Adani Power
Adani Power is entering the capital market on 28th July, 09 with a public issue of 30.17 crore equity shares of Rs. 10 each, in the price band of Rs. 90 - Rs. 100 per share.
Though the company claims to be setting up power projects of 9,900 MW at 4 locations viz. Mundra, Tiroda, Dahej and Kawai, but, only projects of 6,600 MW are under advanced stage of implementation. Its financial closure, equity contribution, fuel linkage and PPA are all in place and is expected to start by March 2012. This will happen in phases - phase I of 330 MW to be operational in July 09. Balance 3,300 MW, with 1980 MW at Dahej and 1320 MW at Kawai is yet to take shape. This has total project cost of Rs. 14,770 crores, of which Rs. 11,816 crores would get raised via debt and balance of Rs. 2,954 crores from equity. So at later stage, this equity component, would either get raised from internal accruals or by further equity dilution, at a later date.
Mundra project is having total generation capacity of 4,620 MW and this is being put up in four phases with first two phases of 660 MW each; 1,320 MW in Phase III and 1,980 MW in Phase IV. Total Project cost of all these four phases is at Rs. 19,160 crores, of which, debt of Rs. 15,266 crores is being raised while Rs. 3,840 would come via equity. Tiroda Project has 1,980 MW with project cost of Rs. 9,263 crores to be financed by debt of Rs. 7,410 crores and equity of Rs. 1,853 crores. The company is presently having 77.38% stake in this project, which may eventually be at 74 %.
The present equity of the company is at Rs. 1,878 crores which is largely used to finance three phases of Mundra. The proposed IPO is being made to mobilize the funds for Phase IV- Mundra and Tiroda project, which is estimated at Rs. 3,163 crores (Considering 74% for Tiroda). The proposed issue would be able to mobilize close to Rs. 3,000 crores, considering price discovery at Rs.100 per share.
The company has Power Purchase Agreement(PPA) in place for 4,744 MW, which is about 72% of the capacity under implementation, of 6,600 MW. Balance will be sold on spot basis. Due to assured returns available to power projects and with gearing of about 4:1, the company will be having advantage to post a return of close to 35% on shareholders funds.
Post issue equity of the company will rise to Rs. 2,180 which would translate into market capitalization of close to Rs. 22,000 crores, considering issue price of Rs. 100 and shall have Net Worth of close to Rs. 5,700 crores. This would result in a PBV of close to 3.85.
the closest contenders for Adani, based on the size of the project are Sterlite Energy, GMR Energy, Jindal Steel Power, JSW Energy, J. P. Power, Reliance Power. And we compare these with Adani, then, it can be seen that the execution capability will be the key for success of all these companies. This has been established by the promoters of the company, after implementing 32,000 acres sea-port project being
Considering all this, issue looks good and recommended even at the upper band of Rs. 100, as power sector holds good long term potentials to reward the shareholders.