Adani Power- IPO Allotment & Listing Strategy

If you have applied for the Adani Power IPO, by now you would have become owner of this yet to be operational power generation company which is part of Adani Group. Check Allotment Status for Adani Power.

 adani_logo The Adani IPO has brought life back to the ailing primary markets. It has received tremendous response from the Qualified Institutional Buyers who have shown huge apatite for the stock. The QIB portion was subscribed more than 39 times. The Retail Investor segment got oversubscribed by just 3 times. A similar pattern was also seen in NHPC IPO. This trend shows that retail investor has still not come out openly and is still licking the old wounds caused by turmoil in stock markets as well as dismal performance of IPO’s. However, on a positive note it shows that the interest in primary markets is building back and it speaks of better prospects for the upcoming issues.

adani basis ipo

Another thing which was quite evident from the subscription pattern was that the investing community rates India as a good investment opportunity and in particular the pace at which  infrastructure reforms are expected to take place has aroused significant interest in Power sector. In India the generation of power is far less than the demand which is estimated to rise at  a far greater rate than in last 5 years.

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. Currently we have a Peak Availability of just 97,669 MW. This shows the tremendous scope available to companies in power sector.

 

Listing Strategy for Adani Power

The stock is expected to list on August 20th,2009. We have been hearing a lot about overpricing of the IPO by the Adani’s. Whether the issue was overpriced or not will be finally decided by the markets. The company has not started operations yet and hence doesn’t have any earnings data.  At Rs 100 per share the company would quote at a Price to Book Value of 2.8. NTPC, an existing profit making company is currently priced at 2.8 times its Book Value. This shows that Adani Power has been priced aggressively. However, one should remember the fact that Adani has certain impressive operational advantages such as location of projects in areas where peak time shortages is maximum, leverage of  presence of Adani group in Coal mining, Shipping as well as power trading.

From a long term prospective the stock looks very promising. However from the current perspective the stock is priced aggressively. The current grey market premium is ruling at  Rs. 8-10. The stock is expected to list in the range of  Rs 110-115 and may go up or down depending on the buying by the QIB’s to cover for the shortfall in allotment.  Investment Guru is of the view that Investors may book profits at a price above Rs 115 and take advantage of listing euphoria. Long term Investors can re-enter the stock at lower levels once the listing sensation is over.

16 comments:

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Karan Batra said...

Any idea about NHPC

I applied for 2625 shares of NHPC at Cut off price thereby blocking capital of Rs. 94500.


Any idea regarding the Issue Price, Date of Listing, Expected Listing Price

Anonymous said...

What should be the stratgey if Adani power lists below 100 ? Should we exit or hold ?

Anonymous said...

Hi Sir,
Can I buy as an long term investor if the price come to 100-105 ? I did not apply in IPO due to lack of money.

anil said...

Hi Rajesh,
One more query. if markets remain down even tomorrow do you think this stock can list and remain above 100 ? Thanks in advance for your valuable advice.

@anonymous if it goes down below 100 I will no sell beacuse it will definitely bounce back in few days... this is my personal opinion.

Anonymous said...

Current grey market premium is Rs. 8

Rajesh Soni said...

Hi Karan

I will post an update on NHPC as soon as basis of allotment is out.

Rajesh Soni said...

@ Anaonymous
It depends on your risk profile. If you want to hold it for long term you can keep the IPO lot. Seeing today's market response to the stock, it is clear that the stock will drfit down to sub 90 levels in coming days. This is a clear dictat by the markets to futuristic companies that they need to provide sufficient room for Investors to gain from listing.

Rajesh Soni said...

@ 2nd Anonymous (please mention your names atleast so that I can use it to adress your queries :) )

You will get a opportunity to enter at lower levels so hold on for some time.

Rajesh Soni said...

Hi Anil,
Adani has not performed on a day when markets were strong. Good that happened, otherwise people would have blamed weak markets for poor listing.

I believe the stock will oscillate between 95-105 levels for some time before we can sense the actual value markets have placed to this stock.

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It might be a better idea to purchase some of these new issues after they go public. New issue tend to be way overvalued when going public.

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