REC - Rural Electrification Corp FOP Review

[komal]

HDFC Securities has the following recommendation for the Follow On Public Issue of REC,

Investors could subscribe to the FPO with a medium term view as the increased funds could lead to a healthy growth in topline, bottomline and Networth / Book Value over the next 2 quarters. Finance companies are typically valued on P/BV basis. With a rise in book value (due to the equity funds being raised at a premium and the profits accruing over the next two quarters, investors could look forward to a decent return over the next 2-3 quarters.

FYI, It was HDFC Fund Managers who went ahead and BOUGHT the stock aggressively last year around Rs 100 levels which is when all other analysts started BUYING. REC was superior on Balance Sheet compared to PFC [Power finance corp] but for some reason the stock was languishing and HDFC Fund Managers gave the boost and made money.

[komal]

Here are Angel Broking Analyst Vaibhav Agarwal and Amit Rane's Views on REC public issue,

At the floor price of Rs203, the stock is available at 1.5x FY2011E Adjusted Book Value of Rs132 and 1.3x FY2012E Adjusted Book Value of Rs151. The valuations compare favourably with its closest peer, PFC, which is trading at 1.8x FY2011E Adjusted Book Value of Rs130 and 1.6x FY2012E Adjusted Book Value of Rs150 (at the CMP of Rs235). We believe that REC can command up to 1.75x on its FY2012E Adjusted Book Value, implying a reasonable upside. Hence, we recommend a Subscribe view on the issue.

[Cher]

Wow!  Rajen Shah, CIO, Angel Broking has to say this:

We don’t think that the REC issue would be any different from NTPC or NHPC. The stock has already started inching towards the issue price. We think that the government should have offered the stock at Rs 160 levels and investors would have lapped up the stock.
Currently, it is trading at about 10 times its FY11 earnings, and in that case, it would have been just 8 times. At this price, investors would be better off skipping the issue, as they would get the same at Rs 180 in the next three months. However, if they are already holding the stock, they should continue to do so.

Source: The Economic Times

[chetan]

Unicon Wealth Research analyst Shweta Rane has the following view on the IPO of REC,

At the CMP of INR 203, REC trades at a P/BV of 2.97x, which is marginally higher than its peer (Power Finance Corporation P/BV 2.17x). On P/E basis, REC is trading at 10.05x, which is cheaper as compared to its peer (Power Finance Corporation Ltd 12.56x). Further, looking at tremendous growth prospects in the power generation sector and diversified portfolio of REC, we recommend subscribing to the issue.