POWER FINANCE FPO ATTRACTIVELY PRICED

Message

   13 MAY IS LAST DAY OF APPLYING IN PFCI FPO FOR RETAIL N HNI CUSTOMERS.PRICE OF 193 FOR RETAIL INVESTORS AFTER 5% DISCOUNT.QIB PORTION OVERSUBSCRIBED 7 TIMES @ 203.
VIEWS INVITED
Motilal Oswal has initiated coverage with a buy recommendation on the
 stock and set a target price of Rs 290, 37% upside over current market 
price of Rs 211/share.
Company provided 5% discount to retail bidders & eligible 
employees through the issue, which will close on May 12 for qualified 
institutional bidders and May 13 for all other bidders.
Motilal Oswal says that PFC is well placed to leverage the strong 
demand for financing in the power sector, with its leadership position 
and strong domain knowledge. "Planned capital raising of Rs 35 billion 
(overall capital raising of Rs 47 billion; government stake sale of Rs 
11.6 billion) would support faster loan growth and provide the
ability to take higher exposure to single/group borrowers."
Oswal expects PFC to clock a 20% CAGR in loan disbursals over 
FY11-FY13 and consequently a 23% CAGR in its loan book to Rs 1.5 
trillion by FY13. 
"Well matched asset-liability profile has been cushioning PFC against
 interest rate risks; however, rising competition and bulk borrowing 
rates are likely to impact spreads," the report said.
"We model PAT CAGR of 18% over FY11-13, supported by lean cost 
structure and minimal credit cost. We expect the return ratios to remain
 strong, with RoA of ~2.7% and RoE of 16-17% (post dilution) for 
FY12-13."
The report said heightened concerns over SEB losses and expected 
slowdown in loan growth (due to environment clearance issues) have led 
to a sharp 45% correction in stock price from the peak. 
Motilal Oswal believes current valuations are attractive at 1.2x 
FY13E BV and has initiated coverage with a buy recommendation and a 
target price of Rs 290 (1.6x FY13E BV), 37% upside.