Indiabulls Power Grey Market Premium

Company Name	Offer Price (Rs.)	Premium (Rs.)
Thinksoft Global	125	4 to 5
Indiabulls Power	40 to 45	1.50 to 2

Indiabulls Power IPO subscribed 22 times

Gets bids for 608.20 crore shares as against 27.86 crore shares on offer

The Indiabulls Power initial public offer (IPO) saw upbeat response from investors. The issue ended with 21.83 times oversubscription, the National Stock Exchange (NSE) data showed. The IPO garnered bids for 608.20 crore shares as against 27.86 crore shares on offer.

The issue saw high demand from qualified institutional buyers with the category getting subscribed 16.21, as of 14 October 2009. Non institutional investors category was subscribed 2.98 times while the portion reserved for retail individual investors was subscribed 0.52 times.

Indiabulls Power will issue a total of 39.07 crore shares in a price band of Rs 40-45 per share in the IPO which remains opens between 12 and 15 October 2009. The company aims to raise about Rs 1,750 crore at the top end of the price band.

On 9 October 2009, Indiabulls Power sold the maximum allowed 30% of the tranche reserved for qualified institutional buyers (QIBs), or 18% of the total IPO, to the eight anchor investors at a price of Rs 45 a piece.

According to a statement, approximately 2.1 crore shares, or 34% of the shares available to anchor investors went to Copthall Mauritius Investment, while BNP Paribas and the Nomura India Investment FundMother Fund (together with a trust company) bought 1.05 crore and 1.08 crore shares respectively. The other anchor investors were Indea Capital, the Norwegian government petroleum fund, Credit Suisse Singapore and Macquarie Bank.

Indiabulls Real Estate currently holds 71.4% in the Indiabulls Power. UK-based billionaire L.N. Mittal's LNM India Internet Ventures holds a 10.7% stake, while private equity firm FIM holds the remaining 17.9%.

Indiabulls Power, a subsidiary of Indiabulls Real Estate, has been established with the objective to develop, construct and operate power projects. The company is currently executing five coal based power projects totalling 6,615 megawatt (MW) generation capacities. The company proposes to set up power plants in Maharashtra (Amravati and Nashik) and Chhattisgarh (Bhaiyathan). The management has indicated that the first power plant would be commissioned at Nashik in 2011-12.

The proceeds of the proposed IPO will part finance the construction and development of the 1,320 MW Amravati Power Project Phase I, fund equity contribution in the company's wholly owned subsidiary to part finance the construction and development of 1,335 MW Nashik Power Project, apart from general corporate purposes.

Credit rating agency CRISIL has assigned IPO Grade "3/5" to the proposed initial public offer of Indiabulls Power, which indicates that the fundamentals of the issue are average relative to other listed equity securities.

Indiabulls Power Ltd IPO

Indiabulls Power Ltd IPO

Siemens, Indiabulls Power IPO, Axis Bank

Siemens, Indiabulls Power IPO, Axis Bank

Indiabulls Power IPO subscribed 6 times on day one

Gets bids for 165.67 crore shares as against 27.86 crore shares on offer

Indiabulls Power saw upbeat investors response for its initial public offering (IPO) on day one. The IPO garnered bids for 165.67 crore shares as against 27.86 crore shares on offer.

Indiabulls Power will issue a total of 39.07 crore shares in a price band of Rs 40-45 per share in the IPO which remains opens between 12 and 15 October 2009. The company aims to raise about Rs 1,750 crore at the top end of the price band.

On 9 October 2009, Indiabulls Power sold the maximum allowed 30% of the tranche reserved for qualified institutional buyers (QIBs), or 18% of the total IPO, to the eight anchor investors at a price of Rs 45 a piece.

According to a statement, approximately 2.1 crore shares, or 34% of the shares available to anchor investors went to Copthall Mauritius Investment, while BNP Paribas and the Nomura India Investment FundMother Fund (together with a trust company) bought 1.05 crore and 1.08 crore shares respectively. The other anchor investors were Indea Capital, the Norwegian government petroleum fund, Credit Suisse Singapore and Macquarie Bank.

