Power Grid Corporation of India

#41
What to do Expert

I invested in IPO not in FPO. Market price is now 102 & If FPO price is 90 ? Is there any probability that market price will drop to 90 or below means there is no profit? How is the FPO size, means how many shares will be there for open market?
 

man4urheart

Well-known member
#42
No you should not value this company with banks and lenders.

They are into electricity transmission business.

Look at this company in this way. India is starved of Power (electricity). We need transmission lines and new power plants.

Now does this mean, Powergrid is placed well to reap this demand?

Well picture doesn't look that good.

Power Grid management is adding new 18711 KMS of new transmission lines at cost of 22650 crores is this a good decision?

Seeing the demand anybody can jump "Yes it is".

Lets look at it this way.

Year 2010

Current Transmission capacity: 75290 Kms
Sales = 7127 crores
Sales Per Kms = 9.4 lakh (Every Transmission line of 1 kM earns a 9.4 Lakh Payment).
Gross Profit: 2722 Crores
Gross profit per km = 3.6 Lakh
Net profit = 2040 Kms
Net Profit Per KM = 2 Lakh

Now Power Grid Management wants to grow the company sales so they increase the Circuit Kms by 18711 KMS (FPO is to finance the expansion)

This will lead to new sales of 1711 Crores
Gross Profit of 676 Crores
Net Profit of 500 Crores.

New Debt of 18850 Crores
New Interest payments of 700 Crores.
-------------------------------------

Now the conclusion

Every Km new addition in circuit of transmission demands 1.21 crores investment, while it earns only profit of 2 .7 Lakhs.

This leads to Power Grid taking new debt of 1 crores.

Do you think this cycle of debt and sales ever gonna end?

The company has heavy capex plans till 2017, which means the share is not gonna perform anytime till 2017 or beyond.

Especially after FPO, the shares will dilute the earnings further and price is bound to fall to adjust the extra supply of shares.

Basically company will keep doing what it is doing now. Issue shares, take more debt, increase the Kms of lines, show increase in sales till you and I are alive and if you choose to invest in this share, it will keep its prices depressed.
 
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Alchemist

Administrator
Staff member
#43
They are in endless cycle of debt.
There is nothing wrong with it.

Power Grid has high debt not because it's a bad business, but because of regulations in India.

Power sector companies have to follow regulations laid down by CERC.

CERC fixes tariffs based on assumption that debt:equity ratio of companies will be at 70:30.

Equity above the 30% mark, is treated as debt and so it doesn't make sense for any power company to have more than 30% equity.
 
#44
One of my demat/bank accounts is need of the refunds from Gravita IPO.

Can I apply using a paper application + cheque on the last day for Power Grid so that by the time the cheque is presented my bank has enough balance to honor it? I applied using ASBA for Gravita.

Or would that be cutting it a bit too close?
 

Alchemist

Administrator
Staff member
#45
One of my demat/bank accounts is need of the refunds from Gravita IPO.

Can I apply using a paper application + cheque on the last day for Power Grid so that by the time the cheque is presented my bank has enough balance to honor it? I applied using ASBA for Gravita.

Or would that be cutting it a bit too close?
It is too risky.

There have been a few holidays in November and there is a strong possibility the Gravita's allotment will be delayed by 2-3 days.
 
#46
should we invest

So sir should we invest in this FPO, what do you say?

I am looking for term of at least 2-3 years.

Please give advice.

As the pricing is going to be declared today where can we see it?
 
#48
It is too risky.

There have been a few holidays in November and there is a strong possibility the Gravita's allotment will be delayed by 2-3 days.
I thought the only weekday off we had was Nov 5. No matter. You are right. Unless we hear allotment results creeping in by 11th it could be a bit dicey.
 
#49
On sheer valuation Power Grid FPO is a must apply based on current year earnings the FPO after retail discount is offered to retail at an PE of less than 14, compared to NTPC which trades at a PE of closer to 20, Short term I dont know, but I dont expect the price to fall below 90, And who knows if we are lucky the issue may get done at 85 bucks, that will be a steal, I am applying for Power Grid.
 

