Investment Guru

In Quest for Power “full” India

Indiabuls Power Ltd. has entered the capital markets with an issue of 33.98 Crore shares of Rs. 10 each at a price band of Rs. 40-45 per share. Investment Guru is of the view that India Bulls is just another player trying to leverage the India Power Story like Adani, Reliance and Tatas. The company is currently in the process of setting up its power plants will take 3-4 years to start commercial operations. It’s a story similar to Adani power and hence it’s more of a long term play.

The Company is a subsidiary of IBREL, a part of the Indiabulls Group.
IBPL is currently executing five power projects: 1,320 MW Amravati Power Project – Phase I, 1,335 MW Nashik Power Project, 1,320 MW Bhaiyathan Power Project, 1320 MW Amravati Power Project – Phase II and 1320 MW Chhattisgarh Power Project.
The company expects to sell 75 per cent of the power generation via a long-term power purchase agreement (PPA) and balance through trading of power.
Since the company has not yet commenced the operations, there is no financial performance to compare with other players.
The projects are expected to be funded through a D/E ratio of 75:25.
It is also developing four medium size Hydro Power Projects in Arunachal Pradesh aggregating to 167 MW. Indiabulls has also entered into MoUs with the Govt. of Madhya Pradesh and Jharkhand for setting up of 2640 MW & 1320 MW Thermal Power Projects in each of these States respectively.

Investment Guru is of the view that we have already seen what happened to the Adani and NHPC issues and there is no reason why Indiabulls should get different treatment. The stock is currently commanding a premium of Rs. 4-5 in grey markets but for that matter even Adani commanded a premium in grey matter. This is a pure long term play and the stock will become dull after listing sensations until news of developments on the operational front starts coming in. For those who are looking for listing gains, if the promoters decide to price at a lower band , you can look for a 10% gain otherwise you would have to pray for your luck .

What does this Bonus means for Reliance Shareholders ?

The Bonus issue is an attempt by Reliance Industries to instill confidence in the shareholders towards the tradition of this company to bestow Investor friendly measures.
Bonus Issues doesn’t change anything in terms of Financial performance & fundamentals of the company and hence is EPS neutral. However, it does have an indirect impact in terms of improving the sentiments for the stock and brings in more liquidity. Historically , we have seen run up in the stocks after Bonus announcements and stocks have given better returns post Bonus adjusted prices. So, essentially, it is a sentiment booster measure.
The timing cannot be more right for the company to announce a bonus as the stock price of reliance Industries has been a laggard as compared to sensex performance due to the ongoing tussle between Mukesh Ambani and his younger brother Anil Ambani over the Gas supply pact. The Bonus issue will provide some impetus to the investor sentiments which was clouded by the ongoing dispute.
The Bonus issue has been on account of two major milestones achieved by the company i.e., successful commencement of Gas production from its KG6 Basin and building of new refinery at reliance Petroleum.
The Bonus issue is also applicable to shareholders of Reliance Petroleum shares pursuant to recent amalgamation of the company with RIL. The company has fixed Record date of 29th September for reckoning the members entitled to receive 1 Share of Reliance Industries for every 16 Shares held in Reliance Petroleum.
The Record date for Bonus has not been announced yet.