Indiabulls Real Estate currently holds 71.4% in the Indiabulls Power. UK-based billionaire L.N. Mittal's LNM India Internet Ventures holds a 10.7% stake, while private equity firm FIM holds the remaining 17.9%.

Indiabulls Power, a subsidiary of Indiabulls Real Estate, has been established with the objective to develop, construct and operate power projects. The company is currently executing five coal based power projects totalling 6,615 megawatt (MW) generation capacities. The company proposes to set up power plants in Maharashtra (Amravati and Nashik) and Chhattisgarh (Bhaiyathan). The management has indicated that the first power plant would be commissioned at Nashik in 2011-12.

The proceeds of the proposed IPO will part finance the construction and development of the 1,320 MW Amravati Power Project Phase I, fund equity contribution in the company's wholly owned subsidiary to part finance the construction and development of 1,335 MW Nashik Power Project, apart from general corporate purposes.

Credit rating agency CRISIL has assigned IPO Grade "3/5" to the proposed initial public offer of Indiabulls Power, which indicates that the fundamentals of the issue are average relative to other listed equity securities.

Indiabulls Power IPO Review

Indiabulls power (IPL) has come out with its initial public offering (IPO), with an issue of 39.07 crore equity shares, which includes 5.09 crore
of green shoes option. At the offer price of Rs 40-45 per share with face value of Rs 10 each, the issue would mop up Rs 1,560-1 ,760 crore, and would represent 19% of post dilution equity capital. The proceeds would go for power projects at Amravati, Phase I and at Nashik.

The two projects would require a total of Rs 3,200 crore of equity funding, and the company would need to put in additional funds in these projects. Considering the status of its projects, projected timelines and funding plans, the stock does not look attractive enough. Investors may wait for the listing, and can consider the stock in the secondary market.

COMPANY’S BUSINESS

Amravati, Phase I project has two units with a total capacity of 1,320 MW, and would require an investment of Rs 6,900 crore, of which only Rs 156 crore has been spent so far as per the prospectus. The company plans to fund the project with Rs 5,166 crore of debt, which is 75% of total cost. While it has received final sanction from the lenders, it is still to enter into formal financing agreement. The company has received assurance for fuel linkage and has also awarded EPC contract for the project.

The expected commissioning of the two units in this phase is June ’12 and Sept ’12. Nashik project has 7 units with total capacity of 1,335 MW, requiring an investment of Rs 6,048 crore. While the company has received the fuel linkage for this project, it has not yet awarded the EPC contract for this project.

Company has another project at Bhaiyathan, with a capacity of 1,320 MW where it has awarded the EPC contract. The company has received captive coal blocks for this project, which is estimated to have reserve of 350 mn tonnes, enough for the life of this project. The estimated investment for the project is Rs 6,796 crore and expects to commission the two units in Dec’ 12 and March’ 13. However, progress related to mining of coal from the block is still awaited.

Apart from these projects, it is developing Amravati Phase II, another project in Chhattisgarh, both having a capacity of 1,320 mw, which are at initial stage, and would require about Rs 5,600 crore each. It also plans to develop 4 hydel units in Arunachal Pradesh totaling 167 mw.


VALUATION AND OUTLOOK:

Since the company is still to begin its operations, it has no income from operations and earned Rs 141 crore as other income in FY09. As such, it cannot be evaluated based on price-earnings model. Further, the lackluster response of the market , after the listing, to the previous two IPOs from power generation companies in the last few months, means the market is not ready to buy the power generation stocks based on the future expectation.


The uncertainty is higher in this case as the first commissioning is almost 3 years away. Further, the progress in each project is still limited, which may get further delayed, as there is no formal agreement for debt financing so far. Further, it will require a total of Rs 7,800 crore of equity for its announced projects, at 75:25 debt-equity ratio.
With a current net worth of Rs 2,400 crore, and the first commissioning expected only by June ’12, there may be more equity dilution at a later stage. As a result, the stock does not seem to have enough attractiveness currently, from an investment perspective. Investors may wait for it to list and find its level, before taking exposure.

