What is green shoe option in an IPO?

A 'green shoe option' in an IPO allows the issuing company to offer more shares than the original prospectus amount if the deal is heavily over subscribed.
Its a provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option.
A greenshoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges.

Example: a company files to sell 10 million shares in an IPO with a 10% green show option; if the deal has large demand they have the option to issue an additional 1 million shares (10% of the original 10 million).
Greenshoe options typically allow underwriters to sell up to 15% more shares than the original number set by the issuer, if demand conditions warrant such action. However, some issuers prefer not to include greenshoe options in their underwriting agreements under certain circumstances, such as if the issuer wants to fund a specific project with a fixed amount of cost and does not want more capital than it originally sought.

The term is derived from the fact that the Green Shoe Company was the first to issue this type of option.

All About IPO's and FPO's

What is an Initial Public Offering?
Initial Public Offering, IPO, is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.

What is a Follow on Public Offering?A Follow on Public Offering, FPO, is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

What is a Fixed Price IPO?It’s an issue where issuing company defines single price per share. After subscription, company decides the basis of allotment depending upon under/over subscription. On this basis an applicant may or may not get allotment of shares.

What is a Book Building IPO?It’s an issue where issuing company defines a price range i.e floor (lower) price and Cap (Upper) price. After subscription, company decides the basis of allotment depending upon under/over subscription. On this basis an applicant may or may not get allotment of shares.

What is a Cut Off Price?In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut Off Price”. Only retail individual investors have an option of applying at Cut Off Price.

How is the Retail Investor defined as?‘Retail Individual Investor’ means an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000/

What are the different kinds of issues?

Primarily, issues can be classified as a Public, Rights or preferential
issues (also known as private placements). While public and rights issues involve a detailed procedure, private placements or preferential issues are relatively simpler. The classification of issues is illustrated below:Public issues can be further classified into Initial Public offerings andfurther public offerings. In a public offering, the issuer makes an offer fornew investors to enter its shareholding family. The issuer company makes detailed disclosures as per the DIP guidelines in its offerdocument and offers it for subscription.

The significant features are illustrated below:

Issues
Public Preferential Rights
Initial Public Offering Further Public Offering
Fresh Issue Offer for sale Fresh Issue Offer for sale

Initial Public Offering (IPO) is when an unlisted company makes either a
fresh issue of securities or an offer for sale of its existing securities or
both for the first time to the public. This paves way for listing and trading
of the issuer’s securities.

A follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP)
What are the eligibility norms for making these issues?SEBI has laid down eligibility norms for entities accessing the primary market through public issues. There is no eligibility norm for a listed compaNy making a rights issue as it is an offer made to the existing shareholders who are expected to know their company. The main entry norms for companies making a public issue (IPO or FPO) are summarized as under:

Entry Norm I (EN I): The company shall meet the following
requirements:
(a) Net Tangible Assets of at least Rs. 3 crores for 3 full years.
(b) Distributable profits in atleast three years
(c) Net worth of at least Rs. 1 crore in three years
(d) If change in name, atleast 50% revenue for preceding 1 year should be from the new activity.
(e) The issue size does not exceed 5 times the pre- issue net worth
To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters, SEBI has provided two other alternative routes to company not satisfying any of the above conditions, for accessing the primary Market, as under:

Entry Norm II (EN II):
(a) Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs).
(b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years
OR
Entry Norm III (EN III):
(a) The “project” is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s).
(b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years.
In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having at least 1000 prospective allotees in its issue

Nothing personal, strictly business: Anil Ambani

In an exclusive interview to ET, Anil Ambani says Mukesh “has already made it amply clear, both within the family, and externally, that he does

The RIL-RNRL row timeline
RIL' KG-D6 facility
RIL's first crude from KG basin
Decade's hottest biz feuds
not visualise any further role for my respected mother in resolving this matter or any other matter.”

There’s nothing personal, it’s strictly business, says Anil Ambani, chairman of the Anil Dhirubhai Ambani Group, a day after he lashed out at his elder brother and Reliance Industries Ltd (RIL) chairman Mukesh Ambani, and the petroleum ministry. Speaking exclusively to ET’s Soma Banerjee on what forced him to deliver that impassioned speech, Mr Ambani says his "respected elder brother’s" stand on the K-G basin gas sharing dispute subverts what all group patriarch Dhirubhai stood for. Petroleum ministry’s intervention is a throwback to the "licence-raj" era, says Mr Ambani, asking why the ministry chose to intervene in the issue only after the Bombay High Court ruled in favour of his stand. Excerpts:

What were the factors that played on your mind when you were preparing for the speech?

