Indiabulls Power IPO subscribed 22 times

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Updated: 15/10/2009 | 10:58 PM IST

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Press Trust of India

Thursday, October 15, 2009 (Mumbai)

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The initial share sale offer of Indiabulls Power, which closed on Thursday, got subscribed nearly 22 times, generating demand for shares worth over Rs 27,369 crore, with most bids coming in from institutional investors.

The issue received bids for over 608.20 crore shares, compared with 27.86 crore shares on offer, thereby garnering demand of 21.83 times, according to the data on the National Stock Exchange.

The shares are being offered in a range of Rs 40-45 a piece and the company plans to mop-up Rs 1,700 crore from the primary market at the upper end of the range.

Qualified institutional investors flocked the issue and bid for over 40 times the shares on offer. While high networth individuals (HNIs) subscribed to five times the shares reserved for them, retail investors portion barely managed to get fully subscribed, investment banking sources said.

Despite good subscription of the IPO, brokerages are sceptical about the company's timely project execution as the group lacks prior experience in power business.

"Indiabulls Power has ambitious plans to install power projects of around 6,615 MW over the next 4-5 years. Though the group has demonstrated strong execution capabilities in real estate and financial services, but lack of prior experience in power sector can lead to high execution risk," Prabhudas Lilladher said in a research note.

Power generators – A dani Power and NHPC — together raised nearly Rs 10,000 crore.

"Currently Indiabulls Power has no operational power plant. Its first power plant is expected to be operational only by February 2012. All its future earnings are highly sensitive to its ability to complete projects on time with all the procurements in place," brokerage firm Sharekhan said.

The share sale has attracted five anchor investors who subscribed to 18 per cent of the issue. The company raised over Rs 316.46 crore from these strategic investors.

The IPO of 39.07 crore equity shares of the power unit of Indiabulls Realestate would result in an equity dilution of 19.06 per cent.

Post the issue, the shareholding of the promoter group would come down to 59.18 per cent from the current 71.43 per cent.

The existing shareholders in the company include LNM India Internet Centures and FIM, which hold 10.71 per cent and 17.86 per cent in the company. The issue would also dilute the holding of NRI billionaire LN Mittal to 8.67 per cent.

The company would utilise the issue proceeds to part- finance the construction and development of the 1,320-MW Amravati Power Project Phase-I and the 1,335-MW Nashik Power Project, apart from general corporate purposes.