Orient Green Power IPO priced below regulated peers: Macquarie

MUMBAI: According to Macquarie Research from price to book value (P/BV) perspective the Orient Green Power IPO is placed below its larger regulated peers.

“Orient Green Power will open its IPO during the week, priced on 1.7–1.9x Price to Book Value (P/BV), which compares favourably with the Indian regulated power sector on 2.0x FY11E P/BV.

We believe the issue provides a unique green power exposure in India. Government policy appears supportive, setting the renewable generation target at 15% of the total power generation mix in 2020. While the target may be bullish, it supports positive pricing policy over the medium term.

In our view, this is likely to be the first of a number of renewable energy listings over the next few years. Due to the small-scale nature of renewable capacities, such companies will likely be in the small-mid cap segment of the market.

During a period of supportive government policy, however, there is likely to be keen interest. Medium-term success of these utilities will hang on the government’s ability to force State Electricity Boards and distribution companies to honour their Renewable Purchase Obligations (RPOs),” the report said.