Adani, NHPC likely to revive IPO market

Adani Power IPO subscribed 3.96 times.

After the initial spark offered by the success of the Mahindra Holidays’ initial public offer (IPO), offers by two big power companies look set to light up the IPO market.

Ahmedabad-based Adani Power’s public offer, which opened on Tuesday, has already been subscribed 3.96 times. Total bids were for 984.90 million shares as against the 248.8 million shares that the company had offered to buyers. This is excluding six anchor investors — T Rowe Price, AIC, Ecofin, TPG (through CLSA), Legg Mason and Sundaram MF — which submitted bids for 94 million shares as against 52 million shares offered in the category.

The company plans to raise Rs 3,016 crore. This is the biggest IPO to hit markets in the past 18 months.

Power utility NHPC on Tuesday announced a price band of Rs 32-36 for its IPO, which is stated to open on August 11. The company plans to raise over Rs 6,000 crore through the government’s divestment of 5 per cent and 10 per cent equity infusion.

“After Adani and NHPC IPOs, investor appetite could return to primary markets. Both IPOs seem to be fairly priced and will attract a lot of India-specific overseas investors,” said Deven Choksey, managing director of Mumbai-based KR Choksey Shares and Securities.

The mood is in stark contrast to the gloom in the IPO market after Reliance Power’s issue one-and-a half years back. With a grey market premium of over Rs 400, R-Power listed at Rs 450 on the National Stock Exchange but went down sharply.

However, the two latest IPOs look likely to kick off the grey market. Sources said both these IPOs were being quoted at a premium of Rs 9-11 in the grey market. Punters trade shares in the grey market. Once the stock is listed, they buy shares from the market and honour their trades in the grey market.

Investment bankers said that unlike the R-Power issue, which had been priced on the upper side, the latest ones look like they had been priced much more conservatively. Also, stock markets had peaked by then (during the R-Power issue) and US markets had already started feeling the tremors of the subprime crisis.

“The R-Power issue left nothing for investors on the table and there was a general feeling that the stock could come down crashing as its valuation was extremely high. On the contrary, both APL and NHPC seem to be fairly priced. Even markets are steady,” said an investment banker.