IPO Details

Price Band: Rs 40-45

Net issue size: Rs 1,563-1 ,758 crore

Date: October 12 - 15

via ET

8 anchor investors help Indiabulls Power

Indiabulls Power, a subsidiary of Indiabulls Real Estate, which is coming out with initial public offering (IPO) on Monday, October 12, has raised Rs 2.75 billion by allocating 61.1 million equity shares of face value of Rs 10 each at a price of Rs 45 each to anchor investors in the pre-IPO placement. The price includes a share premium of Rs 35 an equity share. The issue closes on Thursday, October 15.

Copthall Mauritius Investment picked up majority of the anchor investment stake. It bought 21.08 million equity shares there by helping the firm to raise Rs 948.60 million. Next in line was BNP Paribas Arbitrage which picked 10.50 million which helped the firm raise Rs 472 million.

Other anchor investors who subscribed include Nomura India Investment Fund Mother Fund, The Nomura Trust and Banking India Stock Mother Fund Co as the trustee of Nomura India Stock Mother Fund, Indea Capital,Norses Bank, Credit SuissSe Sinsapore and Macquarie Bank.

SEBI introduced the concept of anchor investors in June. An anchor investor can subscribe for up to 30% of the 60% portion reserved for QIBs in an IPO. Such an investor will have a lock in period of one month

Indiabulls Power IPO

The Indiabulls Power initial public offer carries too high a risk profile for the average retail investor. The company is two years away from commissioning its first project in Nashik.

Other listed companies with operational plants may offer a superior investment option. The discounted pricing of the offer may allow scope for short-term gains on the stock, but long-term investors should put off their exposures until the projects make progress.At the higher end of the offer price of Rs 40-45, Indiabulls Power’s Market cap per Megawatt (taking into account only projects of 2,655 MW which have attained financial closure) is Rs.3.4 crore, which is similar to listed peers. On Price-Book Value terms, the offer is at a steep discount to NTPC, Tata Power, Reliance Power and Adani Power.

However, this discount is justified as Indiabulls Power will not enjoy any income from operations over the next few years.
Expansion plans

The company plans to set up 6,615 MW of thermal power generation capacity over the next four years at a cost of Rs 31,052 crore. Most of the projects are being developed through subsidiaries. Through this IPO, Indiabulls Power expects to raise around Rs 1,758 crore (at the higher end of the price band), including the green shoe option.

A part of the funds raised (Rs 1,435 crore) are to be deployed as equity in two projects — Amravati Phase 1 and Nashik — with capacity of 1,320 MW and 1,335 MW, respectively. Additionally, the company has signed MoU for projects adding up to 3,960 MW. The company also plans to set up a 167 MW hydro power plant in Arunachal Pradesh.

While two of the five projects — Amravati and Nashik — are close to attaining financial closure, the company, according to the offer document, is yet to raise funds for the other projects. Amravati Phase 1, to come up by June-September 2012, is the only project that has been fully tied up having secured fuel linkages, funding and placed EPC contracts. Equipment is to be sourced from SEPCO, China.

The Nashik project, due to change in its configuration, is yet to place equipment orders and is waiting for renewed approvals. The company’s hope of commissioning at least half of this plant’s capacity by September 2011 appears a challenging schedule to meet. Fuel linkages for both projects have already been approved. The third project in Bhaiyathan, Chhattisgarh, has been allotted a captive mine and is expected to be commissioned by 2013. The bulk of Indiabulls’ projects are scheduled for commissioning between 2011 and 2014. The bunching up of the completion dates may pose challenges on securing equity funding and execution.
rationale

The Indian power sector has historically been subject to high execution risks arising out of delays in equipment, funding, approvals and also laying of transmission lines. This pegs up the risk profile on this offer given that the company has no execution track record. Inconsistencies in supply of fuel by Coal India, on which Indiabulls Power plans to rely, is also a risk.

Funding is another concern as Indiabulls has opted for a debt:equity mix of 75:25. The current issue (Rs 1,758 crore) plus cash and investments of Rs 1,154 crore on its books as of June 30, 2009, as of now, fall short of equity requirement for the projects (around Rs 7,750 crore for all the projects).

