Power Sector Ipos Seem To Be The Latest Buzz - July 31 , 2008

NEW DELHI: Power sector IPOs seem to be the latest buzz in government corridors following the trust vote. The power ministry is planning to list at least three central power companies over the next few months. While hydel major NHPC will be the first to hit the market sometime later this year, Damodar Valley Corporation (DVC) and North Eastern Electric Power Corporation (Neepco) would also come with public issues soon. The ministry is also planning to revive the follow-on public offer (FPO) of NTPC.

According to highly placed government sources, the ministry has favoured DVC’s proposal for a public offer which may be launched after the company floats its subsidiary. The company has already appointed consulting firm KPMG for exploring the various options through which the company can tap the capital market.

“The consulting firm will submit its report in the next two days, after which the company’s board will take a decision. Since DVC is a statutory company, the need was felt to set up a subsidiary company, which in turn could be listed,” a senior government official told ET.

The ministry has proposed that Delhi government may pick up 20% stake in the proposed subsidiary as DVC is set to become a major power supplier to the state. DVC is targeting a generation capacity of 11,000 mw by 2012, and Delhi is to get almost 20% or over 2,000 mw.

The government has also started the process of coming out with a public offer of Neepco. The government will first upgrade the company from the list of Schedule-B to Schedule-A and then come with a public offer. “The ministry of heavy industries has agreed to facilitate the process of its upgradation that is essential for the public offering. A proposal in this regard is already with the Department of Public Enterprises (DPE),” the official said. Neepco proposes to raise around Rs 400 crore to fund its projects.

Besides, the FPO of NTPC could also be revived. The finance ministry had earlier turned down the PSU’s proposal to raise nearly Rs 6,000 crore through a follow-on public offering as the government’s disinvestment policy does not favour dilution of equity in navratna companies. As per government estimates, over Rs 10 lakh crore of investment is required in the power sector during the 11th Plan.

Anu's Laboratories IPO Open For Subscription

MUMBAI: The initial public offer of 38.20 lakh equity shares of Anu’s Laboratories opens for subscription on Monday. The company has fixed a price band of Rs 200-Rs 210 per share. The issue will close on May 15.

The issue comprises reservation of upto 2,00,000 equity shares for employees and a net issue to the public of 36,20,000 equity shares. The issue constitutes 31.63 per cent of the fully diluted post issue paid-up capital of the company.

The company plans to utilize the proceeds for – setting up a new plant for manufacturing of drug intermediates including active pharmaceutical ingredients at Vishakhapatnam, setting up of pilot plant for carrying out contract research and manufacturing at Vishakhapatnam, for long term working capital requirement, general corporate purposes and for issue expenses.

ICRA has assigned Grade "2/5" to the IPO. The shares will be listed on Bombay Stock Exchange. The book running lead manager to the issue is Almondz Global Securities.

K P Singh Promoted DLF Assets Ltd

NEW DELHI: Billionaire businessman K P Singh- promoted DLF Assets Ltd is likely to launch the public offer of its office trust in Singapore by June to raise over $2 billion (over Rs 8,000 crore).

DLF Assets, which has been set up to acquire completed commercial projects of India's most-valued realty firm DLF, is planning to file the updated prospectus soon for its proposed IPO to the Singapore authority, the market sources said.

The company plans to raise over $2 billion from IPO, expected to hit the market by June end, they added.

DLF Assets had planned to bring the IPO in January, but decided to delay its public offer in Singapore because of volatility in the stock markets across the world.

It had received the regulatory approvals from Singapore authorities to launch the IPO of DLF Offices Trust, a Real Estate Investment Trust (REIT) of DLF Assets.

However, the company would file an updated prospectus because earlier document had financial information till September 2007, sources said. DLF office Trust would get fresh approval very shortly, they added.

Last year, DLF Assets had raised 400 million dollars and 200 million dollars from global investing firm D E Shaw and a fund sponsored by investment banking firm Lehman Brothers respectively.

DLF Assets has raised 450 million dollars from Symphony Capital in pre-IPO placements. The promoters have pumped in about Rs 1,200 crore in the company, which sources said would help increase investors confidence, besides providing more returns to them as 90 per cent of the profit is distributed to the investors as dividend in REIT.

Anu's Laboratories Plans To Enter Capital Market With Its IPO Of 38,20,000 Share

MUMBAI: Anu's Laboratories plans to enter the capital market on May 12 with its initial public offering of 38,20,000 equity shares of Rs 10 each for cash, at a price to be decided through 100 per cent book building process.

The company has fixed a price band of Rs 200-Rs 210 per share. The issue will close on May 15.

The issue comprises a reservation of up to 2,00,000 equity shares for employees and a net issue to the public of 36,20,000 equity shares. The issue will constitute 31.63 per cent of the fully diluted post issue paid-up
capital of the company.

