NHPC IPO to open on Aug 7;price band set at Rs 30-35/sh

SK Garg, CMD, NHPC said, IPO price band set at Rs 30-36 per share. “The price band is based on 2 times price-to-book ratio," he said. The IPO issue will open on August 7 and close on August 12," Garg added.

He further said, the overall mandate from the government is 24%, but they have asked the company to go for in the first tranche with only 10% of fresh equity and plus 5% of disinvestment. “We have mandate to issue up to 24% stake,” he added. The company’s current capacity was at 5175 MW and plans to increase to 9600 MW by 2013, Garg added.

Here is a verbatim transcript of the exclusive interview with SK Garg on CNBC-TV18. Also watch the accompanying video.

Q: Share with us the price band and how did you arrive at the pricing?

A: The price band has already been decided by the board and we are going ahead with that, it is Rs 30 at the lower end and upper band is Rs 36. The valuations which we have done and then we had taken it to the government and the board, it is basically on the book value to price which we have worked out. We had taken a decision that to price it in Rs 30-36 band and we have decided to open up on August 7 and issue will be closing on to 12 August 2009.

Q: You are raising 15% out of which 5% is the government’s disinvestment which means it goes straight to the government and you get 10%, how much does that 10% translate into at the price of Rs 30 or at Rs 36 and what are you planning to do with that money?

A: The overall mandate from the government is 24% but they have asked us to go for in the first tranche only 10% of fresh equity and plus 5% of disinvestment, of the government’s own equity. So in all we are coming to the market in 15%, if we take the upper band of Rs 36, then it translates into Rs 6,000 crore, so out of Rs 6,000 crore 2/3rd will be flowing to us say Rs 4,000 crore and Rs 2,000 crore will go to government of India. Rs 4,000 crore inflow to us, which will be spending on our projects which are under construction right now, we have seven projects lined up which will be funded out of this equity inflow to the company and 1/3rd will go to the government of India.

Q: You are having the price to book value of 2, lets see one year ahead, on an expanded equity what would be your price to book, looking at 36 being the price, what would it be in the next year or the year after next because you are also adding significant capital investments, have you looked like how it looks in 2010-2012 assuming the Rs 36 price?

A: It will certainly be better if you ask me because we are on a mega expansion spree right now. We have lined up almost 11 projects which right now we are working and one by one which are coming on steam also. So with that, what we are hoping is that by the end of 2013, our capacity would be touching around 9,500 MW. So a lot of investment as you rightly mentioned it will be coming and fructifying into and giving yield on that ROE also. So there will be an impressive book value as against the current which we have around 2 plus.

Q: Could you just walk us through going into September, then December and then going into March quarter, how much new incremental capacity do you see it being added or is most of it back ended, so perhaps it is coming in 2010?

A: Right now my capacity is 5,175 MW with 13 power stations. I will be commissioning one more project this year which is 120 MW and it may come in the month of December and January this year itself, it is in Jammu and Kashmir. Apart from that, another six projects we will be delivering in 2010-11 and the total capacity will be around 2,200 MW, rest one project we are likely to give in 2011-12 and one would be coming in 2013 December. So in all by 2013 or so, the total capacity of this company is nearing 10,000 MW, that will be our capacity. So one after another, 2010 is the base year where we are going to deliver almost six projects to the nation and so as you see, huge capacity is going to be added and followed by other big projects which we have got time which is Arunachal Pradesh, which partly it will come in this plan and partly it will be just coming on the first year of the 12th Plan period and one project we are slated to give in 2013 December which is in Himachal Pradesh.