Adani Power IPO

Looking for Adani Power IPO Analysis – well here are details. Adani Power (APL) has proposed to enter the capital market (with Initial Public Offer) with an equity offering of 30.16 crore shares at a price band of Rs 90-100. The issue would comprise 13.84% of post-issue paid-up equity capital of the company.

• Company Name: Adani Power Ltd
• Issue Size: RS 2,700- 3,000 CRORE
• Price Band: RS 90-100
• Date: JULY 28-31 ’09

Where the funds will be utilized?
The company proposes to use the proceeds to fund its power projects—Mundra Phase IV and Tirodaeach having capacity of 1,980 MW. The total fund requirement for these two projects is about Rs 18,200 crore, including an equity component of about Rs 3,600 crore. This issue would meet the balance equity requirement other than the Rs 384 crore of equity deployed.
Low Risks
Considering the state of executions of its projects, including fuel linkage and finance arrangements, the project risks are relatively low.

Expected Gains
The listing gain are expected to be limited and it looks expensive compared to its established peers such as Tata Power.

Company’s Business:
Adani Power is a power generation company. The company is executing a total of 6,600 MW capacity projects. Together, Mundra I and II, have a capacity of 1,320 MW based on sub-critical technology. Mundra III is based on super critical technology with same capacity. Mundra IV, towards which the proceeds of this IPO will go, has a capacity of 1,980 MW.

Valuation based on projected capacity:
Company has not begun generating power so its financials do not reflect the potential. Valuation will have to be on its projected capacity. At a price of Rs 90-100, the company would command a M-cap of Rs 19,600- Rs 21,800 crore, which is in the same range as similar companies as Tata power, Reliance infrastructure etc. At this price, M-cap per MW of projected capacity in 2012 works out to be 2.97-3 .3 for APL. This compares with M-cap of 3.38 for NTPC, 3.46 for Neyveli lignite and 3.1 for Tata power and Reliance power.

Recommendations

• The price at the upper band looks expensive
• If you are seeking long term growth you can subscribe to the issue at the lower band
• If you are risk averse – wait for its listing as you may get the stock at a lower or same price in the secondary market

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