NHPC - IPO

N H P C

Issue highlights

NHPC is the largest hydro power company in India with a
current total installed capacity of 5,175 MW. With 13
operating stations including Joint Ventures, it accounts for
14% of the Hydro power capacity in India.


NHPC plants are located in areas having good hydro
potential. This ensures ample availability of water
resources for power generation. This also results in
operational advantage.


NHPC has been awarded status of “Mini-Ratna” category-I
PSU in April 2008 in recognition of its performance.


This Issue has been graded by ICRA Limited and has been
assigned a Grade of 3/5 indicating average fundamentals.


Absence of fuel cost and attached fuel price volatility in
hydro power generation.


High operational efficiency as average capacity indices for
FY2008 & FY 2009 stood at 96.12% and 93.61% respectively,
being higher than required under CERC regulation.

Objects of the issue


Utilize the proceeds to part finance the construction and
development costs of certain of Identified Projects.


Amount utilized towards Issue Expenses


General corporate purposes.


BACKGROUND
Company and promoters
National Hydroelectric Power Corporation Limited (NHPC) was promoted by the
Government of India in November 1975.
The company has been designated as “Mini-Ratna” category-I public sector undertaking in
April 2008 in recognition of its performance. As a category-I company it has greater
autonomy to undertake new projects without government approval, subject to an
investment ceiling of Rs. 500 crore set by the government of India.

BUSINESS OVERVIEW
NHPC is a hydroelectric power generating company committed to the planning,
development and implementation of an integrated and efficient network of hydroelectric
projects in India. NHPC is involved in all the activities right from commencement to
development of hydroelectric projects.
NHPC has constructed and developed 13 hydroelectric power stations with a capacity of
5,175 MW. The current total generation capacity of the company is 5,134.2 MW, taking into
account total installed capacity of of the Loktak and Tanakpur power stations (combined
capacity of 1,520 MW) constructed and operated through its subsidiary NHDC.
The company’s power stations and hydroelectric projects are located predominantly in the
North and North East of India. IN FY09 the company and its subsidiary sold 14,587.88
MUs and 2,345.01 MUs of electricity, respectively.
Currently the company is involved in the construction of 11 hydroelectric projects, which
are expected to increase its total installed capacity by 4,622 MW. The company is also
awaiting the government approval of five projects with an anticipated capacity of 4,565
MW and for certain joint venture projects with an anticipated capacity of 2,166 MW.
The company has experience in the design, development, construction and operation of
hydroelectric projects, executing and managing all aspects of projects, from front-end
engineering design to commissioning, operation and maintenance.
NHPC has selective undertaken projects in alliance with state governments where there is
high hydro poetintial and thus tend to enjoy location and operational advantage

Strategy

Capitalizing on the power sector reforms and the Government of India’s vision of
“Power for All.”

Intend to enter into long term Long term power purchase agreements with its
customers.

Plans to invest expand its installed capacity through Joint Ventures and MoUs.

The company plans to continue to deliver advisory services to clients and
government entities in India and abroad and while taking advantage of
opportunities from changes in the Electricity Act, 2003, the Hydro Power Policy
2008, and other regulatory developments.

INDUSTRY OVERVIEW
Overview

India has emerged as one of the fastest growing economies in the world. The Government
of India has identified the power sector as a key sector of focus to promote sustained
industrial growth with a mission –“Power for All by 2012.

Indian Power Sector

Demand Supply scenario: The power industry in India has historically been
characterized by energy shortages. According to the 17th EPS, India's peak demand
will reach 152,746 MW with an energy requirement of 968 bn units (BUs) by FY 2011-
12. By the FY 2016-17, peak demand will reach 218,209 MW with an energy
requirement of 1,392 BUs.

Consumption levels: The per capita consumption of energy in India is extremely low
in comparison to most other parts of the world, in part due to unreliable supply and
inadequate distribution networks.

Installed generation capacity: According to the Ministry of Power, as on September
30 2007, India has an installed generation capacity of approximately 135,782 MW. The
power industry has not grown sufficiently to meet demand and the economy still
faces an acute shortage of power.

Installed generation capacity by sector: As of September 30, 2007, the state
government sector led installed capacity levels with 70,947 MW, or 52.3% of the total
installed capacity in India, followed by the central sector at 46,166 MW, or 34.0% of
the total installed capacity in India, and by the private sector at 18,669 MW, or 13.7%
of total installed capacity in India.

