Retail investors must grab opportunity
Power Finance Corporation Limited is tapping the capital markets with its FPO (follow on public offer) where the QIB portion has closed for subscription being subscribed 6.92 times. The issue closes for non QIB’s on Friday the 13th of May.
| Price Band | Rs 193 – Rs 203 |
| Discount to Retail and employees | 5% of the price fixed on allotment |
| Fresh Offer in Shares | 17,21,65,005 Equity Shares |
| Offer For Sale | 5,73,88,335 Equity Shares |
| Total offer in Shares | 22,95,53,340 Equity Shares |
| Employee Reservation | 2,75,464 Equity Shares |
| Net offer In Shares | 22,92,77,876 Equity Shares |
| Issue Size | Rs 4,430.38 crs at Rs 193 to Rs 4,659.93 crs at Rs 203 |
| QIB’s | 11,46,38,938 Equity Shares |
| Non Institutional Investors | 3,43,91,681 Equity Shares |
| Retail Investors | 8,02,47,257 Equity Shares |
| Book Running Lead Manager | DSP Merrill Lynch Limited |
| Goldman Sachs (India) Securities Private Limited | |
| ICICI Securities Limited | |
| JM Financial Consultants Private Limited | |
| Isssue Opening Date | Tuesday 10th May |
| Isssue closing date for QIB’s | Thursday 12 th May |
| Isssue closing date for other than QIB’s | Friday 13th May |
| IPO Grade | Not Applicable as this is a Follow on Public offer |
| Paid -up Capital Pre IPO | 32,02,12,768 Equity Shares |
| Paid -up Capital Post IPO | 37,17,12,768 Equity Shares |
| Bid Lot | 28 shares |
| Bidding Amount for Retail | 980 shares at Rs 203 or Rs 1,98,940 per application |
Business
PFC is a leading financial institution in India focused on the power sector. The company is also involved in various Government of India programs for the power sector and is the nodal agency for the UMPP (ultra mega power projects) in India. The company as part of its business provides a comprehensive range of financial products and related advisory and other services from project conceptualization to the post-commissioning stage for clients in the power sector, including for generation (conventional and renewable), transmission and distribution projects as well as for related project finance, short term loans, buyers line of credit and debt refinancing schemes, as well as non-fund based assistance including default payment guarantees and letters of comfort. PFC also provides various fee-based technical advisory and consultancy services for power sector projects.
Investment Proposition for retail investors
The price band fixed is Rs 193-203 with a discount of 5% on allotment for retail investors. For simplicity sake let us assume that the price would be fixed at the upper band of Rs 203, and a discount of Rs 10 would be offered to retail investors. The closing price of the stock on Thursday the 12th of May in the cash market was Rs 215.85 implying a safety factor of Rs 12.85 or 6.33%. What this means is that even if the cash market were to fall by Rs 13 on allotment and subsequent listing of the shares, the investor would be covered as his cost is only Rs 203 and on top that there is the retail discount as well.
PFC trades in the futures segment as well and the closing price on 12th May is Rs 205.30. An important point to be noted here is that fresh positions in the stock have been banned as the open interest limit has been breached. This means that the extra safe HNI’s who apply for the issue after hedging themselves are unable to take fresh positions. This is also good for the investor as the gap between the future price which is trading at a discount to the cash market will converge going forward.
I believe this is a great opportunity for retail investors and they should subscribe to the above issue.
SEBI Disclaimer: – I intend to subscribe to the above issue.
