NHPC Listing

BY S. P. Tulsian
NHPC Ltd. stock will be listing tomorrow and looking to the grey market premium of Rs. 5.50 to Rs. 6 and issue having made at Rs. 36 per share, it is likely to list, at around Rs. 42 per share. This listing will definitely be a disappointment for the NHPC allottees and for the primary market.
NHPC went public on 7th August 2009 with an issue of 164 crore equity shares of Rs. 10 each, of which, fresh issue was 112 crore shares, while, offer for sale was of 52 crore shares. The allotment has been made by the company in record 14 days.
QIB category subscribed by 29.11 times, HNI category subscribed 55.93 times while Retail category subscribed 3.79 times and Employees category subscribed by about 0.66 times. Retail category has 13.35 lakh allottees while HNI category had just 6,033 shareholders with 381 allottees in QIB category and 5,530 members in employees category. The total shareholders came to the company’s fold, post IPO, is 13.47 lakh.
Most of HNI applicants have applied in the issue, after availing 95% finance, at an average interest rate of 11.50% to 12.50%. If we calculate interest at 11.50% on 95% amount having availed, for 14 days, the interest cost per share comes to Rs. 8.25 per share. This results in a total cost per share to an HNI investor at Rs. 44.25 per share.
In Retail category, minimum of 175 shares and maximum of 2625 shares were allowed and firm allotment has been given to those who have applied for 700 shares and above. In this category, no applicant avails finance, hence interest cost, on notional basis to them, at 12% per annum, work out to 63 paise, per share of the share allotted. In QIB category, it is not material, as 10% of the money is only paid by these allottees. In such a case, interest cost to them is about 48 paise per share.
So HNI, will be at a great disadvantage and likely to see loss on listing day, if share lists below Rs. 44.25 per share, or rules below this level, throughout the day. Generally, such allottees are not in a mood to hold the position, as they mostly go for listing gain. Inspite of the share now remaining with them, without any debt burden or pledge, still higher cost keeps bothering them at all the time.
In such a scenario, it is likely to see selling pressure coming in from HNI and Retail category investors, for first 2 - 3 days, which will keep pressure on the stock price and may not allow it to move past Rs. 42. Also, poor listing of Adani Power, has disappointed this class of investors, as share is still languishing at Rs. 104. In case of NHPC, even in grey market, trades have taken place at a premium of Rs. 9 to Rs. 12 which will also pose a problem in its settlement, as it is causing loss to those who have gone long in this stock.
On fundamental basis, stock has long term prospect to give a steady and annualized return of about 15% to 18% from a level of Rs. 42. However, don’t expect fireworks in the stock in the near term as stock is likely to move gradually on the lines of NTPC and Powergrid, other 2 PSU utility companies.

Source: www.premiuminvestments.in (By S P Tulsian)