In the regulated tariff scenario, debt raised over and above the norms may strain margins. Higher refinancing terms once the debt gets matured at higher rate of interest may also create problems for the company. In case of levelised tariffs, interest costs at a fixed rate are factored into tariffs. Indiabulls Power, like many other private players, is relying on Chinese equipment for timely delivery, which may reduce execution time but could lead to operational risk.
Some positives

Indiabulls Power’s current projects rely only on relatively cheaper domestic coal, which is a big advantage when the company offers its power on competitive bidding terms. Of course, this will benefit only the power sold on a merchant basis. The company wants to have a 75:25 mix between revenues through power purchase agreements and merchant power. If this materialises, the company can get the right mix of returns once operational.

Demand or offtake is the least of concerns for power generators, given the huge demand and supply gap that is likely to remain over the next few years. Revenue visibility is enhanced by Indiabulls Power signing long-term power purchase agreements for 858 MW with the Chattisgarh SEB for the power generated from Bhaiyathan project and 1,000 MW PPA with Tata Power Trading Company for the Amravati Phase I.

The company also signed MoU with Maharashtra State Electricity Distribution Company for off-take of 1,000 MW from its Amravati plant. It is yet to finalise buyers for the Nashik project. With the company planning to use super-critical technology for most of its capacity, additional revenues may also flow in through carbon credit.

via BL

Indiabulls Power IPO Analysis

Will be without power for many years

First unit to go on stream only by June 2012

India Bulls Power (IBPL), a subsidiary of India Bulls Real Estate, was established to develop, construct and operate power projects either on its own or through various subsidiaries. Post the initial public offer (IPO), Indiabulls Real Estate (IBEL) will hold 57.81% of the equity of the company.

Currently, IBPL has five thermal power projects, with an aggregate installed capacity of 6,615 MW under development. The estimated cost of projects under development is Rs 31052.40 crore. While the Phase I and Phase II of the Amravati power project will be developed directly by the company, the Bhaiyathan Power Project, Nashik Power Project and Chhattisgarh Power Project will be developed through wholly owned subsidiaries of the company, i.e., Indiabulls CSEB Bhaiyathan Power (ICBPL), Indiabulls Realtech (IRL), and Indiabulls Powergen (IPGen). These five power projects will be commissioned between June 2012 and September 2013.

Apart from the above five thermal power plants, IBPL has signed memoranda of understanding (MoUs) for developing four medium-size run-of-the-river hydro-power projects, aggregating 167 MW, in Arunachal Pradesh and for two thermal power plants, with an aggregate capacity of 3,960 MW, in Jharkhand and Madhya Pradesh (MP).

The hydropower projects, whose capacity ranges from 30 MW-60 MW, are to be executed under build-own-operate-and-transfer basis for a lease of 40 years. They are to be located on various tributaries of the Kameng River in the East Kameng district of Arunachal Pradesh. IBPL has already signed MoU with the government of Arunachal Pradesh. As per the MoU, the project will revert back to the Arunachal government on expiry of the lease period of 40 years. For projects in Jharkhand and MP, the company is evaluating establishment of thermal power plants, one, with a capacity of 1,320 MW, in Jharkhand and another, with a 2,640-MW capacity, in Chhindwara, MP.

IBPL has received coal linkages for the Amravati Phase I Power Project and has been allocated captive coal mines for its Bhaiyathan Power Project. While the company has received coal linkage for the Nashik Power Project, the reconfiguration of the project into 1,335 MW, instead of the previously planned 1,320 MW, will necessitate additional approval for coal to meet the enhanced capacity.

IBPL has entered into a power-purchase agreement (PPA) with the Chhattisgarh State Electricity Board (CSEB) for sale of 858-MW power out of the 1,320 MW proposed to be generated at the Bhaiyathan Power Project. For the Amravati Phase I Power Project, the company has entered into a PPA with Tata Power Trading Company, for sale of up to 1,000 MW of power, on 5 June 2009. According to the Tata Power PPA, the company will independently participate in all competitive bidding processes for selling power on a long-term basis. The quantum of power tied on its own will be deducted from the contracted capacity, subject to deduction not exceeding 700 MW. IBPL may withhold 700 MW out of 1,000 MW at its discretion. Subsequently, the company also entered into a MOU with Maharashtra State Electricity Distribution Company (MSEDCL) for sale of up to 1,000 MW of power out of the 1,320 MW proposed to be generated at the Amravati Phase I Power Project. It is yet to sign PPAs for the rest of the power projects.

