MOIL IPO - Very Attractive, But Listing Gains or Long-Term Value?

Whichever valuation metric with which you look at the ongoing MOIL IPO, you can’t be left unimpressed.But one question remains - whether it will be only listing gains, or whether there is long-term value.

The leading PSU miner of Manganese ore in India has a surprisingly high operating profit margin (OPM) of 70%, owing to its exceptionally cheap mining operations.

Even on net interest margin, MOIL comes across as surprisingly strong at nearly 44%, having delivered profits of Rs. 465 crore on a revenue of Rs. 1060 crore in FY’2010.

The ongoing fiscal is all set to be a blockbuster for MOIL, as in the first half itself the company had produced over 70% of last year’s profit. In fact, the according to PK Mishra, Steel Secretary, MOIL is expecting an even better bottomline growth in H2, which means that potential investors in this IPO will be in for a pleasant surprise in the next quarterly and annual result.

Manganese being used primarily in the steel industry, MOIL falls under the oversight of India’s Steel Ministry.

Though MOIL is a company solely doing Manganese, this metal is the fourth largest used metal after iron, aluminium, & copper. But the real relevance of Manganese is that 90% of its production is going to make steel.

ALSO READ: Punjab & Sind Bank IPO - Valuation Attractive, Momentum Doubtful, Timing Problematic

ALSO READ: Claris Lifesciences IPO - Invest or Wait?

With India all set to double its steel production by 2015, and thus become the second-largest producer in the world, Manganese demand is expected to be strong.

India also doesn’t have all the Manganese it needs. Despite being the 5th largest producer of Mn, India has been net importers for the last three years. That makes MOIL’s products to be in much demand in the foreseeable future.

With an over 50% market-share from its 10 mines in Maharashtra & Madhya Pradesh, MOIL is finely poised to be one of the key beneficiaries of India’s infrastructural boom.

The MOIL IPO price band of Rs. 340-375 is very attractive, given that it works out to only a price-earnings multiple (P/E) of 13.5, based on FY‘10 earnings. Retail investors shouldn’t miss this Issue as they will be offered a 5% discount.

In fact, Sumit Bose, India's Disinvestment Secretary has categorically stated that notwithstanding the unavoidable capital market fluctuations, no effort has been made to make the MOIL IPO attractive for retail investors.

Since MOIL is not raising any cash through this IPO, and with only Government of India, Government of Madhya Pradesh, and Government of Maharashtra selling their stake, there will not be any earnings dilution involved, that should be a big plus for investors.

KJ Singh, Chairman & Managing Director of MOIL has explained this, citing the Rs. 1700 crore cash reserves that makes further money raising unnecessary in the short-term.

The company's strong cash balance works out to Rs. 104 per share. MOIL is also a zero-debt company, and unlike bigger mining cousin Coal India, is not having a huge employee base that makes it less riskier on that front.

The IPO of this PSU Miniratna is of Rs. 1260 crore, and it has obtained an IPO rating of 5/5, showing 'Above Average Fundamentals'.

All these clearly shows that investors are all set to get above-average listing gains, with the only dampener being whether the ongoing scam involving certain public sector entities will make investors not very overenthusiastic. But this is unlikely, as with secondary market not providing any sort of investment opportunities in the short-term, investors will turn to quality IPOs in the primary market like MOIL.

On the issue of whether there will be a scramble to get out of MOIL on the listing day, some investors especially retail investors might do this, but due to the long-term value many institutional investors are likely to take a longer view. Also, though MOIL is a PSU, it need not fall into the same kind of unenthusiastic capital market stewardship post-IPO that makes many investors exit PSU IPOs with listing gains.

Claris IPO Subscribed 9% - Why Response is Slow?

Claris Lifesciences IPO which opened for subscription on November 24th could garner only 0.09 times or 9% of the total offer by the close of the second day, as per the cumulative data on NSE & BSE.

