India Morning Report: Powergrid 78 Crore shares on offer, LIC and IDFC better picks

A bond from the Dutch East India Company, dati...
A bond from the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins. (Photo credit: Wikipedia)

The Rupee in the meantime and the bond markets again showed up weaker to announce that India investors remain Hedge funds and non standard  investors ( read hot money) already exited commitments when day began (  on any day) even as the US taper possibilities receded ahead of Jobs data but bond investors sold out just to drive the point home to the US Fed as well, keeping their pressure on after being denied a just reward for having supported the Fed when they expected the taper to start in August РSeptember. The Divestment program is likely to continue in Coal India/BHEL (5% on offer). The Oil swaps window has been closed by the RBI in light of required action being completed ( Second Quarter Q2 economic data near the end)

The quality of India investors in the offshore markets/or of the so called Foreign Institutional investors aside, Indian markets enjoyed remaining flat in the session up to 11 am (We try to make the India Morning Report before 9:45 on most days) and ahead of the European markets enjoying a year end surge of interest as US gets Holiday fever.

Powergrid seems to be well received though no data is available yet for the first of its three investor days. Retail investors can continue to apply on Friday. Post issue purchases in Powergrid are also likely to stack u despite institutions having saved up on trading in the stock for this week of buying, and one can accumulate the stock with excellent India business prospects. The additional 7.8bln shares men 1.9 mln new F&O lots in the NSE. In the US markets in derivatives in Chicago that would have been 78 mln new lots of F&O contracts possible on the available floating stock itself. F&O shorts in Powergrid and colgate currently are likely to peter out and are bullish with individual series’ like Glenmark that is powering ahead already

LIC Housing and IDFC have finally become part of hot pick baskets and infact one or both will be de rigour in all market portfolios including those with stock derivatives strategies as both are actively traded, value investors may still find game in the two that can really build up volumes in play to the period till at least June 2014 when they might lose the value tag eventually.

6250 seems to be a good mark for a breather and may even break the monotonic correlation with Currency and Bond markets allowing RBI to consider more options than a rate hike threat for markets governance. Auto sales reports were as disappointing as post Festival month readings could be with people also postponing purchase decisions to the new year in India and the CV/Truck segments crashing through compared to last year. Traders 20 scouring reveals good shoting skeet in NMDC, GMDC and TN Newsprint (ETNOW, Lancelot D Cunha, Rakesh Gandhi)

Stocks like Lupin and M&M fin also show restless investors in the trading tick showing south while Rel Cap and Rel Infra are back in the good books. As of now Tata Steel continues to just about outperform Tata Motors but soon it may be immaterial to play Tata Motors anyway as Global steel markets relax a vice like bear grip and stabilise with some Chinese Demand pushing up. Commodities including metals are also bottomed out as end of month Chinese data confirms a better November

Exports are stronger even as Domestic Auto markets slow but the winer would be Bajaj Auto and not Tata Motors from our vantage point. The wai for a mid-cap boom seems to coincide with other rtail traders entering markets

The Trade deficit for the quarter was an almost non existent with remittances helping the CAD to a low $5 Bln or 1.2% but the Rupee seems more under slag for equities which will continue to move up regardless. Rupee thus cannot be pushed down now either with full Oil demand in play. Q2 also saw Debt outflows at $5.7 Bln in the quarter though Equity inflows according to Bloomberg ( carrying the GOI press release) are upwards of $17 Bln

This may cler the way for the Rupee rally eventually as Exports showed up above $81 Bln this quarter and imports stayed under last year’s usurius figures of competin growth beating Exports additions as Gold imports remained virtually stopped at under $4 Bln in its biggest market, global rices continuing to hold $1245 marks. Indian trade deficit at an average of less than $12 Bln may see this as the botom in the years to curb when Gold import curbs would be lifted. That reduces the prospects of any Rupee rally

Also, though no affecting any listed stocks Unitech has completed asset transfer to Telenor for the uninor licenses according to reports

