MUMBAI Power Grid Corp of India's (PGRD.BO) share sale worth up to $1.7 billion was fully covered on its first day as investors sought what is seen as relatively safe exposure to surging electricity demand in the country.
The world's third-largest power transmission company operates 95 percent of India's interstate network, carrying half of all power generated in the country. Its share sale is part of India's ongoing divestment programme, which is enjoying a boost from record foreign funds flowing into Indian stocks .
The Power Grid sale comes after a highly successful $3.4 billion IPO of state-run Coal India. Three other share sales in government firms planned by the end of December are expected to generate about $2.2 billion.
"Power Grid as a company is fundamentally very strong and the issue looks very attractive in terms of pricing," said Kishan Gupta, research analyst at CD Equisearch.
"However, it is very different to that of Coal India in the sense that Power Grid is already listed, so everything about the company is in public domain, so excitement will definitely be lower," he said on the sidelines of an investor roadshow for the company in Kolkata.
The Power Grid share sale, which opened Tuesday and closes on Friday, saw orders for just over the number of total shares on offer at the close of books on Tuesday, exchange data showed.
The government has priced Power Grid's share sale at 85-90 rupees each, a discount of 15-22 percent to Tuesday's closing closing price of 103.75 rupees. Power Grid rose 5.5 percent on Tuesday, erasing Monday's decline.
The price range values Power Grid at 14.9 to 15.8 times forecast earnings. By comparison, the UK's National Grid Plc trades at 12.4 times forecast profit.
Macquarie raised its rating on Power Grid on Tuesday to neutral from underperform, while Citigroup lifted its view on the stock this week to buy from hold.
"The risks to PWGR's earnings appear relatively low with the current regulatory period extending to FY14," Macquarie wrote, noting that Power Grid's payments from state electric boards are guaranteed after 90 days by the central government.
And where independent power producers have the risk of securing coal in a market where demand is outrunning supply, Power Grid gets paid based on the availability of its network, not whether power is running down its lines, Macquarie wrote.
"We don't see the stock doubling in the next 1-2yrs (not sexy), although it is a strong defensive exposure to Indian Power," Macquarie wrote in a note, lifting its price target to 100 rupees a share from 91 rupees.
India aims to halve its peak-hour power deficit of nearly 14 percent in the next two years, and triple generation capacity over the next decade.
MORE TO COME
Power Grid's share sale will be followed later this month by an IPO in Manganese Ore India Ltd and a share sale in Shipping Corp of India. A share sale in Hindustan Copper is set for early December. All three are state-run.
India aims to sell stakes in about 60 companies over the next few years, and its recent efforts have been helped by a nearly 20 percent rise in Indian stocks this year, fuelled by a record $28 billion in net foreign fund inflows into equities.
Half of the 841.7 million Power Grid shares on sale are part of the government's existing stake in the firm, and half are shares newly issued by the company.
Goldman Sachs, JPMorgan, SBI Capital Markets and ICICI Securities are lead managers for the share sale by Power Grid. Power Grid has a market value of nearly $10 billion.
(Additional reporting by Manoj Dharra and Kaustubh Kulkarni in Mumbai and Niladri Bhattacharya in Kolkata; Editing by Bryson Hull)