to 130 (Approximate) | 20 to 25 | -- | -- |
| NHPC | 15 to 20 (Approximate) | 4 to 5 | | |