Monday, January 18, 2010

NTPC FPO - Analysis, Recommendation and Review

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NTPC, India's largest power generation company, is entering the capital markets on February 3, 2010 with its follow-on public offer (FPO) of 412,273,220 equity shares of Rs 10 each at Rs 201 - Rs 209. The FPO will close on February 5, 2010. Of the FPO, a total of 4,273,220 equity shares are reserved for NTPC employees.

This offer marks a divestment of 5% in NTPC by the President of India acting through the Ministry of Power. Prior to this Offer, the GoI owned approximately 89.5% of NTPC’s Equity Share capital.

ICICI Securities Limited, Citigroup Global Markets India Private Limited, JP Morgan India Private Limited and Kotak Mahindra Capital Company Limited are the book running lead managers to the Offer and Karvy Computer Share Private Limited is the Registrar.

As of September 30, 2009, the company owned installed power generating capacity was approximately 18.6% of India's total installed capacity. In Fiscal 2009, the company contributed 28.6% of the total power generation of India. In 2009, NTPC was the top independent power producer in Asia, and ranked second in the world, on the basis of asset worth, revenues, profits and return on invested capital, according to a study conducted by Platts, a division of the McGraw-Hill Companies.

As of September 30, 2009, the Company’s total installed power generation capacity was 30,644 MW, including 28,350 MW of generation capacity through 112 units owned by NTPC Limited and approximately 2,294 MW of capacity through two joint venture companies. Of the Company’s owned capacity, 86% is coal-based, operated through 15 coal-based power stations, and 14% is gas-based, operated through seven gas-based power stations (including one naphtha-fired station). In Fiscal 2009, the company generated 206.9 billion units of electricity through its owned stations.

The Government of India has identified infrastructure inadequacy as a significant constraint in realizing India’s economic growth objectives. In particular, the power sector has been recognized by the GoI as a key infrastructure to sustain economic growth. Under the Eleventh Plan, the power sector is expected to attract 30.4% of the total investment in infrastructure during the Eleventh Plan.

Of the total expected investment of Rs 7,253.33 billion in electricity, Rs 4,034.76 billion (56%) is expected to be invested for generation, Rs 1,520.77 billion (21%) for transmission and Rs 1,697.22 billion for distribution.

NTPC is a very good company with impressive track record. Although, considering the volatility in the market, the share may well go very near or below the floor price of Rs 201, so one could think of buying the stock from the secondary market as well. Although, if you are a long term investor, you could consider putting money in the IPO as well.

Watch out this blog for more details on Subscription, Allotment and Listing!
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