MUMBAI, Dec 11 (Reuters) - Jindal Steel & Power (JNSP.BO), headed by India’s richest woman, plans a $2.1 billion IPO of its power unit, and analysts said while the sector was in demand pricing still had to leave something on the table for investors.
The offering by Jindal Power would be India’s second-largest IPO, trailing only Reliance Power’s (RPOL.BO) offering to raise $3 billion in early 2008, and follows a slew of utilities that have in recent months tapped the stock market.
Electricity-generation firms are seeking funds to expand and bridge a crippling power gap in Asia’s third-largest economy, and a rally of more than 75 percent in the benchmark index this year has encouraged them to flock to the market.
“This is a very large amount. The fund raising seems to be based on plans for future projects,” Rupesh Sankhe, a power-sector analyst at Angel Broking.
“The response will depend mainly on the pricing to give a comfort factor to investors,” he said.
Jindal Steel & Power said on Thursday it would seek shareholder approval to raise up to 100 billion rupees for Jindal Power. The IPO is expected to hit the market in early 2010.
The company, part of the sprawling business interests of the Jindal family, reportedly plans to more than triple capacity to 3,400 megawatts from 1,000 MW at a cost of $2.8 billion.
Jindal Steel is headed by matriarch Savitri Jindal, who last month was listed by Forbes magazine as India’s richest woman with a fortune estimated at $12 billion. Her wealth has grown on a near four-fold jump in Jindal Steel’s market value in 2009.
Also a legislator in the north Indian state of Haryana, she took over as chairperson after her husband O.P. Jindal, once Haryana’s power minister, died in a helicopter crash in 2005.
The company is run by their son Naveen Jindal, who is also a member of the ruling Congress party in the national parliament.
Jindal Power’s IPO plans closely follows a public offer by JSW Energy, part of the group that runs India’s third-largest steel maker JSW Steel (JSTL.BO), which is headed by Naveen’s elder brother Sajjan Jindal.
That IPO, to raise a maximum of $583 million, was covered 1.7 times as institutional investors more than made up for a shortfall in retail demand.
Energy firms Adani Power (ADAN.BO), NHPC (NHPC.BO), Oil India (OILI.BO) and Indiabulls Power INDP.BO have together raised about $2.8 billion since late July, capitalising on investor interest as India seeks to achieve energy security and cover a 14 percent peak-hour power deficit.
The NHPC, Adani and Indiabulls Power IPOs were strongly subscribed, but this has not translated into market performance, with all three firms currently trading below their issue price. “This seems to be a sentiment-driven process where companies think there is so much shortage of power, so people will pay any price,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial. “Yes, there is a massive shortage, but valuations have been just too high.” ($1=46.6 Indian Rupees) (Editing by John Mair)