Power finance Ltd IPO

Power finance is one of the many power sector public companies which are raising funds via an IPO. This IPO is soon going to be followed with IPOs of Power Grid Corporation, Rural Electrification Corporation and National Hydroelectric Power Corporation.

Details:
Price Band: Rs 73-85
No of shares to be alloted 117.3 million (10.22% stake)
Offer period: 31st Jan- 6th Feb
date of listing: ???

Analysis
Cons: Although the company is categorized in the power sector. It is in the business of Institutional Lending… so rate it like any other bank or NBFC. (non-banking financial corporation)
Hence you should take into account the risk of interest rate fluctuation, Dollar-Rupee exchange rate, NPA, etc.

Pros:
1) Power sector is expected to grow and lots of new projects and expansions are likely in the next 10 years. So the business should also grow.
2) In India most Power Corporations have a long term contract with the government. Hence the cash-flows are quite stable, and hence NPA is low in this sector. Power Finance and other lenders benefit from this scenario.
3) The balance sheet of the company looks very clean. There was consistency in the yoy financial reports and no spurt in the profits/other income which is usually observed for companies cooking up books for the IPO.

I would say, Treat it like any other financial corporation which is ready to benefit from the booming electrification and infrastructure development of the nation.