KSK Energy Ventures raises Rs 415 cr via pre-IPO placements

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KSK Power Ventures, a company listed on the AIM market of London Stock Exchange, today said its Indian subsidiary has raised Rs 415.34 crore through an pre-IPO placement.

KSK Power said its subsidiary KSK Energy Ventures, has successfully completed a pre-IPO placement of 1.73 crore equity shares at a price of Rs 240 per share, a company statement said.

The company has issued shares to six financial institutions including Macquarie Bank (UK), Tree Line Asia Master Fund, Infrastructure Development Finance Company, Axis Bank, Universities Superannuation Scheme, UK and GE Capital (Mauritius).

KSK Energy was established in 2001 to capitalise on emerging opportunities in the Indian power sector and focus on developing, operating and maintaining power projects.

It has operational power plants capable of generating 144 MW of power, and it is currently constructing, developing or planning power projects capable of generating an aggregate of 8,993 MW of power.

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The initial public offering of KSK Energy Ventures opened for subscription on Monday. The public issue of 3,46,11,000 equity shares of Rs 10 each, is in the price band Rs 240-255 per share. It closes on June 25. The offer constitutes 10 per cent of the post-issue share capital.

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Keynote Capitals has recommended subscribing to the initial public offering of KSK Energy Ventures with a long term view. The company has come out with an IPO of 34.61 million shares of Rs 10 each, aggregating Rs 883 crore, in the price band of Rs 240-255 per share.

KSK plans to generate 8,993 mw of power by 2013, through a mix of thermal and hydro power projects. While it already generates 144MW of power, generating capacity of 2,648MW is under construction and development, while 6,345MW is in the planning stage. The company has already ensured fuel supply for most of the projects.

The company has arranged finance for projects of 2,518MW, while finance for rest 6,475MW projects is yet to be tied up. Further, it is also bidding for 2,320MW power projects in Punjab and Karnataka. Keynote expects large burden of debt, as well as further equity dilution in the future, in order to fill the gap in funding needs.

Lehman Brothers affiliate LB India Holdings Mauritius took a substantial stake of 31.57 per cent (post-dilution 28.41%) at Rs 34.55 per share, as recently as January 25, 2008. The pricing of the placement is at a fraction of the cap price for the IPO.

As per Keynote’s valuation exercise, the IPO is priced at Rs 2.5 crore per MW (considering only existing projects and projects under construction / development) which looks expensive vis-à-vis established peers like NTPC which trades at Rs 2.1 crore per MW and Tata Power at Rs 2.3 crore per MW.

Considering the long term execution tenure of the projects (to be completed by 2013), risk of delays, financing risk, interest rate risk and execution risk would remain, Keynote recommends subscribe.