PowerGrid FPO fully subscribed on Day 1

BY Siddharth Kumar
Delhi

Investors planning to bid for a bigger pie in the state-run Power Grid Corporation of India Ltd’s (PGCIL) follow-on public offer (FPO) after the changed investment limit for retail investors will be disappointed, as the market regulator is yet to officially notify the amendments.

Last month, the Securities and Exchange Board of India (SEBI) had approved an increase in the application limit in public issues for retail investors to Rs 2 lakh from the existing Rs 1 lakh.

The decision to hike the retail limit is yet to be notified by the SEBI and hence the new increased cap “will not be applicable to the Power Grid Corporation of India Ltd’s follow-on public offer,” Union Disinvestment Secretary Sumit Bose told reporters here on Tuesday, during a road show of the state-run power transmission major.

PGCIL has came out with a public offering worth about Rs 7,600 crore and the issue has received good response from investors as it was fully subscribed on the first day of launch on Tuesday. In the secondary market as well, shares of PowerGrid bounced back and gained 5.49 per cent to close at Rs 103.75 each on the Bombay Stock Exchange. In the previous session, the scrip had fallen 3.6 percent.

“Since the FPO is on, volatility in the stock cannot be ruled out,” SMC Global Securities strategist Jagannadham Thunuguntla said.

The issue, priced in a range of Rs 85 to Rs 90 per share, closes on November 12. However, for qualified institutional investors, the bidding will end on November 11. A discount of 5 per cent will be offered to retail investors and employees on the FPO issue price.

The state-run navratna firm is the country’s largest power transmission company and aims to double its capital spending to about $27 billion (about Rs 112,000 crore) in the five years following April 2012.

“We expect PGCIL to achieve the capex (capital expenditure) of Rs 550 billion (Rs 55,000 crore) targeted under the Eleventh Plan, despite meaningful delays in generation capacity additions, given the incremental capex towards high-speed transmission corridors,” domestic brokerage house Motilal Oswal said in a note.

Under the issue, the Centre is divesting its 10 per cent stake by offering to offload its 420 million shares. The FPO also comprises a fresh issue of 420 million shares, representing another 10 per cent stake. Post-issue, the government’s total stake will come down to 69.4 per cent.

According to PGCIL Chairman and Managing Director SK Chaturvedi, the company plans to expand its telecom infrastructure network, including further diversification into value-added services.

The firm aims to diversify into the business of leasing its tower infrastructure to independent tower firms and telecommunications service providers and has appointed a consultant for the same.

The company has also floated tenders for the selection of telecom tower infrastructure providers for utilising its transmission towers in Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir, he said. According to the Motilal Oswal report, “The revenue potential of this business could possibly be Rs 4.5- 5 billion.”

When asked whether the PGCIL issue will be able the generate the kind of demand Coal India’s Rs 15,200 crore initial public offering (IPO) did, Chaturvedi said, “The two should not be compared as demand for an IPO is different from a FPO.”

PGCIL had been entrusted with the statutory role of Central Transmission Utility (CTU) by the government. As CTU, the company operates and is responsible for the planning and development of the country’s nationwide power transmission network, including interstate networks. It was ranked as the world’s third largest transmission utility by the World Bank in January 2009.

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