See favourable risk-reward ratio in Orient Green IPO: Sharekhan

MUMBAI: Sharekhan is of the view that Orient Green Power IPO is available at a discount to an average P/BV multiple of 2.6x for the other regulated power utilities. The brokerage sees a favourable risk-reward ratio for the investors in the issue.

“We do not see any company directly comparable with OGPCL but given the company’s dependence on government policies and regulations its business could be aligned to that of the regulated power utilities.

Based on the price-to-book value (P/BV) multiple, OGPCL’s valuation at the higher end of the price band (Rs 55 per share) stand at 1.9x.

OGPCL is trading at a discount to an average P/BV multiple of 2.6x (based on FY2010 book value) for the other regulated power utilities due to the lower plant load factor for renewable energy versus
conventional sources of energy and feedstock risks.

On the back of favourable sector dynamics, huge capacity additions (over FY2011-13) and reasonable valuations, we see a favourable risk-reward ratio for the investors,” the report said.

The issue aims to raise Rs 900 crore, which would be utilised to finance the construction and development of the company’s four biomass projects and two wind energy projects and to repay debt.