Capacity Additions: The tenth five-year plan for 2002 to 2007 targeted a capacity
addition of 41,110 MW. However, the actual capacity addition in the 10th five-year
plan was just 21,180 MW. The 11th five-year plan recommends generation planning
based on an estimated 9.5% growth in required energy each year.

Hydro Electricity
Hydropower is more economical, less polluting, less damaging to the environment and a
renewable source of energy. Developing hydropower enhances energy security and there
is no fuel cost during the life of the project. In hydroelectric power station, energy is
harnessed from water by running it from a higher height to a lower height. Hydropower
stations are capable of instantaneous starting and stopping and are able to accommodate
various loading alternatives. This helps to improve the reliability of power systems and is
ideal for meeting demand during peak times.

Hydropower Potential in India
India has enormous potential for hydroelectric generation, as per CEA the potential is
84,000 MW at 60% load factor, which translates to 148,700 MW in terms of installed
capacity.
As of May 31, 2009 the total installed capacity in the country was 149,392 MW and
hydropower accounts for 36,878 MW (24.7%). The estimated potential of all the rivers( at
60% load factor) is 84,044 MW and probable installed capacities is 147,701 MW.

Share of Hydropower
Despite the benefits of hydro power projects the share of hydropower has steadily
declined from around 37% in first five year plan to only 25% in FY2009. The hydro power
capacity addition was 7886 MW during the 10th plan which was 54.78% of the targeted
addition of 14,393.2 MW. In the 11th Plan the propsed capacity addition is 15,627 MW of
which only 3,392 MW has been commissioned and 12,235 MW is under construction.

Policy Initiatives
The government has set high priority for development of Hydropower power keeping in
mind the potential and availability of water resources.
The anticipated hydropower capacity additions in the 12th and 14th five year plans stands
at 31,000 MW and 36,494 MW respectively ,with a total hydropower capacity to reach
147,774 MW in the 14th Plan.
The GoI recently introduced a three-stage process for the development of new
hydroelectric projects in the central sector. The new stage-driven process aims to reduce
the time and cost overruns of hydroelectric projects.

Stage I: Survey and investigation of project site, and preparation of pre-feasibility report;

Stage II: Detailed investigation, preparation of a DPR and pre-construction activity
including land acquisition; and

Stage III: Execution of the project after investment decision through PIB/CCEA

Updated CERC regulations
Tariffs are determined by reference to AFC, which comprise primary energy charges and
capacity charges and are determined by return on equity, depreciation, interest on loan,
interest on working capital and operation and maintenance expenses.

Ultra Mega Power Projects
The threshold limit to obtain mega power project status is 500 MW for hydropower
projects. This threshold has been reduced to 350 MW certain states. The number of
incentives, including a 10 year income tax holiday help in generating more hydroelectricity
and the economies of scale in mega power projects help to substantially bring down power
tariffs.

Hydro Power Policy 2008
The Hydro Power Policy of 2008 lays emphasis on increasing private investment in the
development of hydroelectric projects. The policy aims at attracting private funds by
encouraging joint ventures with private developers and the use of IPP model besides
promoting power trading and speeding up the availability of statutory clearances

Future Outlook
The Ministry of Power has set a goal Mission 2012 - Power for All. Based on the 17th EPS,
the total energy requirement in India will increase to 968,659 GWh by FY 2012, and
1,392,066 GWh by FY 2017. The estimated the total investment potential of the sector is
around Rs 9,000 bn for a specified period up to fiscal year 2011. This presents a significant
opportunity for power generation companies, both in the public and the private sector.

ISSUE PROFILE
Investment positives


NHPC is one of the largest hydro power generator in India with a capacity of 5,175
MW accounting for around 14% of total hydro capacity in India

Its projects are strategically located nearing areas of high potential for generation of
hydro power. These locations also happen to be near energy deficit areas.

The company has got into long term power purchase agreements for major portion
of capacity under construction.

The company has strong operating efficiency as reflected in average capacity index
of 93.61% for 200-09.

Being a mini ratna the company can enter in to greater autonomy to undertake new
projects without GoI approval subject to investment ceiling of Rs 500 cr.