There was emotion, sentiment and regret...but thankfully, no anger. And above all, there was great sadness, and even greater pain.

Sadness...that to enforce the gas supply agreement in the interests of shareholders in my group, I have been left with no choice but fight a court case against my very own respected elder brother — the person who I most looked up to, loved and respected, second only to my beloved parents.

Sadness... reflecting on the proud legacy of trust and fair play on which Reliance Industries was founded by my visionary father Dhirubhai Ambani, and how far RIL appeared to have moved away from those original values.

Sadness... that today, gas produced by RIL was flowing to others, before it could be used within the group - simply because RIL, for four long years, has denied us a bankable supply agreement on the terms that my respected elder brother and I shook hands on, with the blessings of my mother Kokilaben Ambani, who is God for me.... As I prayed before the meeting and sought blessings of Lord Shiva and my father from heaven, I asked them forgiveness.

Is this entirely a corporate dispute and not at all a personal one? Was the MoU ever discussed at the company boards?

I am quite surprised by the question. If the MoU was not discussed and approved by the RIL board, how did the entire reorganisation of the Reliance Group, including the scheme of demerger, take place in the manner that it did? How did RIL's board publicly thank my respected mother for facilitating the reorganisation in that fashion? How did RIL, even in its unilaterally executed version of the Gas Supply Agreement of January 2006, incorporate every aspect of the gas supply arrangements as recorded in the MoU? And how did board minutes filed by RIL before the Bombay High Court reflect that the board was provided full and complete knowledge of the MoU? All information relating to the gas supply arrangements are in the public domain. We are not keeping anything hidden.

Are you open to putting these differences aside and starting a fresh dialogue with your brother to take both the businesses ahead?

I have already spoken to my elder brother personally and requested him in the interests of over 8 million shareholders of my companies to arrive at a fair and amicable solution. I was disappointed at the outcome. It is undoubtedly frustrating, but my respected late father, my only guru, taught me - by lesson and example - not to be daunted by adversity, but to diligently pursue my karma, and leave the results in God's hands.

How do you interpret the supreme court's notice to RIL and RNRL?

As per the legal advice received by us, RIL cannot sign any new contract. In case RIL proceeds with signing of new contracts, we will take appropriate legal steps to protect our interests.

Have you tried resolving the matter at your personal level after the Bombay High Court order? Was there any meeting with your mother who played a crucial role in the family settlement?

I have, at every stage, made sincere efforts to amicably resolve all issues, but to no avail. To give you just one example, I offered to personally appear at a time and place of the Bombay High Court's direction, at an hour's notice, and sit across a table with my respected elder brother to amicably resolve all issues. Unfortunately, RIL's counsel informed the court that it was not convenient for my brother to participate in any such discussions.

My respected elder brother has already made it amply clear, both within the family and outside, that he does not visualise any further role for my respected mother in resolving this matter or any other matter.

What is the way forward? And how do you think policy loopholes could be plugged to avoid such cases in future?

There is only one way forward: Contractual obligations have to be respected and honored. There are no policy loopholes to be plugged. What has to be curbed are attempts to subvert policy to benefit RIL. I am also concerned that the Petroleum Ministry's stance is, in effect, that it will solely decide: who should sell gas, to whom, at what price, in what quantity, and when... without any heed to commercial considerations or contractual provisions!

n a complete reversal of the entire direction of economic reforms being implemented by our respected prime minister Dr Manmohan Singh, the

The RIL-RNRL row timeline
RIL' KG-D6 facility
RIL's first crude from KG basin
Decade's hottest biz feuds
petroleum ministry is regrettably pursuing a different path, seeking perhaps a return to the command-control elements of the dismantled 'license-permit raj'!

Do you think there is any scope for a compromise settlement? Are you, for instance, ready to take a re-look at the price ($2.34) if gas assurance is committed?

