Adani Power IPO Analysis

Adani Power, a power project development company, promoted by Adani Enterprises Limited, flagship company of Adani Group, with total revenues of Rs 196 billion, is entering the capital markets with an initial public offering of 301,652,031 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process.

The issue will open on July 28, 2009, and close on July 31, 2009. The company filed the Red Herring Prospectus (RHP) with the Registrar of Companies, Gujarat, Dadra and Nagar Haveli (RoC) on July 14, 2009.

Business of Adani Power Limited

Adani Power Limited will be in the business of developing, operating and maintaining power projects in India. It is part of the Adani Enterprise Limited, which is a large Indian conglomerate with revenues of over Rs.196,097.10 million in fiscal 2008. The parent company is one of the three largest coal traders inIndia and the largest power trading company in India (in the last three years).

The group itself is looking at vertical integration with power projects and it currently has presence in:

* Coal Mining
* Coal Trading
* Shipping
* Power Generation
* Power Transmission
* Power Trading
* Owning and Operating a SEZ

Adani Power Limited has four thermal power plants that are in various stages of development:

1. Mundra Phase 1 & 2 with a capacity of 1,320 MW. Both phases are split into sub - generation of 330 MW each. The first phase of 330 MW each are expected to get commissioned by June 2009 and the full project is expected to get commissioned by Feb 2010.

2. Mundra Phase 3 with a capacity of 1,320 MW, out of which 660 MW will be commissioned in Jan 2011 and the remaining by June 2011.

3. Mundra Phase 4 project with a capacity of 1,980 MW, out of which 660 MW will be commissioned by Aug 2011 and the remaining by April 2012.

4. Tiroda Power Project with a capacity of 1,980 MW, out of which 660 MW will be commissioned by July 2011 and the remaining by April 2012.

All dates are current estimates.

The company has applied for sector specific SEZ approvals for all its coal projects. If granted, this will give them substantial tax advantages.

Since Adani Power is part of the Adani group which is a major coal producer and trader — it will benefit in terms of obtaining raw materials in a timely and secured fashion.

Objectives of the Adani Power IPO

Adani Power is getting in the IPO to raise funds primarily for the following:

1. Finance the Mundra Phase IV 1980 MW Power Project partly

2. Fund the subsidiary that will engage in the construction and development of the 1980 MW Tiroda Power Project.

Buy or Not to buy :

I personally feel it is a buy as Power stocks can show some good movement in near future. One can expect 20% to 30% returns post listing. If you are a long term investor its a must buy then!

Price band : Rs 110 - 130 (Approximate)

Grey Market premium : Rs 30 -35