Qualified institutional buyers shall be allocated 18,10,000 shares or 50 per cent of the issue. From and out of the QIB portion 5 per cent for mutual funds, 15 per cent or 5,43,000 shares to non-institutional bidders and 12,67,000 shares or 35 per cent to retail investors.

The company is presently engaged in the manufacture of basic, advanced intermediates and fine chemicals and supplying them to various drug manufacturers.

The main products of the company include 2,4-Di-Chloro-5-Fluoro Acetophenone (DCFA) (an intermediate for synthesizing quinolone antibiotics like ciprofloxacin), Chlorohexanone, Methyl-4 (4-Chloro 1 Oxo Butyl) a, a Di-Methyl Acetate and Poly Aluminium Chloride, which are manufactured in Mahboobnagar, Andhra Pradesh.

The company plans to utilize the proceeds for - setting up a new plant for manufacturing of drug intermediates including Active Pharmaceutical Ingredients at Vishakhapatnam, setting up of pilot plant for carrying out
Contract Research and Manufacturing at Vishakhapatnam, long term working capital requirement, general corporate purposes and for issue expenses.

ICRA has assigned Grade "2/5" to the IPO. The shares will be listed on Bombay Stock Exchange. The book running lead manager to the issue is Almondz Global Securities.

ICICI Securities, Is Banking Arm Of ICICI Bank

New Delhi: ICICI Securities, the investment banking arm of ICICI Bank, will come out with initial public offer in due course, said CEO of the country's largest private sector bank K V Kamath.

"The IPO will come in due course. We are not in a hurry," Kamath told reporters here.

He said the bank has not decided on the size of the IPO and when the market conditions are favourable, the bank will consider the IPO.

In January, the board of ICICI Securities had approved the initial public offer and private placement of shares to one or more institutional investors.

Soon after the decision, ICICI Bank Joint Managing Director and CFO Chanda Kochhar had said, the shares of ICICI Securities will be listed on the bourses in about six months.

The board had decided to offload 15 per cent of its shares to retail or institutional investors.

ICICI Securities, having an equity capital of Rs 61 crore, is a major player in retail broking and has posted revenues of Rs 527 crore during the first nine months of the current fiscal while profits were at Rs 108 crore in the same period.

India Inc Raises Rs 17,000 Cr Via Ipos In Q4 '08: Assocham

Funds mobilised by India Inc through initial public offerings has doubled to Rs 17,217 crore in the fourth quarter of last fiscal as against a year ago period, industry body Assocham said.

"Even as the number of primary market issues declined to 19 in January-March 2008 from 33 for the corresponding period of the last year, the amount raised in the initial public offer market doubled with 120.68 per cent rise," Assocham Eco Pulse (AEP) study on 'Primary Market Performance' said.

The study conducted for the fourth quarter of FY08 has revealed that despite the bearish conditions in stock markets and credit crunch, the total money raised from the IPO market has more than doubled to Rs 17,217 crore from Rs 7,749 crore in the same period during FY07.

The mega issue of Reliance Power (Rs 10,260 crore) accounting for 60 per cent of the IPO value raised during the period and rise in the overall stock market valuations were the main reasons cited by the AEP, for more than double increase in the money raised from the primary market.

The sectors, which registered maximum growth in last three months over the corresponding period of the fiscal 2007, were power, construction and financial services, Assocham President Venugopal Dhoot said.

The construction sector gathered a significant Rs 4,454.77 crore, despite two companies withdrawing their offer in the period, the chamber said.

The construction sector contributed a share of 25.87 per cent in the total IPO proceeds during the period January-March 2008, it added.

IPOs in power sector were dominated by the mega issue of Reliance Power, which raised Rs 10,260 crore.

The study was based on the data taken from Bombay Stock Exchange, National Stock Exchange, SEBI and respective companies websites, it said.

All IPOs May Now Come With Underwriting Cover

NEW DELHI: Underwriting could become mandatory for the initial public offers (IPOs). The proposal is part of the initiatives which are under consideration of the market regulator to discipline the primary market and ensure quality paper.

An underwritten issue, it is understood, would also give confidence to investors that the issue has been vetted by domain experts after considering the risk factors. It could help obtain better pricing as institutions would not want to underwrite issues that are over-aggressively priced and run the risk of devolving substantially. The move comes in the backdrop of some of the big IPOs - Emmar MGF, Wockhardt etc - being called off. In February, these issues were called off by the promoters after failing to woo investors following cut in price band and extension of deadline.

The proposal has already been given an in-principle go-ahead by the Primary Market Advisory Committee, which is at present discussing the issue of making the IPO process more efficient and transparent. The nitty-gritty of its implementation, however, is yet to be firmed up, sources told ET. However, the proposal will finally have to be cleared by the SEBI board before it is implemented.