A news report (ET ) yesterday highlighted the change in investor tastes in Auto as Bajaj Auto has grown 6X times from 2008/9 while Hero enterprises has exited Honda and grown 1.5X times to now equalise at 800 levels. The pair trades if anyone dared in the initial period probably because of the changeover for Hero are still a fair trade for years to come as Bajaj comes out with a 20% + motorcycle share with much better margin stories. Hero has announced a new JV with Magneti Marelli

 

Another quick doodle on Power Infrastructure | NTPC, REC

GOI plans a French Auction from Feb 3-5 for the NTPC IPO. The FRench Auction will enable best price discovery but trading will be halted for the period because of government concerns about quality of FIIs and QIBs in the country. The Market Price ruling at 240, means the FPO could even take the bids higher, but unlikely as a common cut off is in place per the rules of the French auction to be announced on Saturday Feb 6. Retail Investors get a discount of 5% as last month in Jindal Energy. NTPC is one of the heaviest weighted Sensex scrips. In a separate development GMR got thru to investors for its Power unit’s 15% stake. Again it looks as if we have short-sold the plot for less than 10000 Crs while disallowing retail investors frm participating. The volumes continue to be dry. 

NTPC has a commissioned capacity of 30K MW . Dabhol may also get a 2000MW unit from NTPC in the current premises. NTPC will also be selling 10% of its Power in Market Auctions/Contracts (Merchant Power) where prevailing prices go as much as Rs 17 per unit for distribution companies and Corporates for their requirements. This will increase NTPC profits by approx 5 million units of Power sold at a Profit of Rs 8-10 or Rs. 5 Crores

Also two Transcos have been approved for bidding by REC for Kpatnam run by AP Transco and Tiliana. Companies like Jindal had also planned Transmission projects over Rs 600 Crores for the Bellary plant. REC currently earns a 300 bp spread on its loans with lending capped at an easy 11.5%. Though there is no legal limit on its lending rates.. REC also manages the bidding process on behalf of Power Transcos and Distcos ( state-owned) K’patnam plant for example would be part of AP Transco’s 800 cr 2010 disbursal. In AP over 5 lakh villages have been electrified. (REC Interviews on Bloomberg UTV, ETNOW with NTPC FPO, Other research includes sources at our India http://zyaada.info archives and the India Brand Equity Foundation)

[tag NTPC, india, India infrastructure, Infrastructure, Power, Power Infrastructure, Power, Divestment, 2010]
[category india, India infrastructure, Infrastructure, Power, Power Infrastructure]

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ISEC is running this mandate with Morgan Stanley. ICICI Securities results tomorrow may show some gains from such large mandates of 2009 and will continue to get traction in 2010 but Government has already asked Merchant Bankers to bid for all issue costs in a baket before the mandate is awarded and that may not be cofortable for Kotak, I-Sec and other domestic players

NMDC update (Divestment + Infrastructure = Mega IPO Tickets)

As per current Ministry of Steel meetings, the NMDC stake sale is likely to be of 15% in which case it could easily be over Rs 2000 crores ($400m) at CMP of 375 ( $7.50) As also the ones for Adani Power, Godrej, Indiabulls Power..i think it can happen given that each will have $40-50 million from retail investors, but it requires disciplined Institutional Investors who believe the India story..anyway, this kind of volume has not been done ever before in the same year, but then this is the era of Infrastructure.

Foreign portfolio investors have poured in $8.7 billion since April, while speculation is already rife for PSU divestment in Coal India and National Hydro Electric Corp in the Power sector, each easily worth a $1 b for 15-20% stake. Also SBI Infrastructure fund with Macquarie has raised its bucket size to 1.5 billion adding another $500m.

