Power Grid Corporation - FPO Update

When we carried the FPO analysis of Power Grid Corporation in our latest issue, the company had not declared its price band. However, the price band has now been declared and that is Rs 85-90. Retail investors would get 5 per cent discount to the issue price. Thus, considering the price band and the issue of 84.17 crore equity shares, the company expects to garner a total of around Rs 7154.45 - 7575.3 crore. Considering that 10 per cent fresh issue and 10 per cent is disinvestment by the government of India around Rs 3577.22 - 3787.65 crore would go the government kitty and similar balance amount would come to the company, which would then be used to part finance the 13 identified projects of the government.

As far as the valuations are concerned at the price band of Rs 85-90, Power Grid Corporation story is available at PE of 14.53-15.38x, while on EV/EBIDTA basis as well this long-term story is available at 12.70- 13.08x. This, we believe, is quite attractive and at almost 10 per cent discount to the higher price band of Rs 90, the scrip looks a real grab for long term and hence one can subscribe to the follow on issue for long term.