Power Finance Corporation FPO
Sector: Financial Services
Issue Opens: 10th May 2011
Issue Closes: 13th May 2011
Issue Price: 193 – 203
Minimum Bid: 28 Shares & Multiple
Retail Discount: (5%) at Rs. 193 from Top End Price if Rs. 203
Rating (4/5) – Good (Short term – Neutral | Medium/Long Term – Positive)
Last Trade Price: 217.90
Over-View:
- Power Finance Corporation Limited (PFC) was incorporated in 1986 as a Financial Institution (FI) dedicated to Power Sector financing and committed to the integrated development of the power and associated sectors. PFC is leading power sector financer. Today, PFC has more than 20% share in the power financing business of the country. PFC provides many kind of financial services to various power projects in Generation, T&D (Transmission and Distribution) and Modernization of existing power projects. In addition, PFC also provides technical, advisory and consultancy services related activities through its subsidiary company namely PFC Consulting Limited. The company has Navratna Status by GOI. It is also one of the largest NBFC company in India.
- Power Finance Corporation is pegged to raise around Rs. 4,500+ Crore in order to grow further. BofA Merrill Lynch, Goldman Sachs, ICICI Securities and JM Financial are among the book running lead managers for the offer. Post FPO, Government stake will reduce to 73.72% from 89.78%. Free-float mcap will increase which can increase the volume and could help company to be included in Nifty 50 Stocks or even Sensex.
- PFC has very strong asset without any slippage in last few years. Going forward, Company can further strength its NIM. Company loan book stood at Rs 99,571 crore by 31st Mar, 2011. FY11 EPS stands at 22.82 on equity of Rs. 1,148 crore. As demand is expected to remain strong in power sector. Thus, PFC will get advantage in Its growth verticals. On valuation perspective, REC looks more attractive than PFC. In Addition; Stock has underperformed the market in last few months. It’s down by 45% in last 6-8 months. But Since Its IPO in Feb 2007, Stock has given more than 25% CAGR return which is quite good. CRISIL and ICRA awarded highest credit ratings of “AAA” and “LAAA” for its long term domestic borrowings and “P1+” and “A1+” for its short term borrowings.
View:
Today, PFC closed at Rs. 217.90 on NSE. Due to 5% Discount to retail participants, one can apply for Single Digit listing/short term Gain and for long term capital appreciations. HNI/Institutional won’t get much appreciation due to lack of discount. The Stock is not good because of strong fundamentals but due to Moderate Risk. At 170-190, Long term Investors can accumulate for 20% CAGR for next few years with minimal risk. Those who looking for big listing gain, can avoid. Those who looking to buy for Medium/Long term for decent gain, Can Apply. Listing gain is Optional which could be 5%-10% or might not be any and that also likely to be for retail Investor.
Rating **** 4/5 ( Good )
1/5 – Avoid | 2/5- below Average | 3/5 – Average | 4/5 Good | 5/5 Very Good.
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This Review/Article is provided for assistance only Nothing in this document should be construed as investment or financial advice, and nothing in this document is solicitation to buy or sell the securities of companies referred to in this document.
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