As I have said before, we have, at every stage, made sincere efforts to amicably resolve all issues - including attempting to meet with RIL, in pursuance of the high court's directions. Unfortunately, RIL has refused to even come to the meeting! I still have to learn the art of clapping with one hand!

There is no question of re-looking at the gas price of $ 2.34, when it is a binding commercial obligation of RIL, and when the Bombay High Court has already upheld our claims in this regard.

Going back to the MoU, what was the basis for the division of the gas? What was the value attached to the gas while dividing the businesses between you and your brother?

There is no division of gas - it is a commercial contract for gas supply, to implement the vision of our legendary founder Dhirubhai Ambani to be present in the entire value chain "from well-head to wall-socket". Unfortunately, RIL appears to have decided to ignore the Founder's vision, too!

RIL's commitment to supply gas for our power projects at Dadri and elsewhere dates back to as early as January 2004, and much before the reorganisation in 2005. This was announced in RIL's own media release issued at the time. In October 2004, a joint board meeting of RIL and Reliance Energy was held, wherein the directors of RIL reiterated their commitment to the supply of gas from KG Basin to the Dadri project. So, this is entirely a corporate dispute, and not at all a personal one.

What has the Ministry of Power done to help you get gas to be used for electricity generation?

The Ministry of Power can play a far more proactive and constructive role in resolving the matter, which can ensure the quick capacity addition of 12,000 MW of clean, green power.

You have recently written to the prime minister alleging partisanship by the petroleum ministry...

The ministry's objectivity would have been visible if it had remained consistent with its replies given on the floor of Parliament, and with the decisions taken by the eGoM. To quote just one instance, on April 22, 2008, in specific reference to the RIL-RNRL dispute, the government told Parliament in a written answer: "As per the Production Sharing Contract, the contractor, is entitled to sell its participating share of gas in cost petroleum and profit petroleum." Despite this, the ministry is vocally taking a stand that RIL-RNRL are seeking to divide national property.

Through this entire period, the ministry was a party to, and concurred with, this decision, and did not make any attempt to question the corporate restructuring agreement between RIL and RNRL.

It is only now, after the adverse verdict of the Mumbai High Court against RIL, that the ministry has suddenly decided to intervene in this purely corporate dispute.

Apparently, the Petroleum ministry has used its discretion and not even thought it fit to take the approval, I am informed, of the Cabinet.

ADA:A bogey is being raised To bail out RIL

The legal battle between Reliance Industries Ltd (RIL) and Reliance Natural Resources Ltd (RNRL) over supply of gas from the KG basin has taken on political overtones, with Anil Ambani accusing the petroleum ministry of favouring RIL. In an interview to TOI, he speaks about the raging controversy.

Was the supply of gas from KG Basin to ADAG part of the division in the group or an added arrangement? RIL claims it was not part of the division.

This is a ludicrous claim. Supply of Gas by RIL to Reliance ADAG was an integral part of the corporate restructuring of the group, and not an “added arrangement” . This is duly reflected in RIL's board minutes (filed in the Bombay High Court), the demerger scheme, and various agreements drafted at that time. If this was not the case, it is difficult to understand why RNRL was at all formed and transferred to ADAG!

This was all done, keeping in mind the vision of our founder, late Dhirubhai Ambani , who visualized Reliance being present in the entire value chain ‘from well-head to wall-socket’ . Not surprisingly, RIL has forgotten the founder’s vision, in deciding to sell gas to others. I am truly and deeply saddened by RIL’s conduct in this matter, and its blatant refusal to honour a bonafide commercial agreement.


If it was part of the settlement, why did you agree to the clause, "subject to government approval" for gas

supply?

There is no question of the sale price between RIL and RNRL, which was based on the price arrived at through a global competitive bidding process undertaken by NTPC, being subject to government approval . What is being deliberately twisted by RIL is that as per the PSC (product sharing contract), there is a clear distinction between the sale price of gas, to be fixed by the contractor (RIL), and the price to be adopted for determining the government's royalty and share of production, which is approved by the government.

On August 30, 2007, the government told Parliament in a written answer, “As per the PSC signed by the government under the New Exploration Licensing Policy, operators have the freedom to market the gas in the domestic market on an arms length basis . The government does not fix price of gas. The role of the government is to approve the valuation of gas for the purpose of determining government take.”

