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State-run hydel power company NHPC is likely to bring out its much-awaited initial public offer (IPO) next month after two
postponements in last two years.

SBI Caps, Enam Financial and Kotak Mahindra are book runners and lead managers of the issue, for which Karvy will be the registrar. “If everything goes well, the IPO is likely to be in the first week of August, tentatively August 7,” said NHPC CMD SK Garg you can also nhpc ipo apply online .

NHPC plans to issue 10 per cent of its new equity shares in the public offer, while the government alongside will divest its five per cent stake in the company.

NHPC has set the sale price in the band of Rs31-36 a share. If the shares are sold at the upper end of the band, the firm will net Rs6,000 crore.

This share sale is part divestment from the government, and part expansion of equity. After the sale, the government’s stake in the expanded shareholding base of the firm will come down to 86% from 100%. The offer to sell shares closes on 12 August.

UK-based research house Noble estimates the fair value to be Rs31 a share, taking into account NHPC’s government links. “Optimists can justify buying these shares at the lower end of the price band on the back of this company’s governmental support and contacts,” wrote analyst Bhargav Buddhadev in a 3 August note.

Analysts derived these valuations by computing the future cash flows of the company and using a measure called the price to book value or P/BV. you can alos nhpc ipo apply online This is is the ratio of a firm’s market value to its book value, which is the net worth—the sum of equity and free reserves—of a company. For NHPC, analysts have estimated this multiple to vary between 1.7 and 2 times the fiscal 2010 book value.

In terms of valuations, “the issue is priced....at a discount to the listed utilities in the space”, said a 3 August note from Mumbai-based brokerage Sharekhan Ltd.

NTPC Ltd, the largest power producer in the country, has a P/BV of 3 while Jaiprakash Hydro-Power Ltd, the much smaller and only other listed hydropower producer in India, trades at a P/BV of 3.7.

Of the Rs6,000 crore NHPC hopes to raise at the maximum price of Rs36, a third would go to the Union government. The power producer plans to use the other Rs4,000 crore to part-finance some of its projects. In the red herring prospectus, NHPC has listed seven projects under construction with a total cost of Rs14,000 crore. NHPC currently has a capacity of 5,175MW and these seven projects will add another 3,240MW.

Despite the almost universal thumbs up to the issue, analysts have also raised some questions about NHPC’s performance. For one, there have been delays in the execution of many projects in the last one year. According to the Nobel note, “More than 50% of projects are running behind the commissioning schedule specified by the CCEA (cabinet committee on economic affairs) with an average delay of nine months.”

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Still, given the demand for power stocks, analysts rate NHPC a buy. Power stocks have gained sharply riding on the general economic turnaround this year. Since 1 January, the Bombay Stock Exchange’s power index has gained 59.93% compared with 60.81% for the benchmark 30-stock Sensex.

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