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Friday, July 30, 2010

Year of ‘power’less IPOs...

The list of power companies rushing to raise money through the initial public offering (IPO) route to fund and fuel their growth is only getting longer. The year 2009 witnessed a spate of IPOs from power companies including NHPC, IndiaBulls Power, Adani Power and JSW Energy. However post the Reliance Power fiasco, investor interest (primarily that of the retail investor) is waning and the post listing returns of power companies have been below par. For the uninitiated, the stocks of Adani Power, NHPC and IndiaBulls Power, which came out with IPOs in the last four months (the three IPOs were subscribed 15-24 times, mainly due to strong demand from qualified institutions) are 3-27% below their respective IPO prices. A research report from SMC Capital states that of the Rs.184.07 billion collected through IPOs, retail investors subscribed only 1.86 times on an average as compared to 11.42 times by QIBs (Qualified Institutional Buyers) and 8.49 times by HNIs (High Net worth Investors). Amidst all these and a positive response to the recently concluded JSW energy IPO (from institutional and high net worth investors), Jindal Power has announced plans to come out with a Rs.100 billion IPO in January 2010. Saurabh Mukherjee, Equity Head, Noble India, says, “Retail participation in IPOs has been very low this year due to the disappointing post- IPO performance, especially of power and infrastructure issues.” Can Jindal Power break the jinx? Can companies like Sterlite, GMR and Lanco (likely to tap the primary market soon for their power IPOs) restore the confidence of the retail investors?

Gyanendra Kashyap

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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