Maybe it was due to 24th, the first day of the offer, being a tumultuous day on India’s capital markets, with a major scam breaking out in the housing finance sector, with authorities carrying out arrests of several high-profile executives, and Sensex losing around 230 points.

But even by 5 PM on 25th, the Claris IPO is still to pick up steam, having been subscribed to only 9% of the offer. However, 25th being the monthly expiry day for capital market’s Futures & Options segment, investors might have been busy covering their short positions or rolling them over. The benchmark Sensex lost another 140 odd points on 25th.

ALSO READ: Claris Lifesciences IPO - Invest or Wait?
ALSO READ: MOIL IPO Very Attractive, But Listing Gains or Long-Term Value?

Also, two factors might be weighing down on investors’ minds regarding this Issue, one being a recent FDA ban on Claris that makes it unable to market some of its products in US, where it has a tie-up with pharma giant Pfizer.

Though the company has stated publicly that the FDA ban would amount to only a 3% volume loss at the maximum, the rather heavy under-subscription on the first day shows that investors aren’t fully convinced.

A query sent to Arjun Handa, MD & CEO of Claris to better understand the scenario arising from the FDA ban remained unanswered at the time of publishing.

An even heavier factor weighing down on this IPO might be the legacy of a now defunct pharma company - Core Healthcare Ltd (CHL) - that was promoted by the first relatives of current Claris promoters. CHL, which was earlier known as Core Parenterals Ltd, was a successful listed pharma company (BSE: 500091, NSE: COREPARENT) for many years, but was later caught in a serious debt default situation with banks, and it was also a subject of litigation by multiple law and securities agencies for a few years.

Another query sent to Claris on measures to assuage investor sentiments hit by the CHL episode, also remained unanswered.

The offer valuation of Claris, by way of price-earnings multiple (P/E) is attractive, compared with not only some listed peers like Strides Arcolab (BSE: 532531 / STRIDES, NSE: STAR), but also with the pharma industry-average, and this might help in attracting the requisite share applications before the Issue closes on 26th.

Also, retail investors usually flock to an IPO only on the last day in India, waiting to see whether the Issue is oversubscribed by many times, so that they can quickly exit with listing gains.

Claris Lifesciences was successful in attracting anchor investors at the upper end of the price band, a day before the IPO opened.

Withdrawing an IPO on poor investor response hasn’t happened in recent months, with some Issues being bailed out by QIBs on the last day.

However, multi-times oversubscription seems difficult for Claris IPO as of now.

Claris Lifesciences IPO - Invest or Wait?

The IPO of Claris Lifesciences Ltd, a 10-year old Indian pharma company, which opened for subscription on November 24th is sure to attract eyeballs in the market, due to pharma sector’s outperformance as well as the niche segment of generic injectables that Claris specializes in.

Whether this will translate to actual investor interest is the million dollar question before the company as well as its prospective investors.

Claris seemed to have made all the right connections for a 10-year old pharma company based out of Ahmedabad - its products are sold in 76 countries, it has an international marketing tie-up with pharma giant Pfizer, and it is backed by PE major Carlyle.

ALSO READ: Claris Lifesciences IPO - Why the Slow Investor Response?
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But then the Handa family to which Arjun S Handa, Promoter, Managing Director, & CEO of Claris belongs to, is no new group to the pharma sector. Arjun’s father, Sushil Kumar Handa was a pharma pioneer and promoter of Core Parenterals Ltd, later renamed Core Healthcare Ltd (CHL), and which was a successful listed company for some years (BSE: 500091, NSE: COREPARENT).

But then misfortune struck the firm’s operations and CHL became a loan defaulter to many banks and there were also multiple cases made against Sushil Handa by CBI and Gujarat Police, as well as securities authorities like SEBI, NSDL, CDSL, BSE, NSE etc. However, some of these cases have been since closed.