A dani Power is raising $600m. NHPC is going first planning to issue more than 70 crore shares of Rs 10 par value for offer including a existing 5% stake unlikely to be issued at par(despite reports) to net 2500 crores for 15% of the company capital NHPC also plans to invest Rs 28,000 crore by 2012 to position itself as over 10,000 MW utility. At present, its generation capacity stands at 5,200 MW. The proceeds from the IPO would partly be utilised to finance the expansions.

Indiabulls Power seems to have issued earlier capital at a premium and a current QIP at 25% of the Original at Par to raise a further 200 Cr ( $40m) Thus it is curently sitting on unutilised capital of 2200 crores ($440m). It has two Power plants planned in Maharashtra with the first in Nasik of 1335MW capacity (shld cost between (5500 cr to 7000 cr OR $1.1-1.4 billion) It is unlikely to try for any considerable premium if it comes first.

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NHPC and OIL divestment: Upcoming IPOs

State-owned Oil India Ltd and National Hydroelectric Power Corporation (NHPC) will tap the capital market with their initial public offering (IPOs) in August/September this fiscal. This was stated by the Finance Secretary, Mr Ashok Chawla, at a post-Budget press conference here today.

The other 4 public units for Divestment will be identified by the designated Deptt of Divestment. The budgeted 1854 Crores ($371 million) will flow from the Offers of OIL and NHPC.  Ashok also confirmed that the Government has decided to retain median Cenvat rate at 8 per cent and the service tax rate at 10 per cent. A detailed budget anaysis is available from us The stimulus packages last fiscal brought the Excise collection down to $21.6 billion from a targeted $27.8 billion. Riding on expected increase in economic growth, the Budget 2009-10 has also projected a Rs 10,000-crore increase in surcharge on corporate tax. In 2009-10, the Government expects to collect surcharge (corporation tax) of Rs 26,090 crore compared with Rs 16,001 crore in the previous year, reports The Hindu Business Line. (http://moneycontrol.com)

OIL is engaged in the exploration, production and development of oil and natural gas. In addition, the company is engaged in the transportation of crude oil and production of LPG. It owns and operates 13 drilling rigs and 14 work-over rigs. The company’s operations are spread across India, Iran, Libya, Gabon, Sudan, Yemen and Nigeria. It is a wholly owned Indian government enterprise and holds 26% equity in Numaligarh Refinery Ltd. OIL has a capital base of Rs 214 crore and claims a Return on Networth of 23% with a EPS of Rs 101 ( $2+) which is extremely encouraging on a net worth of Rs 10000 Crores. Its last reported profit (03/09) was Rs 2161 Crores ($432 million)

National Hydroelectric Power Corporation is one of the largest organisation for hydro-power development in India having constructed 13 hydro-power projects in India and abroad with a total  installed capacity of 3694.35 MW (Including the projects under joint venture).  With an  asset value of Rs. 2,00,000 million NHPC has planned to add 2480 MW of power during Xth plan and 6297 MW of power during XIth plan. NHPC’s capabilities include the complete spectrum of hydropower development from concept to commissioning.

NHPC plans to issue 10% new shares and 5% would be divested by the Government. The issue size is speculated to be Rs 2500 Crores ($500 million) NHPC plans to spend Rs 28,000 crore to more than double generating capacity by 2012. Of this, Rs 11,000 crore would have come from its own cash and the IPO and Rs 17,000 crore from borrowings.

The company will offer 168 crore shares, consisting of 112 crore new shares and 55.91 crore shares owned by the Indian government, according to the offer document submitted to the Sebi. Hydro Power has higher efficiency of 90% compared to Coal and Gas (35-50%) but the availability of water resources is scarce because of the natural changes in reservoirs from uneven rains

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The issue size is 167 crore shares at a price band of Rs 30 -36 for an issue size of Rs 6000 crore at the upper end and likely to receive a similar response as Adani. Though realisations for NHPC older plants are lower and water supply a challenge due to earlier monsoons. 4000 out of 6000 crores will go to existing plants and 2000 crores for new plants. NHPC has also kept a greenshoe option of 15%

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