Mega Power IPOs coming soon

So you thought the real estate sector mopped up the lion's share of the capital market this year? Just check these stats — blazing the trail this year is the power sector with an impressive IPO line-up of more than Rs 20,000 crore. This is around 35% more than the Rs 13,000- crore worth of IPOs mobilised in the real estate sector this year, including the mega DLF offering.

In fact, as many as seven companies, including Anil Dhirubhai Ambani's Reliance Power, have filed draft papers for IPOs with market regulator SEBI in the last couple of months. Already, funds worth Rs 3,900 crore from the capital market has come to the power sector this year. In addition, the sector is expected to raise over Rs 16,000 crore as companies such as Reliance Power, REC and NHPC line up to float their IPOs in the next couple of months.

Says Sanjeev Zarbage, assistant vice-president, research, Kotak Securities: "The power sector needs huge funds and that's why we are seeing a slew of companies wanting to tap the capital market. Since the economy is doing well, capital expansion is a natural way of catering to the services of the population.

Infrastructure has remained a major bottleneck in development for a long time. The power sector is expected to raise a lot of money from the markets in the next couple of years too. Apart from that, banking is another sector that will raise money through public issues to keep the credit growth going."

The action in the power sector is currently being fuelled by the growth in the services sector. "We are in the capacity building stage. The huge amount of money raised in the power sector will eventually support the other sectors to grow and, in turn, help the overall growth in the country.

Infrastructure is the other sector where we will see a lot of activity happening. Housing companies, commercial malls, airports and ports are the core infrastructure segments that will raise big amount of money from the markets. Power and infrastructure are the base of growth for any country," says Religare Enterprises COO Shachindra Nath.

The companies that have entered the capital market this year include Power Finance Corporation and PowerGrid Corp. Besides, there have been smaller issues from Suryachakra Power and Indowind Energy, which mopped up nearly Rs 135 crore collectively from their IPOs. The fund flow through capital market into the power sector was nearly Rs 1,300 crore in 2006 through IPOs of firms such as Lanco Infratech and GMR Infra


The mega offering from the sector will be Reliance Power's issue, tipped to be the biggest-ever IPO in the Indian market at nearly Rs 12,000 cr. The company, a 51% subsidiary of Reliance Energy, has identified 12 power projects with a total installed capacity of 24,200 mw. The proceeds through sale of 130 cr equity shares would be utilised to develop the projects, which are at various stages of development.

State-run Rural Electrification Corp (REC) and National Hydroelectric Power Corp (NHPC) also seek to mop up Rs 1,200 cr and Rs 1,700 cr, respectively, through their public offers. The REC IPO would consist of a fresh issue of 10% or up to 7.8 cr shares and an offer for sale of an equal number of shares by the government.

The government's holding will come down by up to 18.18% after the public issue. NHPC would offload around 24% stake through the issue of 111 cr fresh equity shares and offer for sale of more than 55 cr shares by the government.

Again, Chennai-based BGR Energy, equipment supplier to power and process industries, expects to garner Rs 700 cr by floating an IPO of close to 134 lakh shares. Another Chennai-based firm Shriram EPC, part of the Shriram group, is likely to fund its investment plans in the renewable energy market through issue of 5 mn equity shares, representing 11.66% of post-issue paid-up capital.

Kolkata-based Ramsarup Lohh Udyog also proposes to enter the capital market with a public issue of 3 lakh equity shares of Rs 10 each to consolidate its position in power and infrastructure sectors.

Similarly, Transformers and Rectifiers India has filed papers with the market regulator for its nearly 3 lakh shares public offering. The company plans to raise over Rs 96 cr in the primary market to set up a transformer manufacturing facility in Ahmedabad.