But ever since the new company was promoted as Oracle Laboratories Ltd and the reins came into the hands of Arjun S Handa, it has been a long stint of uninterrupted growth, expansion, and profitability at Claris Lifesciences.

Today, with 113 products across multiple international markets and therapeutic areas, Claris is a country leader in its pharma segment of sterile injectables.

Almost all of its products are off-patent and this makes them a focused player in the generic injectables business. Generic injectables, as a segment, tends to outperform even the generally outperforming pharma segment, as entry barriers are higher, competition is lesser, and margins are better.

The comparable and best example from India’s listed space would be Strides Arcolab (BSE: 532531 / STRIDES, NSE: STAR), which has an industry-leading year-to-date price performance of over 125% even after the recent falls in the market. Strides trades at an unbelievable TTM P/E of over 93, but is still regarded as a growth stock.

Compared to Strides Arcolab, the offer P/E of Claris Lifesciences will work out to only 14, and this should be a major attraction to this IPO. However, it should be noted that though Strides Arcolab is comparable to Claris in revenue, as well as a leader in sterile injectables, Strides is also a leader in soft gelatin capsules.

Still, Claris Lifesciences IPO should be mentioned as reasonably priced, as the pharma industry average P/E is in mid 20s. What this means is that Claris can move up significantly in the medium to long-term, may be even by 50% from the IPO price, if its valuations catch up to even the industry average.

But even if it fails to be so, earnings expansion can drive the scrip forward, as Claris has demonstrated between 2005 and 2009 that it can grow at a CAGR of over 25% and deliver an EBITDA margin of over 30%. This should make the short-term quarter-to-quarter prospects also attractive for investors.

The company is planning a Rs. 250 crore capex using the IPO proceeds, and Rs. 46 crore from the remaining will go for repaying debt.

However, a recent FDA ban on certain Claris products marketed by Pfizer in US, may weigh down on the stock temporarily. Its long-term impact remain to be assessed.

Taking into consideration all the above factors, especially its tie-up with Pfizer, investment by Carlyle, its wide product range across 76 countries, and its demonstrated growth curve during the last several years, as well as the attractive offer valuations vis-à-vis competitors, Claris Lifesciences can be considered as a reasonable buy for investors.

The Issue has roped in anchor investors, with their portion of Rs. 54 crore fully covered at the upper edge of the price band of Rs. 278 to Rs. 293.

Claris Lifesciences IPO has obtained a Grade 3 rating from Fitch, showing Average Fundamentals.

Why RPP Infra Projects IPO is Racing to Oversubscription

The enhanced retail investment limit of Rs. 2 lakhs is clearly helping RPP Infra Projects IPO to getting oversubscribed by at least a few times. But a closer analysis shows that this is not the only reason, as both HNIs and Corporate Investors are subscribing to the Issue strongly.

ALSO READ: RPP Infra Projects IPO - Invest or Wait?

By the close of the second day itself, the retail portion was subscribed 107%, showing that retail investors are taking fairly strongly to this IPO, probably also on the enhanced retail investment limit by SEBI. RPP Infra is the first IPO to benefit from this development.

The overall subscription level of 76% by the end of second day is also fairly good, as this clearly shows a race to being oversubscribed by at least a few times.

The Non Institutional Investors segment has also shown surprising response to RPP Infra IPO, having subscribed 292% of the portion reserved for them. The fact that both Corporate Investors and High Networth Individuals (HNIs) fall in this segment bodes well for this IPO, as on the listing day, these are usually the segments clamouring for the scrip if they have missed out on the Issue. And with nearly thrice oversubscription in this segment, such rush for the share is likely on the listing day.

Now the question is why an average infra company’s IPO is garnering this much retail, corporate, and HNI support.

One reason is that the RPP Infra IPO is fairly priced, and not overpriced. What this means is that if the management guidance of 51% topline growth in FY’11 is indeed realized, investors can expect the scrip to reasonably appreciate within the next two quarters itself.