Bombay High Court too has upheld this legal position, and said as long as the government gets its royalty and share of production on the basis of government-approved price for valuation, they have no concern with the sale price at which the contractor sells the gas.

The situation is similar to that of stamp duty on property transactions. If you buy a flat at a price of Rs 10 lakh, the registrar of properties may value the flat at Rs 20 lakh, and charge stamp duty on Rs 20 lakh. But the registrar does not go on to say that you must pay Rs 20 lakh to the seller — and the registrar certainly does not go and file a case in the Supreme Court to make you pay Rs 20 lakh. But this is exactly what the petroleum ministry’s stand means!

Under government's new policy, the first claim on KG Basin gas will be of fertilizer companies, and then power companies stranded for want of gas. Dadri is likely to get gas only if there is any residual supply. Do you believe this policy was made only to frustrate your claim on gas for Dadri?

The policy does not frustrate our claim in any manner. In fact, the Empowered Group of Ministers, which includes the petroleum minister, has clearly recorded that the verdict of the Bombay HC will be honoured in the RIL-RNRL and RIL-NTPC case, and allocation of gas will be made by the petroleum ministry after taking into consideration the court outcome. The EGoM has specifically approved the Dadri project for utilization of KG-D 6 gas in its meeting in January 2009.


The government has also said the KG Basin gas is national property and only it can decide who will use

it.

It is not the government which has taken any stand, it is the petroleum ministry. Facts are being distorted to suggest that the RILRNRL agreement, or the MoU, amounts to a private division of national property. This bogey of national property being divided is being raised with the sole purpose of attempting to bail out RIL and help it renege on its contractual commitments. We are not claiming any rights to ownership of the KG basin gas fields. All our claims for gas supply , initial and future, are purely from RIL’s lawful ownership and entitlement of production under the PSC.

The High Court observed that you two brothers should have worked out an arrangement to supply gas to Dadri.

I have, at every stage, made sincere efforts to amicably resolve all issues, but to no avail. During the hearings before the Bombay HC, I offered to personally meet at a time and place of the court’s direction , at an hour's notice, and sit across a table with my respected elder brother to amicably resolve all issues. Unfortunately , RIL’s counsel informed the court that it was not convenient for my brother to participate in any such discussions.

My respected elder brother has made it amply clear, both within the family, and externally , that he does not visualize any further role for my respected mother in resolving this matter or any other matter.

The Dadri project has not yet been implemented. So, what will you do with the gas if you were to get it? Trade in gas?

RIL has created a situation where our power plants stand delayed by over three years, only because of the wrongful conduct of RIL, and its refusal to execute a workable and bankable gas supply agreement. We have made our position clear that while RIL cannot be permitted to benefit in the intervening period from its own wrongful conduct we will ensure there is no disruption of gas supply to existing gas customers as decided by the government.

This is a pure commercial issue between RIL and RNRL relating to the treatment of the price differential in the intervening period , occasioned entirely by RIL’s wrongful conduct, and does not amount to trading in gas by any stretch of the imagination.

In a speech on Tuesday, you made certain comments about Reliance Gas Transportation and Infrastructure.

All pipeline networks in India are operating on a cost plus basis. End users like us, in power and fertilizers, are ultimately paying for the pipeline network, and we are naturally concerned about costs of the same. To my mind, there is a strong case to revisit the issue of transportation costs for KG-D 6 gas, probably the highest in the world, by the pipeline regulator. Presently, these are pegged at a prohibitive US$1.25, or 30% of the base gas price!

Further, with new tax breaks recently announced, the entire cost of setting up the gas pipeline network has been allowed to be written off in the very first year — a unique benefit not given to any other capital intensive sector. It is only fair that the benefits of these tax breaks be passed on, and gas transportation costs be reduced.


You've also spoken about alleged gold-plating by RIL in the KG

Basin gas.

Given the incredibly high stakes involved, and the fact that each and everyone of us is ultimately paying for RIL's capital expenditure , I have expressed the sincere hope that some of our esteemed public accountability bodies like Comptroller and Auditor General (CAG) and Central Vigilance Commission (CVC) will examine all relevant facts, and take appropriate action, if — and again, I say, if — indeed they find that the capex has been over-stated , and as a result huge losses caused to the public exchequer and all end-users of the gas produced from KG-D 6.