Alchemist

Administrator
Staff member
#52
Friends,

So the 2 lakhs retail limit recently introduced by SEBI is going to be applicable here (FPO), or is it strictly for IPOs?
This FPO was cleared by SEBI before the new rule of 2 lakh for retail was passed, hence Power Grid FPO the maximum limit for retail remains at 1 lakh.
SEBI is yet to notify the rule.

Had SEBI notified the rule before the IPO opened, the 2 lac limit would have applied to the FPO, irrespective of when the FPO was cleared.

Till SEBI notifies the change, all IPOs and FPOs will have the Rs 1 lac limit.

The upcoming share sale by Power Grid Corporation may not benefit from the recent doubling of the limit for retail investors to 2 lakh as the stock market watchdog is yet to notify the change announced last week.
Source: No retail limit gains for Power Grid issue.
 
#53
One thing I don't understand that what's the incentive for current long term Power Grid retail investors to stick with Power Grid stock already in their portfolio. Why shouldn't they sell some of their existing stocks and get back at cheaper rate from FPO? [This is under the assumption that retail over-subscription figure doesn't go too high]
 
#54
I have interpreted the chart in other way!



We are near breakout, FPO price matches the targets on chart!

Rise is capped by 61.8% resistance! and it is the one year resistance!

Should be a good short or just buy a put option.

Looks like price is going to drop below the FPO price, same as MMTC dis investment.

CAPEX is never good for a company, they are also committing for a big capex.

http://www.thehindubusinessline.com/businessline/blnus/03071206.htm

Here is how FPO money will be utilized

http://www.thehindubusinessline.com/iw/2010/11/07/stories/2010110751081700.htm


So Net money required = 22650
Money to be used from FPO = 3800
Where will rest = 22650-3800 = 19850 Crores gonna come from? DEBT?
Dear man4urheart [28250],

I have interpreted the chart. My observation is as follows: -

1. 105.131 is marked in red. That is my target!

2. You have shown 81 in box- at 81 or below, it is screaming BUY in case it falls unexpectedly to that level!

3. You have marked ceiling at 111 & 122.99. That is my medium-term & long-term targets respectively!

Thanks for putting the chart for ready reference. It helped me to take decision.
 

Alchemist

Administrator
Staff member
#55
One thing I don't understand that what's the incentive for current long term Power Grid retail investors to stick with Power Grid stock already in their portfolio. Why shouldn't they sell some of their existing stocks and get back at cheaper rate from FPO? [This is under the assumption that retail over-subscription figure doesn't go too high]
No other incentive except what you have mentioned.

There is no guarantee that applicants will get all the shares that they apply for.
 

Alchemist

Administrator
Staff member
#58
I am applying for flipping it. I will sell as soon as I get my shares.

I have already submitted 2 full applications.

Once the new shares hit the market, the stock should stabilize in the 95-100 range.

It may go slightly higher in the medium-term, but I am not interested in holding this stock for the long-term.

Like other power companies, Power Grid works on a fixed ROE model and is unlikely to give any abnormal returns in the long-term.

Q: Do you believe that they can actually inch their ROEs up to 18-20% with merchant?

A: 18-20% said by the Chairman is primarily on a project basis and not at a corporate level. Even if you look today, the company’s ROEs are closer to 17-17.5%, but the overall ROE is because a part of your capex is there in CWIP and hence there is some amount of cash in investments which makes it come down closer to 13%.

I feel that this 13% today obviously in FY11 will come down because of the dilution but going forward this will go to FY12 which will be 13% - it going forward in FY13-15 it will be somewhere around 14% on an overall basis.
Source: Power Grid FPO at Rs 90 per share well priced: Antique.
 
#59
How to see BSE - RII Demand -Live

How to see BSE - RII Demand - Live ,as on NSE we can easily see how much is the demand of Retail Individual Investors (RIIs) - By the way how much is RII Subscription (NSE+BSE) at the end of first day?
 
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