Secondly, though the infra space has underperformed in recent quarters, it is one of those rare sectors in India’s capital markets where valuations can be stretched to a significant degree. For example, out of the 65 listed infra players, around 16 are trading much above RPP Infra’s asking P/E of 19, which is also around the industry average of 20. Even after cancelling out the exceptional cases, we can find around 10 infra players commanding valuations between 25 and 50.

With RPP Infra Projects growing for the last five years at a CAGR of 28.73%, there is no reason why it can’t command such an above average P/E in the coming years, especially if its BOT forays and expansion to overseas markets like Sri Lanks pans out as planned.

RPP Infra Projects IPO - Invest or Wait?

RPP Infra can be a reasonable buy for those investors who are bullish on the prospects of small-cap construction companies in the country’s emerging infrastructural boom.

RPP Infra Projects IPO which was subscribed almost half (0.48 times) by the close of first day is likely to be subscribed multiple times by the last day, if investors warm up to this infra story, which is not widely known outside of Tamilnadu and the Southern States it largely operates in.

ALSO READ: Why RPP Infra Projects IPO is Racing to Oversubscription

Post the IPO which opened on 18th November and closing on 22nd, the company will be listed in the Indian capital markets segment of ‘Construction & Contracting - Civil’.

This segment is highly competitive, already having 65 listed players ranging from large players like Jaiprakash Associates, Lanco Infratech, & HCC, to medium-sized players like Supreme Infra, PBA Infra, & Mukand Engineers, to smaller players like Elnet Tech, Martin Burn & IRB Infra.

The first thing investors would be looking for is where in this vast infra space - ranging from Rs. 10,000 crore sales to Rs. 10 crore sales - will RPP Infra Projects fit in.

At FY’10 annual sales of around Rs. 147 crore, RPP Infra clearly falls in the lower-middle segment of the listed infra space and is comparable in revenue to IVRCL Assets. To put RPP Infra’s position in better perspective, its annual sales is lower than noted player GMR Infra, but higher than Mukand Engineers, a Bajaj Group company.

The revenue obtained in FY’10 is also not a one-off aberration, following a good growth pattern during the last five years, that is between FY’06 and FY’10, amounting to a CAGR of 28.73%.

The order book of RPP Infra is also at good levels, now having Rs. 613 crore worth of projects, that should come in within this fiscal and FY’12. In fact, Chairman & Managing Director Arul Sundaram expects FY’11 top-line to grow by 50%.

Anyway, the order book size of 4X times FY’10 revenue signals that the growth curve would continue, at least for the next couple of years.

Secondly, investors would be looking at RPP Infra’s profitability levels, and this is crucial in a segment which is prone to volatile profit-loss swings, quarter to quarter and year to year.

For FY’10, RPP Infra delivered an EBITDA of around Rs. 17 crore, which amounts to an EBITDA margin of around 11.64%. The margins have been stable compared with FY’09, even slightly improving from last year’s 11.54%.

The EBITDA margins are good compared to peers like IVRCL Assets, and slightly better than even Mukand Engineers. However, it is no match to the kind of margins enjoyed by a value-adding operator like GMR Infra.

Coming to the valuations front, RPP Infra’s FY’10 EPS was Rs. 5.24 and thus at the top of the price band, the IPO is asking for a price-earnings multiple of 14 odd. However, considering that the IPO also involves a dilution of around 27%, the effective offer P/E on TTM earnings will come to around 19.

The infra industry average P/E being 22 odd, the Issue seems to be fairly priced. But the fact that many peers are available much below the average P/E might confuse investors. For example, Mukand Engineers is available at a P/E of less than 8.

On the flip-side, many infra stocks are known for unimaginably high P/Es, one of the best examples being GMR Infra’s TTM P/E of 4965.

Coming to valuation by book value, on a book value of around Rs. 16, the P/BV comes to 4.6 times, which is again, not-so-high but not-so-low either, with many infra shares trading on higher and lower P/BVs.

