IEX IPO kicks off; should you subscribe or give a miss?
, ETMarkets.com|
Updated: Oct 09, 2017, 09.57 AM IST
NEW DELHI: The Rs 1,001 crore initial public offering (IPO) by India's leading power trading platform Indian Energy Exchange (IEX) opened for bidding on Monday.
Analysts are positive on the company's prospects. They believe that the government initiatives like rural electrification, Power for All, UDAY are likely to drive short-term power market volumes, which could result in an expected share of 21.1 per cent by FY22.
Given the upper limit of the price range, experts do not see much listing pop but believe the stock could prove a good mid-to-long term investment.
Energy trading is at a nascent stage in India with only 3 per cent market volumes traded through exchange compared with 30-35 per cent in developed countries.
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IEX a good bet with strong financials, market share
"High return ratio, strong cash generation and strong industry dynamic make IEX an interesting investment candidate for medium/long-term gains. We believe stock could deliver 12-15 per cent earnings CAGR. At the upper end of the issue price, the post money market cap works out to be Rs 5000 crore and will trade at 44 times FY17 earnings," Prabhudas Lilladher said in a note.
The brokerage has a 'Subscribe' rating on the issue with a medium to long-term view.
The power exchange on Saturday raised about Rs 300.22 crore by allotting 18,19,501 shares to 23 anchor investors at a price of Rs 1,650 per share. The list included ICICI Prudential MF Birla Sunlife MF, Birla Sunlife Trustee Company and SBI Mutal Fund (MF).
The issue size for the public offering is 42,45,508, the price range for which is fixed in Rs 1,645-1,650 per share price range.
Overall, the company is selling 6,065,009 shares or 20 per cent of the post-issue paid-up capital of the company.
The sale will see existing shareholders Tata Power Company, private equity arm of Aditya Birla Group, Madison India Capital and Renuka Ramnath-led Multiples Alternate Asset Management, among others, offloading shares.
Government initiatives like Power for All, Rural Electrification, Seasonality, phasing out of old plants, energy saving certificates are likely to drive short term power market volumes, which as per industry reports, could result in an expected share of 21.1 per cent by FY22E.
Noel Vaz, Research Analyst at Angel Broking said the exchange is likely to continue its current growth trajectory as the short-term electricity market would continue its migration away from other platforms and to the exchanges.
"The company has an ROE of 30.8 per cent compared with 7.4 per cent for MCX, based on FY18 annualized earnings. At the upper end of the price band, the pre issue P/E multiples works out be 40.9 times of FY2018 annualised EPS for IEX against 51.5 times of FY2018 annualised EPS for MCX," Vas said.
Vas has recommended ‘subscribe’ on the issue for a mid-to-long term period view.
Centrum Broking noted that IEX has a near monopoly in the traded contract volumes of electricity contracts.
"Given the dominant market share, healthy financials, stable growth, the IPO could garner interest in the current market environment. Hence, we believe that despite fair valuations, the listing may still be at a premium to the offer price," the brokerage said. The brokerage said that the issue is priced at P/E of 44.1 times post dilution and EV/EBITDA of 31.5 times, on FY17 basis, which appears to be fairly valued compared to other non-directly linked listed exchanges.
Analysts are positive on the company's prospects. They believe that the government initiatives like rural electrification, Power for All, UDAY are likely to drive short-term power market volumes, which could result in an expected share of 21.1 per cent by FY22.
Given the upper limit of the price range, experts do not see much listing pop but believe the stock could prove a good mid-to-long term investment.
Energy trading is at a nascent stage in India with only 3 per cent market volumes traded through exchange compared with 30-35 per cent in developed countries.
ALSO READ:
IEX a good bet with strong financials, market share
"High return ratio, strong cash generation and strong industry dynamic make IEX an interesting investment candidate for medium/long-term gains. We believe stock could deliver 12-15 per cent earnings CAGR. At the upper end of the issue price, the post money market cap works out to be Rs 5000 crore and will trade at 44 times FY17 earnings," Prabhudas Lilladher said in a note.
The brokerage has a 'Subscribe' rating on the issue with a medium to long-term view.
The power exchange on Saturday raised about Rs 300.22 crore by allotting 18,19,501 shares to 23 anchor investors at a price of Rs 1,650 per share. The list included ICICI Prudential MF Birla Sunlife MF, Birla Sunlife Trustee Company and SBI Mutal Fund (MF).
The issue size for the public offering is 42,45,508, the price range for which is fixed in Rs 1,645-1,650 per share price range.
Overall, the company is selling 6,065,009 shares or 20 per cent of the post-issue paid-up capital of the company.
The sale will see existing shareholders Tata Power Company, private equity arm of Aditya Birla Group, Madison India Capital and Renuka Ramnath-led Multiples Alternate Asset Management, among others, offloading shares.
Government initiatives like Power for All, Rural Electrification, Seasonality, phasing out of old plants, energy saving certificates are likely to drive short term power market volumes, which as per industry reports, could result in an expected share of 21.1 per cent by FY22E.
Noel Vaz, Research Analyst at Angel Broking said the exchange is likely to continue its current growth trajectory as the short-term electricity market would continue its migration away from other platforms and to the exchanges.
"The company has an ROE of 30.8 per cent compared with 7.4 per cent for MCX, based on FY18 annualized earnings. At the upper end of the price band, the pre issue P/E multiples works out be 40.9 times of FY2018 annualised EPS for IEX against 51.5 times of FY2018 annualised EPS for MCX," Vas said.
Vas has recommended ‘subscribe’ on the issue for a mid-to-long term period view.
Centrum Broking noted that IEX has a near monopoly in the traded contract volumes of electricity contracts.
"Given the dominant market share, healthy financials, stable growth, the IPO could garner interest in the current market environment. Hence, we believe that despite fair valuations, the listing may still be at a premium to the offer price," the brokerage said. The brokerage said that the issue is priced at P/E of 44.1 times post dilution and EV/EBITDA of 31.5 times, on FY17 basis, which appears to be fairly valued compared to other non-directly linked listed exchanges.