Apart from focusing on development and operation of power plants, IBPL is also augmenting its power project management capabilities. It has set up Elena Power & Infrastructure (EPIL), a wholly owned subsidiary. As it has no prior Engineering, Procurement and Construction (EPC) experience in the development of power projects, EPIL has entered into back-to-back contract with overseas players such as Shandong Electric Power Construction Corporation (SEPCO), China for the Amravati Phase I Power Project and with CNTIC-ZJ Energy Consortium, China for the Bhaiyathan Power Project. Having given engineering, procurement and construction (EPC) orders to EPIL from its own portfolio, IBPL proposes to develop EPIL as a project management company to tap and bid for power-project management contracts from third parties.

ICBPL, the special purpose vehicle for Bhaiyathan Power Project, has entered into a share subscription agreement with CSEB, dated 13 October 2008. CSEB will acquire a 26% equity stake in ICBPL for consideration other than cash. In accordance with the consortium agreement on 30 December 2007, Sunflag Iron and Steel Company (SISC), entitled to 0.074% of the share capital of ICBPL, has exercised its right to subscribe. But the company has informed SISC that it will not be able to transfer shares prior to allotment of shares to a successor entity of CSEB. Further, SISC is entitled to exercise a call option to purchase shares up to 5.926% of the equity capital of ICBPL from the company. IBPL proposes to utilize a portion of the net proceeds of Rs 1435 crore to part finance the construction and development of the Amravati Power Project Phase I and the Nashik Power Project.

Strengths

All the thermal projects are located in Maharashtra and Chhattisgarh in the west zone load center, with one of the highest peak power shortages. The west zone experienced a peak power deficit of 19.6% in August 2009.

All the power projects, barring the Nashik Power Project, are based on super critical technology, giving better plant efficiency and consuming lower coal compared with a sub-critical power plant.

Has applied for approvals to develop the power projects located at Amravati (Phase I & II) and Bhaiyathan under the mega power project scheme, thereby entailing certain tax benefits including customs and excise duty exemption on purchase of equipment. Similarly, the Nashik Power Project is coming up within the Sinnar Special Economic Zone (SEZ) in Nashik, proposed as a co-developer.

Weaknesses

No operational power unit

The first unit will go on stream only by June 2012. With increased additions in generation capacity in 2010-12, the peak deficit could moderate, thereby affecting the current high price realization from merchant sales of power. Moreover, with the Kyoto Protocol scheduled to expire in 2012, a new framework for the implementation of clean development mechanism (CDM) may not be brought into effect immediately. With the first unit going on stream only by 2012, there is uncertainty on the ability to avail CDM benefits.

Yet to appoint EPC contractors for two super critical projects & Nashik sub critical project

Of the five power projects (total 6,615 MW), the EPC contract has been placed for only two projects i.e. the Amravati Phase I Power Project and Bhaiyathan Power Project of 1,320 MW each. For other projects. i.e., the Nashik Power Project, Amravati Phase I Power Project, and the Chhattisgarh Power Project, the company is yet to initiate the process of appointment of EPC contractors.

The target to complete all the five power projects is September 2013. The long lead-time for supply of power plant equipment by domestic equipment manufacturer is, therefore, a concern. Alternatively, power plant equipment may have to be procured from global majors, particularly from China. But there is a general apprehension about the performance of Chinese power plant equipment. Domestic financial institutions are reluctant to fund projects with Chinese players as vendors.

No prior experience in development and management of power project / coal mines

No prior experience of development and management of power project. Reliance on Chinese companies for project management, supply, erection, commissioning of its power projects. Hitherto, Chinese companies deployed their personnel in India through business and visit visas. But, now, the government of India insists on work visas for Chinese workers. Work visas are not forthcoming easily. As a result, there may be delay in execution of the Amravati Phase Power Project and the Bhaiyathan Power Project as well as the project management and EPC contracts placed with Chinese companies.