Risk factors

Long gestation period in term of project execution may depress return on equity in
the construction phase.

Potential upside is limited as the tariffs are regulated by the government. Any
change in tariff policy may adversely affect the revenues.

Particularly when projects are located in complex terrain and harsh climatic
conditions may delay and thus increase the cost of the projects.

The majority of NHPC’s revenues are derived from sales of power to the state
electricity entities, as per the directives of the GoI, and there is no assurance that
company will always be able to secure payment from state electricity entities.

Adani Power IPO oversubscribed 21.5 times

Adani Power IPO subscription at 21.51 times

The Initial Public Offering (IPO) of Adani Power Limited which hit the primary markets on July 28, 2009 has received overwhelming response from investors. The issue has received subscription of 21.51 times till 5:00 PM on July 31, 2009. The issue has received bids for 5351653580 equity shares against the offer of 248794681 equity shares. The issue has received bids for 213067075 equity shares at cut-off price.

The issue has received subscription of 15.02 times in NSE with bids for 3737896890 equity shares against the offer of 248794681 equity shares. The issue has received subscription of 156456950 shares at cut-off price.

In BSE, the issue has received subscription of 656.91% with bids for 1634351940 equity shares against the offer of 248794681 equity shares.

The company has come out with IPO of 301,652,031 EQUITY SHARES [including 52,857,366 Equity Shares Anchor investor portion] of Rs 10 each for cash at a price band of Rs. 90 To Rs. 100 through 100% book-building process.

The IPO closed Yesterday- July 31, 2009.

The rating agency ICRA Limited has assigned IPO Grade 3 for the issue.

We will be a 9,500mw company by 2013: NHPC

NHPC IPO: $1.2bn proceeds to fund 11 projects
It will be the first public sector enterprise to tap the capital markets this year. National Hydroelectric Power Corporation (NHPC) has kicked off its road shows, as it looks to raise up to Rs 6,000 crore. Katya Naidu and Vidhi Godiawala report.
For the first time in its 34-year history, NHPC has 11 projects under construction. At the same time, it is looking at a USD 1.2 billion IPO to fund it. The company wants to double its capacity over four years.
SK Garg, CMD, NHPC, said, "By 2012, we will be commissioning almost 2,300 MW. Two projects will come in the first year of the 12th Plan, which will add another 2,000 MW. By 2013, our company will be something like 9,500 MW company."
The IPO is expected to raise Rs 6,000 crore at the higher end of the price band. Of this Rs 6,000 crore, around Rs 4,000 crore will accrue to the company, Rs 2,000 crore will go to the government for its 5% stake it is divesting.
At Rs 30-36 per share, the IPO is aggressively priced. Bankers hope the uptick in market sentiment and the government's credibility will make it a good bargain.
Vallabh Bhansali, Chairman, Enam Securities, said, "It is a unique company. It is in hydro power, it is a large company, financially very good, and not leveraged like other power companies. A lot of factors have gone into valuing this company."
Falguni Nayar, MD - Institutional Equities, Kotak Mahindra Bank, said, "We are hoping for a positive response because market is improving and investor appetite is improving."
S Vishwanathan, MD, SBICAPS, said, "This issue will be a forerunner for many more issues to come."
NHPC hopes its IPO will see the same strong subscription rush seen by Adani Power's IPO earlier this week, when it was subscribed 4 times on the very first day. Experts point out that NHPC's expansion is not the only thing that hangs in the balance. This IPO could well set the pace for future divestments as well.

Reliance Life seeks govt nod for floating early IPO

Wishing to hit the market with
an initial public offer for its life insurance business, an
Anil Ambani group firm has approached the government to waive
off the ten year clause for an insurer to go public.

Reliance Life has requested the Finance Ministry to allow
it to launch IPO before completion of the 10-year operation
clause, official sources said.

The 6AA provision of the Insurance Act, specifies that
Indian promoters having more than 26 per cent shareholding
shall after 10 years reduce it in some appropriate manner or
within such period the central government may decide.

Citing the above provision, the insurance sector
regulator IRDA has already shot down the proposal of the
Reliance Life to hit the capital market.

"They (Reliance Life) had come to the regulator to seek
the permission and we have found that we are not empowered to accord any such thing before 10 years," IRDA Chairman J Hari Narayan had said.

