Power Grid issue band likely $1.9 to $2 per share: sources

By Ketan Bondre and Sumeet Chatterjee

MUMBAI (BestGrowthStock) – Indian state-run Power Grid Corp (PGRD.BO: ) is likely to set the price band for its follow-on share offering at 85-90 rupees ($1.9-$2) each, two sources with knowledge of the situation said on Sunday.

The offering consists of fresh equity issue of 10 percent by the company and sale of another 10 percent by the Indian government. The share sale by the transmission utility opens on Tuesday and closes on Friday.

At the top end of the indicative range, Power Grid is likely to raise as much as 76 billion rupees ($1.7 billion). The price band represents a discount of 12-17 percent to the current market price.

Officials at Power Grid could not be immediately reached for comment.

A Indian government panel is expected to finalize the price band late on Sunday, sources said.

Recent weeks have seen a resurgence in initial public offerings as investors’ risk appetite revives, especially in Asia and Europe, with more companies rushing to cash in on recent stock market strength.

The Power Grid offer comes just weeks after state-run Coal India (COAL.BO: ) raised $3.4 billion through an initial public offering in which investors applied for more than 15 times the shares on offer.

Analysts said that the enthusiastic response to Coal India, which followed sluggish demand for some of the recent offerings by state-run companies, has added pressure on New Delhi to price future deals attractively.

The government is looking to raise roughly $8.5 billion from share sales in 2010/11 as it aims to bring down its fiscal deficit by selling stakes in some 60 state-run companies over the next few years.

A record $26 billion in foreign fund inflows into stocks this year brightens the outlook for India’s divestment program.

The Power Grid share offering will be followed by a $270 million IPO in Manganese Ore India in early December and another follow-on offer in Hindustan Copper (HCPR.BO: ) that could raise $1.6 billion.

Shares in Power Grid, valued at $9.8 billion, closed up 0.7 percent at 102 rupees on Friday in the main market (.BSESN: ) that rose 0.5 percent. The stock is down 7.4 percent so far this year underperforming a 20 percent rise in the benchmark index.

Goldman Sachs (GS.N: ), JPMorgan (JPM.N: ), SBI Capital Markets (SBI.BO: ) and ICICI Securities (ICBK.BO: ) are the lead managers for the Power Grid offer.

Power Grid, the world’s third-largest transmission utility, carries almost half of the electricity generated around the country and is also engaged in the businesses of telecom infrastructure leasing and consulting.

The company will use the share sale proceeds for building nine country-wide high-capacity power transmission corridors, its Chairman S.K. Chaturvedi said last month.

Power Grid last month posted a 42 percent jump in net profit in the quarter ended September to 6.5 billion rupees.

($1=44.2 rupees)

(Editing by Erica Billingham)

Power Grid issue band likely $1.9 to $2 per share: sources