Shouldn't the petroleum ministry be concerned about getting higher prices for gas...

I wish it were so.

Aren't high gas prices justified in view of the demand-supply scenario?

This entire concept of scarcity of gas in India is actually a myth — in the medium to long run. Gas production in the country is set to double to over 200 million cubic meters of gas per day in the near future, based on further production from RIL's KG-D 6 fields alone.

In addition, there will be production from gas reserves already found by various other players like GSPC and ONGC. Besides, RIL has so far reportedly explored only 4% of its total fields in KG-D 6.

In a few years, India will become a gas surplus nation provided contractors are subject to an independent process of assessment and verification which prevents hoarding, under-reporting or sub-optimal production of gas.

Do you think your proximity to one particular political party —Samajwadi Party — is costing you dear?

I have relationships across the political spectrum, like several others from Indian industry. Why not take a look at certain proximities that exist in Reliance Industries . Anu Tandon, who is a Lok Sabha Congress MP, is on the board of Observer Research Foundation, a lobbying arm of RIL, disguised as an independent think tank. Parimal Nathwani, who is a Rajya Sabha MP, is a full time employee of RIL. Y P Trivedi , who is a Rajya Sabha MP, is a director serving on the board of RIL.

It's said the fact that ex NTPC chairman C P Jain joined Reliance ADAG after retirement indicated that NTPC's move to sue RIL was an attempt to block supplies to NTPC and increase ADAG's share of gas from 28 million cubic meters a day to 40 million...

I take great objection to the comment. Mr Jain is an outstanding independent professional , and I challenge anyone to make any such defamatory statement against him in print and face the consequences in the courts. We have General V P Malik, former chief of the army staff, on the board of Reliance Infrastructure. Do you think that means the Indian Army belongs to us?

Americans want to buy Indian,Chinese cars: Survey

WASHINGTON: Every fourth new car buyer in the US is now ready to buy the next vehicle from India or China, threatening to challenge the dominance

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of Japanese and Koreans in the American auto market, according to a new survey.

The "Opportunity for Chinese and Indian Brands in the USA" survey by AutoPacific shows that 15 percent of the new buyers would look at buying a car from China, while 11 percent would go for a car from India.

"As Hyundai and Kia have been on the American scene for decades now, it's surprising that consideration for Chinese and Indian brands would be about as strong as it is for the Korean brands," automotive research firm AutoPacific president George Peterson said.

"It appears that buyers in America are willing to give Chinese and Indian vehicles a chance right out of the box. Understanding these consumers will be critically important to the success of any newcomer," he said.

"Not only are a significant number of people willing to consider Chinese and Indian brands, this group consists of highly desirable buyers who would be coveted by any manufacturer," Peterson said.


The study shows those looking out for Chinese and Indian cars are likely to currently own Japanese and Korean brands, indicating that these brands may face a lot of competition from the new entrants, rather than domestic brands - Chrysler, Ford or GM.

More than 30,000 buyers across the US were interviewed for the survey.

RNRL demystified

Future of RNRL

Current scenario : RNRL top gainer on the chart with 10% rise.

This stock after lying low at around 20 levels for long time has been a high flier in recent times.
From 20 something it is now trading at 160 levels (from high of 200) much beyond comprehension.

Why is this stocks rising?
Will it continue to rise?
What does this company do?
Should you invest in this stock?

And there will be many more questions cropping up in your mind.

History of RNRL
This company was formed in year 2000 as Reliance Platforms Communications.Com Private Limited.
Later it was made a public company in the name of RNRL after the split between ambani brothers.

RNRL got the share of gas from RIL discoveries in KG basin.

Currently as I see it this company doesn't do any thing, it paper company with rights of gas.

RNRL and RIL are fighting the gas share and its price from long time.

What RIL wants : Higher price realization for its gas.

What REL wants :- Long term sustained gas supply for its power plant at low cost.

What RNRL has :- Assured gas supply from RIL at low cost which is being battled it court. Otherwise their is no real business of RNRL and no reason for its existence. No future businesses to hold other than some news of city gas distribution.

This company is only being used as a leverage. If RIL and REL has gas they can directly start business which RNRL would plan so no real benefit of this company.

Current rumours :- RIL going to buy RNRL which is being denied publicly.