When contacted Reliance Capital spokesperson declined to
comment on the matter.

Reliance Capital, the holding company of Reliance Life,
last week said that it plans to come up with an initial public
offer for its life insurance business or go in for a strategic
stake sale.

At Reliance Capital's Annual General Meeting recently,
ADA Group Chairman Anil Ambani said he was considering various
options to unlock value of the life insurance business-- "from
a potential IPO to strategic or financial stake sale, or even
a combination of both-- subject to necessary approvals."

"A final decision in this matter will be taken shortly,
driven by the sole objective of maximising returns for our
shareholders," he had said.

Since the past four years the company's life insurance
business has grown rapidly, and has emerged amongst the top
four private life insurance players in India.

Reliance Life Insurance registered 65 per cent growth of
policy-holders' funds under management to Rs 5,895 crore in
2008-09 from Rs 3,555 crore in FY'08.

During FY'09, eight new life insurance policies were launched by the company.

Adani Power IPO over subscribed 4 times in an hour

The initial public offer of Adani Power got subscribed nearly four times the shares on offer within an hour of start of the book building process today.

The issue received bids for over 94.91 crore shares against 24.87 crore shares on offer, as per the data available on the National Stock Exchange. The company has fixed a price band of Rs 90-100 per share and most of the bids came in at Rs 95.

Adani Power, the electricity generating unit of Adani Enterprises, plans to raise Rs 3,610 crore at the upper end of the price band and Rs 2,715 crore at the lower end. This is the first issue wherein anchor investors, strategic investors for whom biddi ng process is carried out one day before the issue opens, have participated. As many as 13 anchor investors, including Credit Suisse, Sundaram BNP Paribas, T Rowe Price and CLSA, subscribed to the IPO at Rs 95 per share, the data showed.

Market regulator SEBI last month allowed new class of entity -- anchor investors -- to pick up a maximum of 15 per cent of the total IPO size.

Adani Power Ltd

Company Profile
Adani Power Limited (APL) is a power project development company. It operates and
maintains power projects across India and it is a part of Adani Group, a leading
business group in India.
APL has four thermal power projects under various stages of development, with a
combined installed capacity of 6,600 MW. In addition they are also planning to
develop two thermal power projects at Dahej and Kawai with a combined installed
capacity of 3,300 MW.
It proposes to implement 2640 MW Coal based Thermal Power Project at Mundra,
Dist. Kutch, and Gujarat, India. It also proposes to implement 1320 MW Coal based
Thermal Power Project at Tiroda, through its 100% subsidiary, Adani Power
Maharashtra Ltd. (APML). APL is also actively planning to implement other Thermal
Power Stations at various locations in India, totaling to about 10000 MW in the coming
years.

Objective Of The Issue
Particulars
To part finance the construction and development of Mundra Phase IV Power Project, for
1,980 MW
Funding equity contribution in its subsidiary Adani Power Maharashtra Limited to part finance
the construction and development cost of power project for 1,980 MW at Tiroda, Maharashtra
General Corporate Purposes


Investment Rationale

Increasing Industry Demand: India is a power deficit country. The gap
between demand and supply is increasing, leading to increase in power
shortage. The peak deficit in western region of India is at 26.5% of peak
demand requirement. According to the 17th Electric Power Survey, India’s
peak demand will reach approximately 152,746 MW with an energy
requirement of approximately 968 billion units by fiscal year 2012. By the
fiscal year 2017, peak demand is expected to reach 218,209 MW with an
energy requirement of 1,392 billion units.

It has secured supply of fuel for many of its power projects: One of the
critical success factors for any power generation project is the availability of
cost-effective fuel sources throughout the lifetime of the power project. Its
Mundra power projects are located along the coast and will utilize imported
coal as primary fuel for its operations. Further it entered into long-term coal
supply arrangements for coal with Adani Enterprises Limited (AEL) for
Mundra power projects.

Location Advantage: All its power projects under development are located in
Western India, where according to the CEA, the peak deficit was 7,086 MW
for the period between April 2008 and March 2009. Higher deficit will increase
the demand for the power and to boost the top line of the company in the long
run.


