Sucheta Dalal :Government treads cautiously on SJVN’s IPO
Sucheta Dalal

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Government treads cautiously on SJVN’s IPO  

April 28, 2010

The government seems to have priced the Satluj Jal Vidyut Nigam Ltd (SJVN) initial public offer (IPO) at a fairly low price after receiving lackadaisical retail investor response from its recent follow-on public offer (FPOs) for various State-run units.


NTPC’s FPO was priced at Rs201 and got a meagre 0.1646 times retail subscription. Similarly, Rural Electrification Corporation Ltd’s (REC) FPO priced at Rs203, received just 0.22 times subscription from the retail investor category. NMDC Ltd priced at Rs300 at the lower band received 0.21 times retail subscription. The only exception was United Bank of India which was issued at a price band of Rs60-Rs66 and was subscribed 9.80 times in the retail investor category. Another government owned entity, NHPC Ltd, which was priced a bit lower at a price band of Rs30-Rs36 than REC and NTPC, received 3.87 times subscription from retail investors.


The government holds 75% stake in SJVNL and the remaining 25% is held by the Himachal Pradesh government. SJVN has given a 5% discount to retail investors and its employees.


The object of the issue is listing on the stock exchanges; SJVN will divest 10.03% stake in the company by issuing 41.50 crore shares.


Incorporated in 1988, SJVN (erstwhile known as Nathpa Jhakri Power Corporation Limited or NJPC) is a hydroelectric power generation company originally established as a joint venture between the Centre and Himachal Pradesh to develop and operate the the Nathpa Jakhri Hydro Power Station (NJHPS).


The company posted a profit after tax (PAT) of Rs775.37 crore in the nine-month period ended in the December quarter of 2009. In FY09 and FY08 it recorded PAT of Rs759.32 crore and Rs716.91 crore against a total income of Rs1,634.84 crore and Rs14,62.28 crore respectively. It had a net cash flow of Rs215.71 crore in its December quarter of 2009. In FY09 and FY08 it had net cash flow of Rs577.84 crore and Rs72.56 crore respectively.


SJVN’s P/E stands at 13.79 for the year ended March 2009 while its earnings per share (EPS) stand at Rs1.77 based on the year ended March 2009 earnings. The peer group hydropower companies like KSK Energy Ven and NHPC Ltd carry a price earnings ratio (P/E) of 137.7 and 23.5 respectively.


JM Financial Consultants Pvt Ltd, IDFC Capital Ltd, IDBI Capital Markets Services Ltd and SBI Capital Markets Ltd are lead book-running managers for the IPO. The issue opens for subscription on 29 April 2010 and closes on 3 May 2010. Ratings agency CRISIL has assigned an ‘IPO Grade 4’ to the issue. SJVN plans to raise Rs954.50 crore-Rs1,079.00 crore at a price band of Rs23-Rs26. — Ravi Samalad

-- Sucheta Dalal