The government seems to be crazy but it is pretty good for the investors. The Powergrid FPO is priced @ Rs. 85.5 for retail investors. The 52 week low is Rs. 95. This is a defensive (low-beta) stock. At this level in this bull market, it is a very good investment with a good risk-reward ratio.
Some details about Powergrid and the valuations:
Incorporated in 1989. World's leading power transmission utility carrying 51% of nation's power. Also holds large amount of fiber optic network.
The issue is 50% offer for sale by government and 50% fresh issue (to be deployed for enhancing transmission network).
Networth as on 30th Sep: Rs. 17296 crore
Issue is to increase capital by 42,08,84,123 shares. Post issue, at a price of Rs. 100, Powergrid will trade at a Trailing 12 Month P/E of 19.3 which is below its average historic P/E and not high for a utility. The big debt is not an issue as it is common with power transmission utilities who are not exactly high ROE candidates.
With large amount of power projects coming up, the scenario is supposed to get rosier for the company.
One should subscribe with full amount without hesitation.
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