Government treads cautiously on SJVN’s IPO

After receiving poor retail interest in the recent follow-on public offers of NTPC, REC and NMDC, SJVN has been priced at Rs23-Rs26 to woo retail investors

The government seems to have priced the Satluj Jal Vidyut Nigam Ltd (SJVN) initial public offer (IPO) at a fairly low price after receiving lackadaisical retail investor response from its recent follow-on public offer (FPOs) for various State-run units.

NTPC’s FPO was priced at Rs201 and got a meagre 0.1646 times retail subscription. Similarly, Rural Electrification Corporation Ltd’s (REC) FPO priced at Rs203, received just 0.22 times subscription from the retail investor category.

NMDC Ltd priced at Rs300 at the lower band received 0.21 times retail subscription. The only exception was United Bank of India which was issued at a price band of Rs60-Rs66 and was subscribed 9.80 times in the retail investor category. Another government owned entity, NHPC Ltd, which was priced a bit lower at a price band of Rs30-Rs36 than REC and NTPC, received 3.87 times subscription from retail investors.

The government holds 75% stake in SJVNL and the remaining 25% is held by the Himachal Pradesh government. SJVN has given a 5% discount to retail investors and its employees.

The object of the issue is listing on the stock exchanges; SJVN will divest 10.03% stake in the company by issuing 41.50 crore shares.

Incorporated in 1988, SJVN (erstwhile known as Nathpa Jhakri Power Corporation Limited or NJPC) is a hydroelectric power generation company originally established as a joint venture between the Centre and Himachal Pradesh to develop and operate the the Nathpa Jakhri Hydro Power Station (NJHPS).

The company posted a profit after tax (PAT) of Rs775.37 crore in the nine-month period ended in the December quarter of 2009. In FY09 and FY08 it recorded PAT of Rs759.32 crore and Rs716.91 crore against a total income of Rs1,634.84 crore and Rs14,62.28 crore respectively. It had a net cash flow of Rs215.71 crore in its December quarter of 2009. In FY09 and FY08 it had net cash flow of Rs577.84 crore and Rs72.56 crore respectively.

SJVN’s P/E stands at 13.79 for the year ended March 2009 while its earnings per share (EPS) stand at Rs1.77 based on the year ended March 2009 earnings. The peer group hydropower companies like KSK Energy Ven and NHPC Ltd carry a price earnings ratio (P/E) of 137.7 and 23.5 respectively.

JM Financial Consultants Pvt Ltd, IDFC Capital Ltd, IDBI Capital Markets Services Ltd and SBI Capital Markets Ltd are lead book-running managers for the IPO. The issue opens for subscription on 29 April 2010 and closes on 3 May 2010. Ratings agency CRISIL has assigned an ‘IPO Grade 4’ to the issue. SJVN plans to raise Rs954.50 crore-Rs1,079.00 crore at a price band of Rs23-Rs26.

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Over Rs200 crore of fund commissions of banks held up for non-compliance with KYC norms

Fund houses have been forced to hold back more than Rs200 crore of commissions for non-disclosure of KYC details as per the SEBI mandate

Some leading private sector banks, including foreign banks, are struggling to comply with the market watchdog Securities and Exchange Board of India’s (SEBI) circular which mandates banks and national distributors to submit know your client (KYC) details to fund houses. According to souces in the fund industry, some banks were reluctant to submit KYC data to fund houses. When fund houses reported this to the market regulator, SEBI apparently asked the houses not to release their commissions until the banks submitted KYC data to the fund houses.

This has led to a huge piling up of commission with asset management companies (AMCs) that was supposed to be paid to banks. According to industry estimates, more than Rs200 crore in commission fee is yet to be released by fund houses.
“Nobody has completely submitted the documents. Whatever data we have got, we have released commission against that. A lot of data comes from banks like HDFC Bank, Citibank and ICICI Bank. The work is in progress. SEBI is correct in forcing the holding back of commissions as funds should know the source of investments, as per the KYC norms,” said a top official from a leading fund house.

In December 2009, SEBI had mandated all AMCs to obtain KYC documents from all bank distributors and hold the commission of distributors back unless they submit the correct details. Banks that are national distributors were holding back citing operational inconvenience and business secrecy. SEBI hit back by asking funds to hold back commissions to force the banks to reveal the KYC data.
There is another angle to all this. According to the rules of the Reserve Bank of India, if an ‘income receivable’ for banks is due for more than 90 days it is considered ‘doubtful debt’. According to sources, banks do not want to show the commssions as doubtful.

The KYC issue exposes another flaw in the business model of fund houses. Many fund houses—mainly the foreign ones—have been managing money of retail customers without knowing who these customers are. They have been relying on foreign and other large private banks which hold the KYC data. This is another step by the regulator that would force fund houses to be truly customer-oriented.

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COMMENTS

AJ

7 years ago

This is a good move from SEBI to ensure accountability at both the bank and AMC levels.