But IPOs, especially smaller IPOs often tend to outperform as markets ascribe to them a better rating than listed peers. Also taking into consideration that India’s infra sector is set to boom, and taking into account the promoters professional background, diversification into irrigation and BOT, and the company’s growth prospects, RPP Infra Projects can be said to be a reasonable buy.

RPP Infra IPO is the first IPO to benefit from the recently increased retail investment limit of Rs. 2 lakh.

Power Grid FPO - Why World Rushed In and Why Retail Investors Should Follow

The FPO of Power Grid Corporation (BSE: 532898, NSE: POWERGRID) closed the second day with overall oversubscription of 9.72 times, of which the QIBs led the rush with oversubscription of 15.29 times. But the reserved quota for retail individual investors was subscribed only 0.61 times. This anomaly seems to be due to a lack of understanding of Power Grid's growth prospects among the lesser informed retail investors.

Also Read: Why Power Grid FPO Should Not be Missed

For a developed world starved of growth opportunities, the emerging markets are no doubt the only bet to invest and grow their money. And in emerging markets, India stands out due to its advanced and well-regulated stock markets, while among the country’s various growth opportunities, power generation and transmission stands out as perhaps the only sector needed for all other sectors.

But one look at the country’s listed power space will be enough to convince anyone that not many quality investment opportunities are there any more. What you see is a bunch of private players, quoting at astronomical valuations, as well as a few PSU power companies quoting at modest valuations but which are increasingly being pressured in their operations.

For example, Indiabulls Power is trading at a price-earnings of 193, Reliance Power at a P/E of 142, Adani Power at a P/E of 72, Jaiprakash Power at 49, Tata Power at 40, and Reliance Infra at a P/E of 24.

Compared to these, Power Grid Corporation’s effective P/E at the FPO price of Rs. 90 is just 16. Is there any wonder then that the world rushed in?

Even if you assign Reliance Infra’s reasonable P/E to Power Grid, you have a scrip that can reach Rs. 136 on a modest re-rating. There is no reason why such a re-rating is an impossible scenario post-FPO as influential international brokerages are sure to wake up to the fact that smaller private players like Indiabulls, Reliance, Adani, Jaiprakash, or Tata are no match to a state-owned almost-monopoly like Power Grid.

But even while foreign institutional investors have lapped up as many shares as they can, domestic retail investors have been slower to this FPO. One reason for the relatively lukewarm retail support till now should be Power Grid’s rather flat price-performance over the year-to-date. But in the long run, all the scrip needs is a re-rating which has been partially fulfilled on the FPO opening date when Citi and Macquarie upgraded their outlook and target prices for Power Grid.

Anyway, retail demand should ideally change on the last and third day as retail investors have much more to gain, as the Power Grid scrip will come to them at a P/E of 15 due to the additional 5% discount. Even if Power Grid ends up at the comparable NTPC kind of valuations, that is at a P/E of around 19, this means an upside of almost 30% from the retail FPO price.

And the downsides are almost negligible. Because even if no valuation expansion takes place through a re-rating, here is a story that can appreciate solely on earnings expansion of 15-25% a year.

That is why Power Grid FPO can be one of those long-term wealth creators for retail investors much like the upcoming FPOs of better performing PSUs like SAIL, IOC, MMTC, SCI, RCF, ONGC etc.

Manappuram at All Time High - How to Invest Here Now?

On the first trading day post its successful QIP of Rs. 1000 crore, Manappuram Finance (BSE: 531213, MANAPPG / NSE: MANAPPURAM) has marked not only new 52-Week Highs, but All-Time Highs.

Naturally, it raises the question of how to enter or accumulate the stock, going forward.

Though it has recently become a BSE-500 index stock, Manappuram is yet to have glaring media publicity across all segments of investors, like some other NBFCs promoted by diversified business houses like Bajaj, Mahindra, Reliance, Shriram, or Sundaram. Perhaps one reason was lack of awareness regarding Manappuram’s core gold loan segment.

