Saturday, February 20, 2010

REC FPO - Analysis, Subscription, Allotment and Listing

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Rural Electrification Corporation has come out with a follow-on public offer. REC is engaged in the business of financing and promotion of transmission, distribution and generation projects throughout India. The state-run company raised over Rs 1,600 crore through an initial public offer of 15.61 crore shares in February 2008.

The issue consists of a fresh issue of 128,799,000 equity shares by the company and an offer for sale of 42,933,000 equity shares by the President of India, acting through the Ministry of Power, Government of India. The issue comprises a net issue of 171,382,000 equity shares to the public and a reservation of 350,000 equity shares for eligible employees. The net issue shall constitute 17.36% of the fully diluted post-issue capital of the company. The government holding will be reduced to 66.80% post issue.

The floor price for 171,732,000 shares FPO is fixed at Rs 203 per share. The price is at a 7% discount over Wednesday’s closing price. The offer of the state-run finance provider for power projects will close for subscription on February 23, 2010.

The objective of the offer for sale of shares is to carry out disinvestment and the company would not receive any proceeds from the offer for sale. It intends to utilise the funds being raised through the fresh issue to augment capital base to meet future capital requirements.

For the quarter ended September 30, 2009, the company has reported net profit of Rs 928.89 crore on total income of Rs 3,136.71 crore.

The book running lead managers to the issue are Kotak Mahindra Capital Company Ltd, DSP Merrill Lynch Ltd, ICICI Securities Ltd, JM Financial Consultants Pvt Ltd and RBS Equities (India) Ltd. Karvy Computershare Pvt Ltd is the registrar.

The IPO got a muted opening but managed to get fully subscribed at the close of the FPO. The FPO got subscribed 3.14 times at its close. Click here to check if you have been alloted REC FPO shares!

The FPO gave good returns to investors on the opening day. On the listing day, REC opened at Rs. 237 on NSE, went to a high of Rs. 244 and a low of Rs. 230 before closing the day at Rs. 241. Compared to its issue price of Rs. 203, it gave over 18% return to investors.

Watch out this blog for all details on subscription, allotment and listing!
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