"If an issue is not able to get subscription, the underwriter should come forward to subscribe it. Why should an issue be called off or dates extended? The move is in the overall interest of the investor and markets. It would ensure that only quality paper comes to market," Association of NSE Members of India past president KL Garg said.

At present, underwriting is optional and bankers prefer soft underwriting in which the underwriter agrees to buy the shares at later stages of the offer, after book-building is complete and pricing has been done. Moreover, the underwriter has to put in money only if investors after bidding for shares default in payment on allotment.

During the Controller of Capital Issues regime, hard underwriting in which the underwriter agrees to buy shares at its early stage prior to the opening of the issue was compulsory. Even after free pricing was introduced under Sebi regulations, hard underwriting was mandatory in the first few years.

Experts feel that mandatory underwriting will increase issue expenses, because of the underwriting fee that would have to be paid to underwriters, but it would make the issue safe for the issuer. The total cost of an issue ranges from 0.5% to 3% of the issue size depending on the size. It is less for bigger issues and more for smaller issues. Since failed issues disturb the market, the proposal is good for the overall health of the market.

Former BSE VP, Deena Mehta, says: "In exchanges we have a trade to guarantee fund which is there to ensure that every trade will be honoured by the exchange. If this is the kind of discipline we are trying to bring in into the primary market, it would be great."

CARE Assigns 'IPO Grade 3' To PNC Infratech

MUMBAI: CARE has assigned ‘CARE IPO Grade 3’ to the initial public offer of PNC Infratech Ltd, which indicates ‘Average Fundamentals’.

CARE’s IPO grading is an opinion on the fundamentals of the issuer.

PNC Infratech plans to raise Rs 150 crore from around 5.8 million share offering by May. The company focuses on airport infrastructure and on highways, and has worked on airports in Lucknow and Dehradun, and Madurai.

The CARE grading factors experience of PNC Infratech’s promoters, increasing order book position and track record in roads and airport runways for government agencies/ public works departments. The additional factors considered include moderate level of corporate governance and positive outlook for the construction sector. The grading is constrained by the working capital intensive operations, vulnerability to increasing competitive pressure given its relative size and inherent cyclical trends associated with construction sector.

PNC Infratech has presence in various states and has completed around 15 major projects during FY05-07 aggregating Rs 490 crore. Presently, the company has over 18 projects under implementation with order book of around Rs 995 crore as on Sep 30, 2007.

Think Twice Before Investing In IPOs

MUMBAI: Ten out of 16 initial public offerings (IPOs) that made their debut on the bourses this calendar year are quoting below their issue prices, a statistic that is likely to make investors think twice before rushing to पुट money into the next ‘hot IPO’. But merchant bankers are not to be dissuaded so easily. They feel the primary market is showing signs of a revival, only that investors have become a bit more finicky about the price they are willing to shell out.

“People are coming back but at a price,” said an investment banker with a leading domestic brokerage. “Unlike the earlier trend of where any issue was oversubscribed, there is an element of caution today. In a highly volatile market, most investors prefer secondary market trade rather than primary market trade,” he added.

Industry experts aver the new issuances and their performance on the bourses in the recent past also need to be judged against the backdrop of whether the deal was announced before the market crash (January 21) or after the market crash. Most importantly, if the crash was taken into account in the IPO pricing.

“Most IPOs are priced to their peer groups. In the instance of Emaar and Wockhardt, their valuations were compared to their peers in a bear market,” said an industry source.


The meltdown in share prices mid-January adversely impacted the performance of many stocks on listing. “New issuances once listed, are but a subset of the secondary market. As such they will be impacted by all developments of the secondary market, be it industry as a whole or company related news,” said Prime Database MD Prithvi Haldea.

BGR Energy, Burnpur Cement, Manaksia, Precision Pipes & Profiles Company, Aries Agro, Porwal Auto Components, Future Capital Holdings, Reliance Power, J Kumar Infraprojects, Cords Cable Industries, KNR Construction, On Mobile Global, Shriram EPC, Bang Overseas, IRB Infrastructure Developers and Tulsi Extrusions are the 16 issues that debuted in the calendar year 2008.

“Post-listing, primary and secondary markets catch up with each other. The valuation of companies in the secondary market has corrected, as a result some of the companies listed in this period were also impacted. However, there is no denying that for quality issuances there is appetite at every level from investors. Hence if two-three issues are quoting above their offer price it is a function of quality,“ said an i-banker with a leading foreign brokerage.

The partial revival in sentiment notwithstanding, there is no denying that confidence levels are at an all-time low. And for the retail investor given a choice between an already listed stock and a new listing, there is but one way to go.

“A volatile market is detrimental to IPOs. It has left the retail investor jittery about taking positions in already listed stocks, so they are bound to be cautious about investing in new listings,” said Mr. Haldea. He expects the primary market to go through a lull phase till post budget.