Adani Power Ltd

Company Profile
Adani Power Limited (APL) is a power project development company. It operates and
maintains power projects across India and it is a part of Adani Group, a leading
business group in India.
APL has four thermal power projects under various stages of development, with a
combined installed capacity of 6,600 MW. In addition they are also planning to
develop two thermal power projects at Dahej and Kawai with a combined installed
capacity of 3,300 MW.
It proposes to implement 2640 MW Coal based Thermal Power Project at Mundra,
Dist. Kutch, and Gujarat, India. It also proposes to implement 1320 MW Coal based
Thermal Power Project at Tiroda, through its 100% subsidiary, Adani Power
Maharashtra Ltd. (APML). APL is also actively planning to implement other Thermal
Power Stations at various locations in India, totaling to about 10000 MW in the coming
years.

Objective Of The Issue
Particulars
To part finance the construction and development of Mundra Phase IV Power Project, for
1,980 MW
Funding equity contribution in its subsidiary Adani Power Maharashtra Limited to part finance
the construction and development cost of power project for 1,980 MW at Tiroda, Maharashtra
General Corporate Purposes


Investment Rationale

Increasing Industry Demand: India is a power deficit country. The gap
between demand and supply is increasing, leading to increase in power
shortage. The peak deficit in western region of India is at 26.5% of peak
demand requirement. According to the 17th Electric Power Survey, India’s
peak demand will reach approximately 152,746 MW with an energy
requirement of approximately 968 billion units by fiscal year 2012. By the
fiscal year 2017, peak demand is expected to reach 218,209 MW with an
energy requirement of 1,392 billion units.

It has secured supply of fuel for many of its power projects: One of the
critical success factors for any power generation project is the availability of
cost-effective fuel sources throughout the lifetime of the power project. Its
Mundra power projects are located along the coast and will utilize imported
coal as primary fuel for its operations. Further it entered into long-term coal
supply arrangements for coal with Adani Enterprises Limited (AEL) for
Mundra power projects.

Location Advantage: All its power projects under development are located in
Western India, where according to the CEA, the peak deficit was 7,086 MW
for the period between April 2008 and March 2009. Higher deficit will increase
the demand for the power and to boost the top line of the company in the long
run.


Entered into long term Off-take aggrement:: It entered into two off-take
agreements with Gujarat Urja Vikas Nigam Limited for the supply of 1,000
MW of power produced from the Mundra Phase I and II Power Project, and
for the supply of 1,000 MW of power produced from the Mundra Phase III
Power Project. This agreement will help the company to sell power produced
in excess and to mitigate off-take risk, while enabling to sell the residual
power at market determined rates.

Investment Concern

APL does not have a revenue stream, which shall flow when it is able to
successfully execute its projects. Further power projects require long
gestation period to execute the projects.

The companies rely mainly on Chinese equipment for setting up the power
plants. There have been instances in India of power generation players facing
intermittent problems with Chinese equipment.

Valuation
The company does not have any past earnings records; hence relative valuation with
peers is not possible. The valuation of the company is possible only when it starts its
operation as power projects takes long gestation period. Considering company can
perform well in the long run, we recommend investor with long-term investment
horizon to subscribe the issue.


Industry:
Power Generation & Supply

Issue details:

Price Range: Rs.90-100
Issue Period: 28th July’09 to
31st July’09

Issue Type: 100% book building
Issue Size: 30.16 crore shares
Pre-Issue Equity: 187.83 crore shares
Post-Issue Equity: 218.00 crore shares

Lead managers
1. Enam Securities Private Limited
2. IDFC - SSKI Limited
3. JM Financial Consultants Private Ltd
4. Kotak Mahindra Capital Company Ltd
5. Morgan Stanley India Company Pvt Ltd
6. ICICI Securities Limited
7. SBI Capital Markets Limited