Vedanta proposes IPO for Sterlite Power, grey market super-excited

Anil Agarwal-led Vedanta Group is planning to float an initial public offering (IPO) for its power arm Sterlite Power Transmission by the end of 2021. The company has sent a postal ballot notice to its shareholders for the same.

ET has seen a copy of this notice, stating that the group will consider and if thought fit pass, with or without modifications the IPO plans as a special resolution.

The company’s plan has made Sterlite Power the latest sensation in the grey market – the unofficial market for unlisted shares. The company is planning to issue shares worth Rs 2,000 crore, they said.

The stock has surged to Rs 780-800 apiece from Rs 550-560 just a week back. The stock was available at Rs 400-425 earlier this year, grey market dealers said.

Dealers in unlisted shares are gung ho on the stock, while sellers have vanished from the market, as myriad calculations of IPO price and company valuation start doing the rounds.

The company has an equity capital of 6 crore shares. At Rs 750 apiece, it would add up to a market capitalisation of Rs 4,500 crore.

Jasbir Singh, Founder of Pune-based boutique firm Meera Associates, said the company is likely to dilute 20 per cent of its equity through the IPO, valuing itself at over Rs 10,000 crore.

“There would still be headroom for a hefty upside for the stock before IPO, which is expected later in 2021,” he said. “Investors should not be surprised if the company announces bonus shares before going public.”

Sterlite Power manufactures power products, and is in the business of power transmission and offers solution for problems of intersection of time space and capital.

It is the second most prominent power transmission company of India after

PowerGrid

NSE 0.09 % and is ahead of Adani Transmission and Essel Group in terms of market share.

Umesh Paliwal, co-founder of UnlistedZone, said the company has a huge order book in India and Brazil. The company’s record of efficient and swift order execution adds to its attraction.

“A strong management, Vedanta Group’s backing and sound business in India and overseas, the company has it all,” Paliwal said. “The company has bagged big orders in 12 states of Brazil.”

The Institute of Energy Economics and Financial Analysis (IEEFA), in a report released in February 2020, pegged Sterlite Power’s market share at 31.5 per cent in terms of tariff. PowerGrid had a market share of 36 per cent, and Adani Transmission less than 18 per cent. Sterlite has approximately 13,500 circuit km of transmission lines.

“The best opportunity is yet to arrive, as telecommunication companies are expected to capitalise on the power transmission infrastructure for nationwide 5G rollout,” said Ripunjay Aggarwal, Director at Delhi-based Growfast Securities.

“Sterlite Power has been continuously focusing on debt reduction to boost topline. Besides, it has been monetizing assets through INVITs at a sturdy margin,” Aggarwal said. “The company is also likely to reap the benefits of its renewable energy focus.”

The company turned profitable in the financial year 2020-21 by reporting Rs 362.92 crore profit on a standalone revenue of Rs 2,933.85 crore. Consolidated profits for the year stood at Rs 869.77 crore. The company had announced an interim dividend of Rs 5.30 per share with the face value of Rs 2 apiece for the year.

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