Has been allocated two captive coalmines for the Bhaiyathan Power Project in Chhattisgarh by the ministry of coal. Has no experience in developing and operating a coal mine. As per the consortium agreement, SISC has the right of first refusal to carry out mining operations for the Bhaiyathon Power Project at competitive prices under the supervision of ICBPL. However, SISC's right to carry out mining operation shall cease to exist if it does not exercise its call option to purchase up to 5.926% shares of ICBPL. Without experience of operating coal mines, development and mining of these coalfields may affect the commercial operation of the linked Bhaiyathan Power Project.

Nashik project converted into sub critical project, but approvals are pending

The configuration of the Nashik Power Project has been revised. The capacity has been increased from 1,320 MW (2x660 MW) of super-critical plant to 1,335 MW (5X135 MW, 2X330 MW) of sub-critical units to bring down the gestation as the delivery schedule of super-critical units is higher. Preparation of the revised project document is underway. Has yet to receive relevant approvals. Refusal may affect the business plans. Pending approval for this change, EPC contractor for the Nashik Power project is yet to be finalized.

Bhaiyathan Power project bagged at very competitive levelised tariff

The Bhaiyathan Power Project was bagged amid stiff competition. Has to supply 65% (or 858 MW) of the power at a levelised tariff of Rs 0.81 per KWH. This tariff is much lower than Rs 1.19616 per Kwh of the Sasan ultra mega power project (UMPP) of Reliance Power. The distance from the coalfield to the power plant is approximately 85 km and coal is to be transported through rail network. This will add to the cost. The only advantage is that higher rate of 35% can be charged for merchant sales. Hence, the profitability of this project hinges on the ability to optimize realization on merchant power sales.

Financial closure achieved only for one project

Financial closure has been achieved only for the Amravati Phase I Power Project. In addition, commitment for a significant portion of the debt requirement of the Nashik Power Project has been attained. But tie-ups for funds for others including the Bhaiyathan Power Project are yet to be finalized.

Litigations

There are outstanding litigations against the directors, promoters and promoter group companies including criminal cases. Regulatory actions initiated against Inidabulls Securities, with common directors, by the Securities and Exchange Board of India and the stock exchanges.

Valuation

Currently. IBPL has no operational power plant. The first unit will be operational only by June 2012. Given this background, the company has priced its offer in a price band of Rs 40 to Rs 45. At the upper price band, the market capitalization will be Rs 9223.65 crore compared with the current market capitalization of Rs 174721.3 crore, Rs 38684.35 crore and Rs 22072.8 crore of NTPC, Reliance Power and Adani Power. The market cap per MW works out to Rs 1.39 crore per MW at the asking price of Rs 45. This is marginally higher than that of Reliance Power (Rs 1.17 crore per MW). On the other hand, the market cap per MW of Adani Power, which is expected to commission its Phase I & II of its Mundra Power Project (4x 330 MW) by February 2010, stands at Rs 3.34 crore and that of established player NTPC at Rs 3.51 crore.

Given the higher execution risks associated with the power projects enhanced by no prior experience of the group in setting up or operating a power plant, the asking price seems steep.

Grey Market Premium - Indiabulls Power

Company Name	Offer Price (Rs.)	Premium (Rs.)
Pipavav Shipyard	58	4 to 4.50
Thinksoft Global	115 to 125	3 to 4
Euro Multi Vision	70 to 75	4.50 to 5
Indiabulls Power	40 to 45 (Approximate)	4 to 5

Indiabulls Power IPO coming soon

Reportedly plans to raise Rs 1,500 crore through the public offer

Indiabulls Real Estate said on Wednesday, 15 July 2009 its wholly-owned power subsidiary Indiabulls Power has filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) for an initial public offer (IPO).

However, No other details were announced by Indiabulls Real Estate in a filing to the Bombay Stock Exchange.

Indiabulls Power (formerly Sophia Power Company) reportedly plans to raise Rs 1500 crore through an IPO to finance its three upcoming power projects in Maharashtra and Chhattisgarh.