Power Grid Corporation of India Limited (PGCIL) has tapped the capital markets with it FPO for 60.18 crs shares and an offer for sale by the Government of India of 18.52 cr shares in a price band of Rs 85-90. There is a discount of Rs 4.50 for retail and employees. The issue has been oversubscribed by QIB’s and would close for retail, HNI’s and employees today.
| Price Band | Rs 85 – 90 |
| Offer for sale in shares | 18,51,89,014 Equity Shares |
| Fresh Offer in Shares | 60,18,64,295 Equity Shares |
| Total offer size in Shares | 78,70,53,309 Equity shares |
| Total offer size in Rupees | Rs 6689.95 crs at the lower band to Rs 7083.48 crs at the upper band |
| Retail Discount | Rs 4.50 per share which is 5% at higher band of Rs 90 |
| Reservation for employees | 30,00,000 Shares |
| Net issue size in shares | 78,40,53,309 Equity shares |
| QIB’s | 39,20,26,655 Equity shares |
| Non Institutional Investors | 11,76,07,996 Equity shares |
| Retail Investors | 27,44,18,658 Equity shares |
| Book Running Lead Manager | SBI Capital Markets Limited |
| Citigroup Global Markets India Private Limited | |
| ICICI Securities Limited | |
| Kotak Mahindra Capital Company Limited | |
| UBS Securities India Private Limited | |
| Isssue Opening Date | Tuesday 3rd December 2013 |
| Isssue closing date for QIB’s | Thursday 5th December 2013 |
| Isssue closing date for HNI’s and retail | Friday 6th December 2013 |
| IPO Grade | As the issue is not an IPO grading is not required |
| Paid -up Capital Pre IPO | 462,97,25,353 Equity Shares |
| Paid -up Capital Post IPO | 523,15,89,648 Equity Shares |
| Market Cap pre listing (price on 29th Nov) | Rs 44,005.54 crs |
| Market Cap post listing | Rs44,468.51 crs at the lower end to Rs 47,084.30 crs at the upper end |
| Bid Lot | 150 Equity Shares at Rs 90 and post discount at Rs 85.50 |
| Bidding Amount for Retail | 2250 Equity shares at Rs 85.50. Rs 1,92,375 per application |
The company had come out with its FPO exactly three years ago in November 2010 at an identical price band of Rs 85-90. There was a 5% discount that time as well. The business of the company and its activities remain the same. What has changed in three years for PGCIL is very important. The EPS of the company for the year ended March 2009 was 4.02 which increased to Rs4.85 in the year ended March 2010. Earnings for the half year ended September 2010 on an annualised basis saw the earnings of the company at Rs 6.44. This time around when the company is issuing shares in December 2013 the EPS for the year ended March 2012 is Rs 7.03 and Rs 9.15 for March 2013. In the six months ended September 2013 the EPS is at Rs 4.92 while on an annualised basis on a fully diluted basis the EPS is Rs 8.71.
The PE in 2010 on a fully diluted basis was 15.38 times while this time around it is at 10.11 times at the upper band of Rs 90. One needs to also take note of the fact that the sheer size of the company has grown. From 79,556 circuit kms it is now 1,02,109 circuit kms. Similarly against 132 substations earlier it is now 172 substations.
There is a concern that the current return on equity of 15.5% enjoyed by the company may not continue. This fear seems to be unfounded as the interest rates whether it is the yield on G.secs or the PLR of banks have risen in the five year period. Secondly the return is calculated on the period after the asset is commercialised which reduces the yield further. It would therefore be a fair assumption that in the worst case scenario the return on equity would remain unchanged if not increased.
| Rupees in | millions | ||||
| 6 months | 6 months | ||||
| Mar-12 | Mar-13 | Sep-12 | Sep-13 | ||
| INCOME | |||||
| Transmision Income | 95441.90 | 121626.60 | 57336.70 | 70810.00 | |
| Consultancy income-services | 2899.50 | 2289.60 | 1278.90 | 1217.60 | |
| Consultancy income-Sale of Products | 0.00 | 864.40 | 0.00 | 1861.30 | |
| Telecom Income | 2011.90 | 2313.90 | 1124.60 | 1465.00 | |
| Other operating revenue | 1289.40 | 484.00 | 342.40 | 240.60 | |
| Other income | 6207.40 | 5708.90 | 2147.60 | 1790.10 | |
| Total Income | 107850.10 | 133287.40 | 62230.20 | 77384.60 | |
| Expenditure | |||||
| Purchases of Stock in trade | 0.00 | 635.00 | 0.00 | 1379.20 | |
| Employee Benefits Expense | 8429.70 | 8864.00 | 4404.10 | 4616.60 | |
| Depriciation and Amortisation Expenses | 25725.40 | 33519.20 | 15816.60 | 19303.80 | |
| Transmision, Adminstration and other expenses | 8099.80 | 8715.40 | 3997.10 | 5120.50 | |
| Finance Costs | |||||
| a) Interest and other charges | 18588.30 | 26091.40 | 12444.40 | 15612.60 | |
| b) Foreign Exchange rate variation | 844.30 | -739.20 | -687.60 | 0.00 | |
| Total Finance Costs | 19432.60 | 25352.20 | 11756.80 | 15612.60 | |
| Total Expenditure | 61687.50 | 77085.80 | 35974.60 | 46032.70 | |
| Profit before prior period adjustment and exceptional items | 46162.60 | 56201.60 | 26255.60 | 31351.90 | |
| Less prior period adjustments (Expense/Income) | 186.60 | -247.00 | -136.50 | -5.50 | |
| Less Exceptional Items | 0 | ||||
| Profit before tax | 45976.00 | 56448.60 | 26392.10 | 31357.40 | |
| Provisions for current tax | 8911.00 | 10715.00 | 5143.50 | 6390.40 | |
| Provisions for earlier years | -25.90 | -194.20 | -194.70 | 0.00 | |
| Total Deferred Tax | 4541.40 | 3582.80 | 1483.30 | 2171.60 | |
| Total Tax expenses | 13426.50 | 14103.60 | 6432.10 | 8562.00 | |
| Profit After Tax | 32549.50 | 42345.00 | 19960.00 | 22795.40 | |
| Net Margins | 30.18 | 31.77 | 32.07 | 29.46 | |
| EPS | 7.03 | 9.15 | 4.31 | 4.92 | |
| Equity Capital | 4629725353 | 5231589648 | |||
| Fully diluted and annualised EPS | 8.71 | ||||
| PE AT LOWER | 9.75 | ||||
| PE AT UPPER | 10.33 | ||||
The QIB book closed for subscription yesterday and the same was subscribed 9.09 times. The retail portion was subscribed 0.65 times and the overall book 4.77 times. It would be a fair assumption to presume that the retail book would be subscribed between 2-2.4 times. The price at which shares would be allotted to retail at the top end of the price band less discount would be Rs 85.50. There is a substantial gap between this price and the market price of yesterday in the cash market which closed at Rs 96.30 and at Rs 92.80 in the futures market.
I believe retail investors must apply for this issue for listing gains and those looking for better returns may hold on for the price to improve further to Rs 105-110 before selling. This price was the average price at which the share traded prior to the FPO being announced.
