Adani Power IPO Analysis - SUBSCRIBE Rating By KR Choksey
The company's management team has strong execution capabilities with an established track record, knowledge in the power generation sector and strong understanding of the domestic market.
Further, the vertically integrated business model, long-term fuel tie ups and the tax exemptions enjoyed at the Mundra Power plants on account of APL being a co – developer in Mundra SEZ (and Tiroda project will be subject to MAT), would lead to higher margins and thus result in higher RoE (50%).
We have valued the company based on the profitability (EV per EBITDA) and capacity (EV per MW). Based on both these parameters, we believe that the company’s fair value is slightly higher than the price band of the IPO (Rs 90 – 100). Further, given the current market sentiment towards the power sector and interest in the sector by the investors, we expect the issue to get significantly over-subscribed.
Thus, we would recommend our investors to 'SUBSCRIBE' to the company’s IPO. Based on our calculation, the company’s fair value comes at Rs 104 per share, we thus believe that the downside risk is negligible and one can look into the issue for listing gains.
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