'Subscribe' to Orient Green Power IPO: Arihant

MUMBAI: Arihant Capital Market has recommended investors to ‘ Subscribe’ to initial public offering of Orient Green Power at the lower end of the price band with long term perspective. The company has entered the capital market to raise Rs 900 crore by issuing shares in the price band of Rs 47-55 per share.

The proceeds will be used to finance four biomass projects, fund subsidiary OGP Rajasthan to develop biomass project, fund subsidiary Beta wind farms to develop wind power project and repayment of debts on the books of four subsidiaries.

“Considering P/B valuation methodology that normally applicable to power generating companies, Orient Green Power is trading at a P/B of 5.8x times on the lower end of price band and 6.8x times on the upper end of price band on its FY10 book value.

The company does not have direct comparable peer group in the same field due to relatively nascent stage of business; we have considered larger peer set from conventional energy source. Though stock looks expensive at current valuations vis a vis its conventional peers, however, owing to its rapid capcity expansions by almost 5x times and strong project execution capabilities, through its parent company Sriram EPC, should benefit company to de-risk its project execution risk.

With this background, strong earning visibility and favorable demand-supply dynamics coupled with favourable policies, we believe OGPL is a strong investment case for long-term investor who wants to benefit from India growth story and recommend our investors to SUBSCRIBE to the issue at lower price band with a long term view in mind,” the report said.

The issue closes Friday.