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Project risk may tell on Adani Power

Project risk may tell on Adani Power
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First Published: Wed, Aug 19 2009. 09 48 PM IST
Updated: Wed, Aug 19 2009. 09 48 PM IST
Mumbai: Shares in Indian utility Adani Power Ltd are expected to rise 6-10% on their debut on Thursday before surrendering gains in what could be a lukewarm start for India’s biggest initial public offering (IPO) since early 2008.
Adani, which raised Rs30,680 crore in its initial public offer last month and received subscriptions for more than 20 times the shares on offer, could open at Rs106-110 a share, traders said. Analysts expect the shares to fall below the issue price of Rs100 during trade as investors price in project execution risk for a firm that is still building the bulk of its capacity, although the low float and strong appetite for the IPO should offer some support.
“Although the Adani group’s project development track record is strong, the execution risk is too high. There is little power generation now,” said V.K. Sharma, head of research at Anagram Stock Broking Ltd.
Adani Power generates 330MW of power at present and is building power plants with capacity of 6,600MW.
The shares were quoting at Rs108-109 a share on the grey market, unofficial pre-launch trading, which gives a rough indication of the opening, traders said, adding they expected the shares to fall as low as Rs88-90 a share in trade.
Adani’s IPO was the largest in India since Reliance Power Ltd raised Rs11,700 crore in January 2008, although the NHPC Ltd IPO last week raised Rs6,000 crore or so. Reliance Power, India’s largest IPO, has never traded above its issue price since it debuted in February 2008.
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First Published: Wed, Aug 19 2009. 09 48 PM IST