JSW Energy IPO should you invest? Check Brokers View
The initial public offering (IPO) of JSW Energy, a part of Sajjan Jindal-led JSW Group, has been fully subscribed on the first day of the issue opening. The issue is of Rs 2,700 crore. The price band is between Rs 100 and Rs 115 per equity share and the issue will close on December 9, 2009.
Sharekhan’s on JSW Energy IPO
While comparing with other power utilities, JSWE (post issue) looks fairly priced both in terms of price/book (P/B) as well as market cap/MW basis. However, JSWE is having clear revenue visibility at least from the 995-MW operational capacity. Also, another 2,280MW capacity coming up within 18 months would provide further boost to its near future revenue stream. We believe, although listing gains may not be huge looking at reasonably priced offer price, the expected commissioning of power plants within two years provides JSWE a better revenue visibility vis-à-vis its peers.
Angel Broking’s view on JSW Energy IPO
At the lower price band, the IPO is available at 2.8x and 2.3x FY2011E and FY2012E P/BV, respectively. JSWEL will have a market capitalisation of Rs 16,407 crore, compared to current market capitalisation of Rs 172,371 crore and Rs 21,848 crore of NTPC and Adani Power (APL), respectively. JSWEL’s EV/MW works out to Rs 6.7 crore, while NTPC commands EV/MW valuation of Rs 5.4 crore with its proven track record in execution as well as operation of power plants. We have valued all the upcoming projects of the company individually and have arrived at a Fair Value of Rs 107/share, excluding all other initiatives in mining, equipment manufacturing and other projects totaling 7,740MW projects under implementation, as these businesses are at nascent stages. We believe that the IPO is fairly priced and keep a Neutral view on it.”
Hem Securities’s view on JSW Energy IPO
“The company is bringing the issue at price band of Rs 100-115 per share with a discount of Rs 5 to retail investor. However the valuations of the company still looks stiff even after taking into consideration the discount facility available to retailers as the P/E at the above mentioned band will be between 30.03-34.54 at post issue eps of Rs 3.33( Basis PAT annualized for 6 months ending Sept’09). Though looking after projects of the company which are presently working at various stages the long term prospect of the company looks good but at the present level due to high pricing as compare to its various listed peers we recommend the investor to avoid the issue.
Fortune Financials’s view on JSW Energy IPO
Fortune Financial Services has recommended investors to ‘Subscribe’ to JSW Energy IPO for a probable 8-10 per cent listing gains.
“JSW Energy already has revenue stream flowing from its 995 MW of installed capacity at present and another 2,280 MW capacity is coming up within 18 months, which would provide further boost to its near term revenue stream. With the buoyancy in short-term tariffs (Rs 5.5 currently) and bulk of its initial capacity addition targeted at short-term sales, the company should deliver strong operational performance in FY11 and FY12.
We believe, since the issue is fairly priced compared to the host of other power IPOs that hit the market recently, investors can look for modest listing gains to the tune of 8-10%. Anything more than that would be an added bonus keeping in mind that the market has already seen a slew of power IPOs in the near past (most of which have disappointed investors) and some more of them might be lined up in near future too, to capitalize on the ‘power bandwagon’ that the equity market has experienced of late. Thus we would recommend our investors to ‘Subscribe’ to the issue for a probable 8-10% listing gain,” the IPO report said.
Deven Choksey , MD, K R Choksey’s view on JSW Energy IPO
I am not too sure about JSW Energy because if they price their issue aggressively, then possibly JSW Energy may once again meet the same fate, which the other power sector IPOs have met. So I would reserve my opinion for JSW Energy
Investment Advisor, SP Tulsian’s view on JSW Energy IPO
Investment Advisor, SP Tulsian said one could apply in the issue even at the upper band of Rs 115 for listing as well as investment gains. He said, “The interesting part of the company is that, it is already a profit making with sizeable presence in the sector. For the six-months ending September 09, the total income of the company was at Rs 875 crore with PAT of Rs 267 crore.”
“Looking to the aggression and execution capability, which has been exhibited by the group in JSW Steel, the present progress of the power projects of the company, it has good prospects of growing faster than its peers in the energy sector, as an integrated player. Even now, the financials of the company are better placed with its peers. Adani Power, presently has an EV of Rs 7.20 crore/MW with total capacity to become operational by March 12. However, the company has an EV of close to Rs 7.20 crore/MW by netting off investments and other related power business, as also considering cash flow from early commencement of 2,145 MW by October 2010.”
Manisha Bhatt of Prabhudas Lilladher’s view on JSW Energy IPO
Manisha Bhatt of Prabhudas Lilladher said one could subscribe to the issue at lower end of price band at Rs 100.
Amit Dalal of Amit Nalin Securities said he was wary of merchant pricing and power in case of JSW Energy. “I am a little wary of JSW Energy, mainly because I am very wary of merchant pricing and power. I don’t believe merchant pricing in power can remain so expensive for the country at large and finally it will settle at lower levels. Today we are discounting uptrend in a very aggressive manner when we price these utilities including JSW, so that is my concern with JSW.”
Amit Dalal of Amit Nalin Securities’s view on JSW Energy IPO
Amit Dalal of Amit Nalin Securities said he was wary of merchant pricing and power in case of JSW Energy. “I am a little wary of JSW Energy, mainly because I am very wary of merchant pricing and power. I don’t believe merchant pricing in power can remain so expensive for the country at large and finally it will settle at lower levels. Today we are discounting uptrend in a very aggressive manner when we price these utilities including JSW, so that is my concern with JSW.”
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