Still, Manappuram, headquartered in the non-descript village of Valappad in Thrissur District of India’s southernmost Kerala State, has been one of the most ardent wealth creators for its faithful band of early investors, many of them from Kerala itself.

Manappuram stock which began its journey quietly at Rs. 10 in 1995, now stands effectively at Rs. 3560 - a jump to 35600% of original value. To put this in perspective, a Rs. 1 lakh investment in Manappuram in 1995 would be now worth Rs. 3.56 crore. A 356 times increase in as little as 15 years.

The recent 52-Week High of Rs. 178.95 is after a 10/5 split, as well as two bonus issues, thus making the current effective rate for the original Rs. 10 face-valued scrip at Rs. 3560.

Some later day investors made even more from the scrip - almost double than first investors - and that too even quicker, as Manappuram had slipped from its face value to a range of Rs. 6 to Rs. 7.50 during 2002 to 2004.

However, today, many discerning investors must be ruing not about these levels, but the fact that Manappuram was available in its young teens during 2005, in its early 20s during 2006, and in its early 40s in as late as 2007.

An even greater chance, by way of rapid gains, was available in the scrip as recent as 2009, when the scrip was available below Rs. 100. Not the current scrip of face value Rs. 2, but the original scrip of face value Rs. 10 which now has a value of around Rs. 3560.

Was that the last multi-bagger opportunity in this stock? On first looks it would seem so, because from 2009 lows of Rs. 97 it shot up swiftly to almost Rs. 700 and Rs. 800 levels in 2009 and 2010 respectively.

These were the years when the interest in this stock  started soaring, due to the bountiful returns of 5X it accorded to high-profile investors like US headquartered Sequoia of Apple-Yahoo-Google fame.

Now, the question before investors post QIP - in fact Manappuram’s second successful placement in recent fiscals - is whether the scrip is still of multi-bagger potential. 

The almost unbelievable, but fundamentally correct answer is yes. A quick glance at the six-months post their last bonus and stock-split is enough to convince anyone of this. The stock has grown to 225% or 2.25 times since May 2010.

Now that brings investors to the next question - is this just a technical rise or is it backed by fundamentals? Again, a quick glance at the two quarters post May provides the answers. Net profit has jumped to 324% in June quarter and to 325% in September quarter, both YoY.

Manappuram today trades at 33 P/E on TTM earnings, around 6 multiples above the NBFC industry average of 26. By book-value also it is highly valued, trading at 8.84 P/BV. Though it signals that caution is required, Manappuram has now reached a stage where forward P/E for FY’ 2012, 13, or even 14 are considered by investors due to the steady and relentless growth exhibited by this NBFC.

How does the just concluded QIP change the scenario for entering and accumulating the stock? For one, the fact that the QIP was oversubscribed by nearly 1.8 times, at much above the floor price of Rs. 158.70, signals that a new support may be forming around the QIP price of Rs. 168. The Issue which was arranged by Bank of America Merrill Lynch, UBS, CLSA, & Enam, is known to have roped in quality long-only funds from high-profile institutions like Goldman Sachs, Fidelity, & Blackstone.

Earlier, before the QIP, speaking to Seasonal Magazine, Manappuram Chairman VP Nandakumar had indicated that the QIP wouldn’t amount to much dilution due to the good valuations, and that EPS growth could catch up with profit growth by the end of this fiscal.

Also Read on Manappuram:
Manappuram at All Time High - How to Invest Here Now?
Manappuram Improves Further on Higher Growth, Lower Expenses
Manappuram’s Gold Loan Business - Risky or Rewarding?
Manappuram - Overrated or Underrated?  
Can Manappuram Keep Growing at 60%?