Entered into long term Off-take aggrement:: It entered into two off-take
agreements with Gujarat Urja Vikas Nigam Limited for the supply of 1,000
MW of power produced from the Mundra Phase I and II Power Project, and
for the supply of 1,000 MW of power produced from the Mundra Phase III
Power Project. This agreement will help the company to sell power produced
in excess and to mitigate off-take risk, while enabling to sell the residual
power at market determined rates.

Investment Concern

APL does not have a revenue stream, which shall flow when it is able to
successfully execute its projects. Further power projects require long
gestation period to execute the projects.

The companies rely mainly on Chinese equipment for setting up the power
plants. There have been instances in India of power generation players facing
intermittent problems with Chinese equipment.

Valuation
The company does not have any past earnings records; hence relative valuation with
peers is not possible. The valuation of the company is possible only when it starts its
operation as power projects takes long gestation period. Considering company can
perform well in the long run, we recommend investor with long-term investment
horizon to subscribe the issue.


Industry:
Power Generation & Supply

Issue details:

Price Range: Rs.90-100
Issue Period: 28th July’09 to
31st July’09

Issue Type: 100% book building
Issue Size: 30.16 crore shares
Pre-Issue Equity: 187.83 crore shares
Post-Issue Equity: 218.00 crore shares

Lead managers
1. Enam Securities Private Limited
2. IDFC - SSKI Limited
3. JM Financial Consultants Private Ltd
4. Kotak Mahindra Capital Company Ltd
5. Morgan Stanley India Company Pvt Ltd
6. ICICI Securities Limited
7. SBI Capital Markets Limited

Adani Power IPO subscribed 3.8 times; most bids at Rs 100

The initial public offering of Adani Power has seen huge investor interest and was subscribed 3.8 times within the first few minutes of its opening, quoting sources. Maximum bids for the initial public offering of 301,652,031 shares were at Rs 100 a share.

Confirming this development, Ameet Desai, Director, Adani Power, said most bids had indeed come in at Rs 100 per share. He said the company will take a decision on pricing during the closing of the IPO.
According to Desai, the largest anchor investor allocation is to T Rowe Price.
The company, he said, is likely to list its shares around August 20.
Here is a verbatim transcript of the exclusive interview with Ameet Desai

Q: How much has the issue done so far in the first 45 minutes of opening?
A: It’s about 3.5 times over the subscriptions which we have received in first one hour and most of these are large bids from large investors.
Q: And at what prices has this 3.5 times book made?
A: Most of the bids except one are all at Rs 100 is what I have been told by the advisors, I am actually currently engrossed doing the road shows.
Q: Even if the hits are mostly towards Rs 100 per share will the management look favourably at leaving something on the table and perhaps pricing it to the lower end of the band?
A: Pricing is something on which we will take a decision on the close of that issue, I just want to say that this is an extremely gratifying experience with investors posing their full confidence in India story and in Adani power as a power opportunity. We are certainly feeling extremely overwhelmed and thankful to the investors so I am sure like all our decisions we will take the decision and the room for the upside.
Q: What kind of feedback are you getting at these road shows because you are referring from some investors that there is a concern on the valuations for the Adani Power IPO, I know it’s many times oversubscribed and even though people feel that on the valuations front its been priced at a little on the premium side?
A: Of several investors that we have met over the last one week leaving a handful, not more people have really expressed concern on valuations and the story has been extremely well received and we are seeing that investors are actually waiting to participate in Indian infrastructure story and in Indian power sector.
Q: Can you confirm the name of anchored investors who bought at Rs 95?
A: Some of the names like Sundaram MF etc on the local side and then we have Ecofin, T Rowe Price, Legg Mason, AIC of Canada and a couple of more investors and even this participation has clearly come with an understanding that whatever is the final pricing, they are willing to go to that level and 5.2 crore shares which are allocable and we have the demand of 9.4 crore shares.
Q: It was all done at Rs 95 pending the final price of the issue?
A: Yes it has done with Rs 95 with clearly instructions on the depositary side that if the price moves to Rs 100 then this will move to Rs 100.
Q: Who has the largest allocation being done to amongst the anchor investors?
A: T Rowe Price.
Q: of the 3.5 times book which has been done already in the first one hour of trade, can you give some sense of a retail response and whether its come in, because retail typically comes in on the last day but have you seen any initial signs of nibbling from retail?
A: Not yet, and as you said, its too early for retail people to come to the market but what we hear from the distribution channels of the broking houses and the brokers the response for participation seems to be on a very positive side.
Q: Given your calculations of how long it will take to process, have you come up with a rough date of listing, even a ballpark date of when the stock may list?
A: This should be around August 20.

