REC FPO opening tomorrow, analysts upbeat

Within weeks of NTPC biting the bullet, another state-run company REC's follow-on-offer opens tomorrow which the analysts said would fare better since the floor price is substantially lower than the market price.

The floor price for the FPO is fixed at Rs 203 which is nearly 8 per cent lower than the prevailing market price. If subscribed fully, the issue would fetch about Rs 3,451 crore.

The company plans to sell 17.17 crore shares (including fresh issue of 12.87 crore and an offer for sale of 4.29 crore shares) resulting in an equity dilution of 17.39 per cent.

The government's stake in the company would come down to 66.82 per cent from the current 81.82 per cent.

"The REC FPO response would be better than NTPC. Institutional investors should start bidding at the lower end so that the maximum bids come in the range of Rs 203-206, which will make the issue successful," Kejriwal Research and Investment Services Head Arun Kejriwal said.

The NTPC share sale was subscribed only 1.2 times which analysts say was mainly because of offer price of Rs 201 was barely competitive when compared to the prevailing market price. Also LIC MF and SBI MF brought a major chunk of shares.

However, SMC Capitals Equity Head Jagannadham Thunuguntla said retail demand might remain subdued as there is no discount on price for them. "The FPO is fairly priced and institutional investors would flock the counter, he added

Speaking to reporters here, Rural Electrification Corporation's (REC) CMD P Uma Shankar also expressed the hope that the FPO would elicit good response.