EPS of Pipavav for FY08-09 is 0.08 and hence PE with lower band (55/-) and upper band (60/-) comes to 687.5 and 750 respectively. It looks too high compare to its peers because it is still in construction phase.
This company does not have much operating history. The shipyard is still in construction phase.It looks like same story like Adani power or Reliance power. Eventhough the valuation looks decent. one point to be remembered is that punj lloyd bought stake in pipavav one year back at 1/3 rate of what we are being asked to pay... ABG and Bharti shipyard seem to be much better bets ....
Qib subscription 53 times no sence because thay pay only 10% amount,retal invester 1.4 times mean thay will obtand very havy quantity,thay have only one option stop payment of cheque,because after listing these Qibs will not rady to buy below IPO prise.please look NHPC QIBs subscription more than 30 times but these QIBs are not rady to buy NHPC at Rs 34 [Rs 2 below ipo prise],it is a game take care.
Pipavav Shipyard has fixed its initial public offering (IPO) price band at Rs 55-65 per share. The issue may open for subscriptions on September 16 to raise around Rs 550 crore by diluting nearly 12% equity, reports CNBC-TV18.
Did You Pay Double The Price For A Share Of NHPC? *CLSA* *NHPC: Will You Buy A Government Bond At 2X The Market Price? Simply stated why did you buy a Rs 18 stock for Rs 36 per share?* *(Rajesh Panwani-Head Asia Power Research)*
*Investors have done just that buying NHPC at Rs 36 per share they have effectively ascribed a market cap of $ 9 bn to the company. And this is the fallacy, until investors realise an appropriate entry price into a stock there chances of making a gain by flipping the IPO stands virtually at nil.*
*Over the last five years the ROE of NHPC has ranged from 4.8 per cent to 6.7 per cent (10 year GOI yield in India is 7 per cent currently). Over the next 5 years we do not expect the ROE of NHPC to go up much higher than 7 per cent. Meanwhile the price band of the IPO implied a Price to Book of 1.8 to 2.2X on March 2009 net worth. Effectively it means you have bought a GOI owned company that generates similar ROE as return on a Government Bond but is selling at a times Book. As a result your yield drops down to a pauper like 3.4 per cent or indirectly it gives a PE of 30 to the NHPC stock.*
*On a different plank, NHPC offers exciting growth of 9 per cent CAGR over the next 5 years. Thus, if you were to hold the NHPC stock for 5 yields your earnings yield will go upto 4.8 per cent by the year ending March 2014 and even then it will imply a PE of 21X FY14 earnings.*
*What you could have done?*
*For investors interested in the Indian Power sector and those expecting stable returns we would recommend buying NTPC which offers higher returns, lower earnings volatility, predictable growth (and a likely bit higher growth than NHPC), with much better control over its project costs,execution and valuations. *
*So what exactly have investors spent Rs 6000 crore while buying NHPC?*
*Largest hydro power company in India that is 100 per cent owned by the GOI currently. Current Capacity 5 GW. Another 5GW under construction.*
*Why is NHPC's ROE low?*
*1.Long gestation period of hydro power project means that substantial capital is always tied up in CWIP. Unlike HK utilities which earn returns on CWIP, Indian utilities do not earn any returns while projects are under construction.*
*2.Frequent delays in project execution given substantial risks/uncertainties involved in hydro power construction. Cost over-runs -which are not always approved by the regulator. Hence you spend the money but do not earn anything on that.*
*3.Over $ 800 mn of cash and equivalents on balance sheet. So why raise another $ 1 bn? Probably because they can in the current market conditions.*
*Will NHPC's ROE's remain low?*
*1. The nature of business does not change. Gestation/execution periods will remain long. Execution risks remain.*
*2. Another $ 1 bn cash is a further drag on the extant ROE.*
*3. In recent years NHPC's O&M costs have not been sufficient to recover all the costs. We also suspect that NHPC is not run as efficiently as NTPC.*
*Footnote:*
*The NHPC issue will be a bloomer on the books of GOI as was RPower on the books of the ADAG group. Unless offcourse the GOI sponspored DIIs pick up the entire slack from the market, the stock can easily move down to Rs 18 over the next few months, where Risk/Reward will seem equal.*
*Secondly, and most importantly the biggest of NHPC projects are being executed in the State of Arunachal Pradesh-a territory claimed by the PR China as it's own. *
*Thirdly, in deference to the wishes of the government of PRC the Indian government had dropped plans to pursue the 20,000 MW upper Siang project and NHPC will now undertake projects only on the middle and lower Siang.*
*Fourthly, all rivers of the North East including the mightly Brahamputra and it's numerous tributaries originate from glaciers in Tibet, where the Government of PRC is planning massive hydel plants. A few years down the line, there may not be enough water to run the hydel plants proposed on the Siang.*