28 Jul 2009,
MUMBAI: According to Angel Broking, the initial public offering of Adani Power is fairly priced. The brokerage has a neutral view on the
IPO.
“Adani Power has drawn up ambitious expansion plans, which, when complete, will catapult it into the ivy league of power generating companies in India. In fact, the company also has the vision of having 20,000 MW of installed capacity by 2020. The company’s plants are located strategically and with adequate fuel supply. However, the company’s lack of a significant operating history casts a shadow over its ability to execute projects of such mammothscale.
To add to the skepticism, the company has decided to use only Chinese equipment at all its plants, which have been dogged by a host of technical issues when used for operating Indian plants in the past. On the project financing front too, the company has over-leveraged itself with a Debt-to-Equity ratio of 80%. We have valued all upcoming projects of the company individually and arrived at a fair value of Rs 82/share, while strictly adhering to the execution timeline given in the RHP. We have assumed the Cost of Debt and Cost of Equity at 11.25% and 14%, respectively. We believe that the IPO is fairly priced and keep a Neutral view on it,” the report said.
Adani Power is coming out with a initial public offering of 29.40 crore shares of face value Rs 10. The issue represent 13.5 per cent of the post-issue paid up capital of the company.
The company has fixed the price band in the range of Rs 90-100 per share, resulting in a post money valuation of Rs 196 billion to Rs 218 billion respectively. At the indicated IPO price band, Adani Power will raise Rs 26.4 billion to Rs 29.4 billion. The issue opens for subscription today.
Adani Power plans to use the proceeds to part finance construction and development of Mundra Phase IV, Gujarat power project for 1,980 MW. It will fund equity contribution in subsidiary Adani Power Maharashtra to part finance construction and development cost of power project for 1,980 MW at Tiroda, Maharashtra.