If RIL buys out RNRL it can directly sell gas to REL.

REL gets much needed gas and RIL gets the money. Everyone wins RNRL loses out.

Future of RNRL depends on What Anil ambani wants to do with this company.

If RNRL has tomake profits it has to sell gas at higher price to REL or Reliance Power.

Then RNRL is profitable and REL(RPL) profit margin will reduce.

Which company he wants to keep profitable would be his decision.

Obviosly he will secure intrest of his bigger company with defined business model.

What holds out for RNRL.

1. If status quo is maintained , all the profits from gas coming into RNRL is factored in. Price hike is not possible because it is long term fixed price contract. Share price other than what trades speculate will not change much. maximum 20-30 rupees. No point in entering at this point if you don't already hold it.

2. RNRL is sold out to either company. Share price will fall or if it is delisted there will be share swap so instead of buying and RNRL and getting RIL in share swap go and directly buy RIL.

3. Unless RNRL gets new businesses like city gas distribution very little chance of appreciation.

After all being said, Reliance stocks are currently fancy of traders and almost opposite can happen.

But long terms bets are against it. You would be better of staying invested in other blue chip reliance pack companies.

Happy investing!!

Today's market

The Sensex wrapped the day on a firm note led by FMCG, oil & gas and banking stocks. Broader markets also performed well.

It opened positive with a gain of 61.51 points, at 15,449.47 on Friday tracking cues from international markets. After few minutes, the index gained momentum on the back of sustained buying interest seen in frontliners. The index touched a 52 week high and year high for the first time. Whereas Nifty breached the crucial level of 4,650 in the early trades. As the day progressed, it traded higher, touching a high of 15,732.81. In the noon trades, the index however pared most of its gains as European markets opened on a negative note. Finally, it ended on a higher note but off high`s.

The BSE Midcap and Smallcap index increased 1.17% and 0.03% respectively.

Among the sectoral indices, BSE FMCG surged 3.17%, Oil & gas gained 2.65%, Bankex, IT, Consumer durables and Metal rose over 1% each, while Realty dipped 1.36%.

Bhanshali, Uday Kotak on NHPC IPO

The NHPC initial public offer (IPO), the first one this year from the government's stable, is being flagged off in the next few days’ time. NHPC will go on to raise up to Rs 4,000 crore. Rs 2,000 crore is an offer of sale from the government and the rest is being raised by the company. It is also significant because this is not a private sector IPO. There was a lot of talk in the budget about the lack of disinvestment but a few weeks after that, this is the first off the block from the government’s stable and surely more will follow.
This is a significant move and comes close on the heels of the Adani Power IPO, which has been over-subscribed. Usually we have seen that the primary market revivals are stoked by government supply of paper and this is a very significant one that is starting of.

What is NHPC all about?

NHPC is a government of India Enterprise with an objective to plan, promote and organise an integrated and efficient development of hydroelectric power in all aspects. Later on NHPC expanded its objects to include other sources of energy like Geothermal, Tidal and Wind.


SK Garg, CMD, NHPC said that as on date NHPC’s capacity is 5,175 megawatts with 13 power stations and a huge order book, adding that the company aimed at reaching a capacity of 9,500-9,600 megawatts in four years time. “We are working on 11 projects with a capacity of 4,622 megawatt.”


ABL Srivastava, Director – Finance, NHPC said that all of NHPC’s project were well financed for and that it would therefore not require any further equity financing from the government for these projects. “We don’t need any further equity from the government. From March 7 no government equity is coming and the part of this IPO proceeds will be utilized for these projects.”

What does it hold for retail and institutional investors, and is it the starting point of a much larger disinvestment programme from the government?


Uday Kotak, Executive VC & MD, Kotak Mahindra Bank the markets would receive the disinvestment well because a company like NHPC is a solid company on the ground. “It has existing capacity, you are not necessarily looking too much into the future. You are looking at what is now and real.”
He commended the government’s efforts and said “I think disinvestment process is moving forward and the government of India is moving forward steadily on that.”


Vallabh Bhanshali, Chairman, Enam Securities said, “This disinvestment is going to be a corner stone of that policy. I think the commitment of this government was astounding.”
According to Bhanshali, one business that looks the best in this country for the next 15-20 years is the power business.