Why Power Grid FPO Should Not be Missed

Power Grid (BSE: 532898, NSE: POWERGRID) is no doubt a fundamental performer in the PSU sector, but ever since its FPO opened on 9th November, the scrip is all set to be an outperformer both fundamentally, as well as technically, on price-action.

Also Read: Power Grid FPO - Why World Rushed In and Why Retail Investors Should Follow

Though the scrip had slipped on the eve of the FPO opening, as is customary when Government announced the discount-to-market-price as well as the 5% retail discount, Power Grid bounced back strongly on the FPO opening date, possibly due to rating upgrades by Citi & Macquarie. If the slip on the FPO eve was 3.63%, the bounce-back on the opening date was by 5.54%, thus more than making-up for the slip.

By 12.00 hours IST on its second day, Power Grid FPO was oversubscribed by 1.10 times, and with two more days to go for the FPO to close, is all set to be oversubscribed by at least 5 to 10 times.

But even while new investors are lapping up the shares between the price-band of Rs. 85 to Rs. 90, it is impressive that the Power Grid counter is holding its own in the secondary market at around Rs. 103.50 levels even on the second day, that too with good volumes. Not an easy feat for any scrip going through an FPO on discount, and it also signals that due to the expected strong oversubscription, not everybody is expecting to get shares from the FPO.

In any case, those who are lucky to get in through the FPO, stands to gain a minimum of 15% in a matter of days, if the secondary market stands firm, and the demand for the FPO grows as it enters the final days.

The real positive point for investors amidst all these is the fact that the technical demand and price-action for the stock is more than backed by the company’s fundamental performance.

Here is the only monopoly player in the power sector. Here is a company that has never dipped in sales or profits for the last six years. And here is a company that despite having dominant status in the core business of inter-state power transfers, is actively pursuing secondary revenue streams like consultancy and telecom towers.

Capital market investors the world over are keenly looking for monopolies to invest in. Monopoly power can be via brand strength like the case of say Infosys in India or Apple in USA, or in the case of Chinese and Indian PSUs, a dominant presence in the regulated core sectors is enough. The success of Coal India IPO was the most recent large-scale example of this phenomenon.

But when it comes to India’s power sector, it is becoming increasingly difficult to identify monopolies, thanks to the systematic de-regulation of the sector. In sales, Power Grid Corporation is comparable to Tata Power or Reliance Infrastructure. In profits, even better, made second only by power leader NTPC.

But when it comes to market dynamics, even NTPC is no match, as Power Grid is a near monopoly in its core segment of inter-state power transfers, while NTPC is getting increasingly pressured from all sides.

Now, what if such an assigned monopoly has always risen to its responsibility and outperformed consistently? Power Grid Corporation hasn't dipped in sales or profits for the last six years. The recent second-quarter results has stunned the markets, and provided the perfect backdrop for Power Grid’s Rs. 7500 crore FPO. Though powered also by some one-time developments, Q2 revenue has jumped by over 25% YoY, while profits have surged by almost 42%.

From the investors’ viewpoint, Power Grid also comes cheap, trading 3 multiples below the industry average P/E of 21, and with price-to-book-value still below 3 which is reasonable considering its industry dominance. Interestingly, these valuations are after the recent run-up, which means that Power Grid is still an investment opportunity in the secondary market, and all the more in the primary market as the FPO comes with a decent discount from market price, that amounts to a P/E of 15.05 and a P/BV of 2.28 for retail investors.

All in all, Power Grid FPO is truly an occasion for the Indian public to hold part ownership of their own treasures, as per the disinvestment vision. Half of the Rs. 7500 crore issue will go to the Government, and the other half will go for part-funding the impressive capex of Rs. 55,000 crore planned by Power Grid, that will make it grow in revenues and profits in the years to come.

Interestingly, under the leadership of Chairman & Managing Director SK Chaturvedi, Power Grid has not only advanced on its core business of inter-state power transfers, but improved its two secondary revenue streams of consultancy and hosting telecom towers in remote and forest areas.