Decision on Future Ventures' IPO in 30 days: Kishore Biyani

Kishore Biyani, Managing Director of Pantaloon Retail (India) Limited, said the company was mulling an initial public offer for Future Ventures, and that a decison on the same would be taken in 30 days.
Biyani said he was looking to raise Rs 2,000 crore through the IPO and added he would put the money to use for new ideas.
“We are looking at reorganising the group business and consolidate retail under the financial business,” Biyani said, adding that the company would unfold plans to realign businesses in the next few weeks.

Q: Are you going to go ahead with the IPO and what is the exact quantum that you seek to raise?
A: I think we have started working on drawing board of how we can look at IPO of Future Ventures. So definitely something is on the cards but we will take a decision in the next 30 days and the original quantum will get reduced. We are still working on the final numbers. But we are looking at some form of IPO for Future Ventures because that is one of our largest dreams. Lot of people can participate in the growth of the consumption story. We have some big plans on Future Ventures but we will unfold it in the next few days.
Q: We hear that even if the trim down version of the IPO should be Rs 2,000 crore plus, what would you need to raise that kind of money for and will any of that money come into any of your group companies?
A: No, that is not the idea. The idea is to fund or be a mentor capitalist to a lot of consumption stories in the country. The idea is also to look at partnering with various partners in building up the consumption theme in India and also building up new projects. Maybe we might look at entry into our own brand of airtime along with somebody and they might be funded by this. So, we are looking at some big ideas to be funded out of this Future Ventures.

Mahindra Holidays & Resorts India Ltd- IPO (Subscribe)

Company Profile
Mahindra Holidays & Resorts India Ltd (MHRIL) is incorporaed in 1996. MHRIL is an
established player in the leisure hospitality segment, and provides holidays through
vacation ownership memberships. The members enrolled for the company’s
offerings can reside at resorts in a range of locations, for a pre-determined number
of days for a fixed period.
MHRIL’s flagship brand is Club Mahindra Holidays, which has been selected as
Superbrand 2009. MHRIL has also introduced new vacation ownership offerings such
as Zest and Club Mahindra Fundays, Mahindra Homestays, travel and holiday related
services through club mahindra.
The cumulative member base increased to 92,825 in fiscal 2009 from 38,691 in
fiscal 2006. As of May 31, 2009, MHRIL has 96,067 members and 27 resorts across
India and Thailand, of which it own 11 properties and others are leased. About
35.18% of new member additions in FY09 came from referrals by existing members.

Objects Of The Issue

Investment Rationale

Market leader: It is one of the leading leisure hospitality providers in
India. The Club Mahindra vacation ownership members increased to 96067
members in May 2009 from 38,691 members in 2006.

Domestic expansion: The Company is expanding its network by launching
seven new projects at Pondicherry, Kumbhalgarh (Rajasthan),
Kodambakkam (Tamil Nadu), Binsar (Uttaranchal), Theog (Himachal
Pradesh) and Tungi (Maharashtra), which will increase its top line in the
long run.

Expanding internationally: It is in the process of evaluating markets such
as South Africa and China, and it has also plans for investment in Austria.
This will increase its member base and resort inventory thus resulting in
increased revenues.
Investment Concern

The company’s revenues are highly dependent on the travel industry and
declines in or disruptions to the travel industry, such as those caused by
terrorism, natural disasters, financial instability or a downturn in economic
growth, may adversely affect its financial condition and results of
operation.

Industry Profile

The domestic trips are expected to grow at a CAGR of 11.7% over 2007-
2012, to reach approximately 871 million trips in 2012 from 527 million
domestic tourists in the year 2007.Further the domestic tourism
expenditure is expected to rise to Rs 2,621.1 billion, growing at a CAGR of
13.6% over 2007-2012.


Valuation
The company has priced its issue at 29.02x of its FY09 earnings. The issue seems to
be normally priced compared with its peer. Further its consistence financial
performance, growing Indian economy and increase in consumer spending looks
attractive for the company. So we recommend to “SUBSCRIBE” the issue for long
term perspective and listing gains.