Adani IPO closes; likely to list around Aug 20

Adani Power initial public offering (IPO) witnessed huge investors' interest and was subscribed 21.63 times. The issue received bids for more than 538 crore shares as against the issue size of 30,16,52,031 shares, as per the data available on the NSE website.

Qualified institutional investors has given strong response to the issue and their portion was subscribed 36 times, till 16 hours IST.
Amit Desai, Director of Adani Power said almost all bids were at upper end of the band, Rs 100 a share. The company, he said, was likely to list its shares around August 20, 2009.
Also read: Subscribe to Adani Power IPO: Experts
The price band was fixed between Rs 90 and Rs 100 per equity share.
The net issue would constitute 13.47% of the post-issue paid-up equity share capital of the company.
The company intends to utilize the net proceeds of the issue to part finance the construction and development of Mundra Phase IV Power project for 1,980 MW and fund equity contribution in its subsidiary, Adani Power Maharashtra Limited, to part finance the construction and development cost of power project for 1,980 MW at Tiroda, Maharashtra.
Here is a verbatim transcript of the exclusive interview with Ameet Desai on CNBC-TV18. Also watch the accompanying video.
Q: Last we checked it was 14 times, what are your numbers suggesting?
A: As of 3 pm the overall number has gone close to 19 times – 18.85 times.
Q: How much of that is QIP? How much HNI and how much retail?
A: The QIP portion is oversubscribed by about 36 times. This is after the anchor investment allotment which has been done and HNI has gone past 4.5 times and retail is inching towards 2 times but of course I understand more bids will be uploaded between now and 5 pm for QIB and HNI and bankers are likely to seek little longer time for the retail bids update later in the evening.
Q: Where have most of the hits come at – the upper end of the band?
A: Almost 99% of the bids have come at Rs 100.
Q: So it seems likely that that is where you would choose to price the issue or because of this hefty subscription you will think of redoing it a little bit?
A: The bids have come at Rs 100 for most part of the issue and we would obviously now start discussing this issue with the investment banks but quite highly likely that we will go by where the bids flow has been.
Q: You placed two anchor investors at Rs 95, of course with the understanding that finally they would buy at the issue price but do you think it is likely that you may consider doing it at Rs 95 for goodwill – give Rs 5 to the investor or do you think you will make the anchor investors pay Rs 100?
A: All anchor investors have sent a separate communiqué to the banks through which they came in that they would fully desire to participate at the rate at which the issue gets done. As such the regulation is that if we price the issue at Rs 100 – they pay the difference. So the fact that they have given the confirmation of Rs 100, they are not really looking at Rs 95.
Q: While you won’t get into specifics, just give a sense of the kind of names that have come into this QIB slot?
A: Very encouraging. Obviously the names would come out later but we have got demand from some of the highly respected long only investors from different parts of the world – Asia, Europe, US and domestic. So it is an extremely healthy combination in the book that we have been able to get as demand which is actually very gratifying.
Q: Does August 20 remain the proposed listing date if all goes well?
A: Absolutely. We are working towards that. The registrars and banks have been gearing up on that ever since the issue opened. So we surely are looking forward to list this scrip on August 20.
Q: How will you choose the institutions to which you will allot because there has been some talk that may be some of the institutions have got in for that flipping game – to buy now and to sell on listing day, can make a quick 10-25%? In that, would you be stringent on who you allot the stock to, so that these are slightly longer-term investors and not out for a quick buck?
A: This is not a discretionary allotment. This is a book built and at the price at which we priced the issue at that level whatever are the bids they get allotted in proportion of their application. So this becomes quite a non discretionary and very objective process.
Q: While you did indicate in your interview with Udayan a couple of days back that you’re not looking at any other fund raising mechanism, because of the kind of oversubscription you’ve got, would you look at tapping the market again to raise some money via QIP once you’re listed?
A: For Adani Power no. We do not need equity is what we have stated earlier and I think our objective was to raise this money for largely completing the equity funding of 6,600 megawatts. Balance money beyond what we need for 6,600 – a small proportion from IPO will go towards kick starting 3,300 megawatts and then we will finish that 3,300 megawatts from internal accruals. So a short answer to your question is no, we won’t come back to the market for Adani Power’s equity requirements.