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Adani Power Issue Oversubscribed 21 Times

31 July, 2009

Investors bid for Adani Power shares worth around Rs 60,000 crore (~$12 billion) as against the IPO size of under Rs 3,000 crore. This translates into ‘oversubscription’ of over 20 times the size of the issue for the Gujarat-based firm backed by private equity investor 3i. Excluding the ‘anchor investors’ portion of the issue the issue was oversubscribed 20 times.

A large chunk of the bids have come at the upper end of the price band of Rs 90-100 for the IPO which means Adani Power would raise somewhere close to Rs 3,000 crore from the issue. It would also mean an immediate upside of around 66% in value of holdings for UK’s 3i, whose average cost of investment per share is estimated at Rs 61.

Adani Power had earlier become the first company to see full subscription of its initial public offer on day 1 this year. The largest public issue since the IPO of Reliance Power in early 2008 was oversubscribed close to three times on the first day of the IPO, indicating the investors appetite.

DSP Merrill Lynch Ltd was the global co-ordinator and book running lead manager(BRLM) while Enam Securities, IDFC – SSKI, JM Financial, Kotak Mahindra Capital, Morgan Stanley India, ICICI Securities and SBI Capital were the other BRLMs.

STRAIGHT INTO THE FOURTH SLOT IN POWER SWEEPSTAKES

At the upper end of the price band the company will be valued at Rs 21,800 crore($4.5 billion) making it the fourth largest power business firm behidn NTPC, Power Grid Corp and Reliance Power. Its valuation would be much above other listed power generation and transmission firms such as Reliance Infrastructure, Tata Power, Neyveli Lignite, Torrent Power, JP Hydro and CESC.

WHO BOUGHT THE ISSUE?

Adani Power’s issue has seen a significant interest from institutional investors who have carried the issue quite comfortably even as retail investors were yet to participate in a big way as of the penultimate day(Thursday) of the IPO. The non institutional non retail portion of the issue was also oversubscribed one day before the issue closed for subscription.

WHAT IT MEANS FOR OTHER POWER ISSUES?

Given the size of the issue, the largest in 18 months, the investor interest sets a positive tone for the rest of the public issues including the other power sector IPO of NHPC. Government owned hydro power firm NHPC is coming up with the maiden offer in one week targeting to scoop up as much as Rs 6,000 crore(~$ 1.25 billion)

ANCHOR INVESTORS

The issue was also the first public offering which allotted shares to a group of anchor investors after market regulator Sebi institutionalised the concept early this year.

Anchor investors were allotted 52.8 million shares(out of total 301.6 million shares on issue) at Rs 95 per share. The group of anchor investors include T Rowe Price, Sundaram BNP Paribas Mutual Fund, Credit Suisse, CLSA, AIC Advantage Fund and Ecofin along with one or more of their investor arms.


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Adani Power Issue Oversubscribed 21 Times

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