B V Kudtarkar

7 years ago

Mr.Patil, sebi not asking document from you but from your bank -broker ,who is not ready togive. you need not worry becasue your dividend redemption will not be kept on hold but bank and broker's commission is put on hold which doesm;t concern you.

K B Patil

7 years ago

When I open an account with a broker, I submit all the details as required under KYC. In fact, the broker's representative has personally collected all the details after meeting me. So, when you are again asked to submit the same set of documents, it is enough to annoy you. My simple request to SEBI is, when investors have opened trading accounts with large brokerages and after satisfying all the KYC conditions, they should not be made to go through with this procedure again.

B V Kudtarkar

7 years ago

Sebi is on right path of action as one can not know if bank staff in connivance with investor may be investing illgotten money through benami account as there is no kyc done by bank.When we go to open bank account we are seen as doubtful investor by asking lot of documents b ut here thousands of crores are invested without kyc.
Great work by Mr.Bhave and team.
when commission is abolished from 1st august than how rs.200 crore is due to bank?

santhana

7 years ago

Thanks to the foreign banks,we have Swiss banking in India with their secrecy laws of the clients and source of their funds. Most of these money would be ill gotten and untaxed. May be even belonging to Dubai based gangs!! SEBI had rightly asked the fund houses to hold the commissions to the banks. After one year the unpaid commissions should be credited to the Govt. That would be some justice.

Chetan Bhatia

7 years ago

I suppose SEBI is now getting its act right after a longtime. It has hit the tip of the iceberg, the real reason for which it needed to come out with the No load thing. However at the cost of IFA's. A little more digging and .......

Jaypee Infratech goes ballistic with pre-IPO hype

The mass media is flooded with news about the group’s bid for Federa airport in Dholera special investment region (SIR), completion of the Yamuna Expressway project ahead of schedule and its Rs70,000-crore ambitious expansion plans

Companies go all out to tout their various planned business ventures just before an initial public offering (IPO). Jaypee Infratech which hits the market on 29 April has gone on a media blitzkrieg.

Here’s a sample of what the group says that it has in the pipeline, according to various media reports. It has been reported that Jaypee Infratech is proposing to bid to develop the Federa airport in Dholera special investment region (SIR) in Gujarat.

There are also reports that the Jaypee group will complete its current Yamuna Expressway project in the year ending 2011, instead of the projected deadline of 2013 while another report talks of Jaypee Group’s plan to invest Rs70,000 crore in the 1,047-km Ganga Expressway within the next five years.

Jaypee Infratech will use approximately Rs3,210.66 crore in the financial year 2010-11 to part-finance its Rs9739.29-crore Yamuna Expressway and integrated township project. The Adani group had backed out of this bid last month.

"Around Rs80 crore worth (of) infrastructure tenders are to be released for the proposed international airport at Federa coming up near Navagam village near Dholera special investment region (SIR). We are interested in entering the bidding,” Manoj Gaur, executive chairman at Jaiprakash Associates Ltd (JAL), a Jaypee group company, was quoted as saying in the Business Standard.

Some of the write-ups that appeared just a few days back in various newspapers include headlines like: ‘Our group’s philosophy is to reward shareholders: Jaypee Group’; ‘Yamuna Expressway to be opened in ’11: Jaypee’; ‘Jaypee Group to bid for Federa airport’s infra projects’).

The sole business of Jaypee Infratech is development of the Yamuna Expressway Project—to operate and maintain it for 36 years.

The company recorded a net profit of Rs266.73 crore and a net loss of Rs11.36 crore in FY09 and FY08 against a total income of Rs556.25 crore and Rs70.66 lakh respectively.

Infrastructure companies like IRB Infrastructure Developers Ltd and IL&FS Transportation Networks Ltd carry a P/E of 163.20 and 169.7 as on 12 April 2010 respectively while Jaypee Infratech’s P/E is 55.36.

The issue opens on 29 April 2010 and closes on 4 May 2010 and plans to raise Rs1,650 crore at a price band of Rs102-Rs117. Incorporated in 2007, Jaypee Infratech is part of the Jaypee Group which was granted concession from YEA (Yamuna Expressway Authority) to develop, operate and maintain the Yamuna Expressway in Uttar Pradesh, connecting Noida and Agra. The concession also provides for the right to develop 25 million square metres of land along the Yamuna Expressway at five locations for residential, commercial, amusement, industrial and institutional purposes.

There are 123 cases filed against Jaypee Group companies including 100 land dispute cases and 936 cases are pending against Jaiprakash Associates Ltd in various courts.

The lead book-running managers are Morgan Stanley, DSP Merrill Lynch, Axis Bank, Enam, ICICI Securities, IDFC Capital, JM Financial, Kotak Mahindra Capital, and SBI Capital.

Rating agencies ICRA and CARE have assigned ‘IPO Grade 3’ to the offer. 

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COMMENTS

R Balakrishnan

7 years ago

Looks like a cheap stock! I am sure it will get cheaper...

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