FMCG major Hindustan Unilever Ltd (HUL) on Tuesday reported a fall of 2.69 per cent in its first quarter net profit at Rs 543.19 crore as against Rs 558.18 crore during the corresponding period last fiscal.
The company, however, reported a growth of 7.77 per cent in its net sales at Rs 4,475.68 crore during the quarter ended June 30, 2009 as compared with Rs 4,152.84 crore during the same period last year.
The company's domestic FMCG business grew by 12.80 per cent during the period under review to Rs 4,148.66 crore as against Rs 3,677.92 crore during the first quarter last year.
HUL's home and personal care segment reported sales of Rs 3,405.82 crore during the first quarter, registering growth of 11.87 per cent over the figure of Rs 3,044.53 crore reported during the same period of last fiscal. Its foods segment business jumpe d by 17.28 per cent to Rs 742.84 crore during the quarter ended June 30, 2009 compared with Rs 633.39 crore reported during the corresponding period last fiscal.
In the exports segment, the company registered a significant fall of 34.72 per cent to Rs 255.58 crore for the first quarter as against Rs 391.51 crore during the same quarter of 2008-09. HUL's other income also fell by 14.35 per cent to Rs 71.44 crore during Q1 of this fiscal compared with Rs 83.41 crore during the same period of last fiscal.
Tuesday, July 28, 2009
TCS loses Rs 250 cr UGC e-governance project
UGC cancels Rs 250 cr E-governance project bagged by TCS
University Grants Commission cancels the Rs 250 crore E-governance project bagged by TCS in March. Project was to make UGC processes paperless.
This move as we learn was due to funding and internal conflicts in UGC. Now the project is to be broken in phases- Rs 40-50 crore per phase.
Various IT companies to be called for bidding. TCS, HCL, Wipro and Patni most likely contenders
TCS says UGC has sent communication on re-tendering of contract. TCS will bid for individual projects once tender is open
University Grants Commission cancels the Rs 250 crore E-governance project bagged by TCS in March. Project was to make UGC processes paperless.
This move as we learn was due to funding and internal conflicts in UGC. Now the project is to be broken in phases- Rs 40-50 crore per phase.
Various IT companies to be called for bidding. TCS, HCL, Wipro and Patni most likely contenders
TCS says UGC has sent communication on re-tendering of contract. TCS will bid for individual projects once tender is open
Delhi Metro mishap: Gammon India faces ban
The Delhi Metro Rail Corporation’s Action Taken Report was submitted to Urban Development Minister Jaipal Reddy on Tuesday.
The report, by a four-member expert committee probing Delhi Metro Rail Corporation's worst accident on July 12, which killed six people, says construction giant Gammon India faces a two-year ban from construction for two years and a show cause notice has been slapped on them.
If Gammon fails to reply to the notice, it will be blacklisted.
The report also says three DMRC engineers have been suspended and the design consultants have been blacklisted for five years.
Structural design engineers Tandon Constructions have been barred for three years.
DMRC says independent consultants will be hired for further construction.
“Design consultants will be blacklisted for five years, Tandon Consultants, the structural consultants to be debarred for two years. M/s Gammon India will be given a show cause to be blacklisted for two years,” Reddy said in Parliament.
Gammon has refused to comment, says will react only after going through the DMRC report.
The metro rail deadline remains 2010.
The committee headed by A K Nagpal of the Indian Institute of Technology-Delhi probed the collapse of an under-construction beam meant to support the elevated rail track connecting central Delhi to Badarpur in the south of the Capital.
In the last 10 years, more than 69 people have lost their lives in various metro accidents but none of them have received compensation packages as per the Workmans' Compensation Act of 1923.
The DMRC set up a labour welfare fund in 2003, but lawyers say it seems that this was done to evade civil liability.
Till date, the DMRC has been lauded for completing most projects before stipulated deadlines but statistics show that it needs to do a lot more to uphold the safety and concerns of its employees.
The report, by a four-member expert committee probing Delhi Metro Rail Corporation's worst accident on July 12, which killed six people, says construction giant Gammon India faces a two-year ban from construction for two years and a show cause notice has been slapped on them.
If Gammon fails to reply to the notice, it will be blacklisted.
The report also says three DMRC engineers have been suspended and the design consultants have been blacklisted for five years.
Structural design engineers Tandon Constructions have been barred for three years.
DMRC says independent consultants will be hired for further construction.
“Design consultants will be blacklisted for five years, Tandon Consultants, the structural consultants to be debarred for two years. M/s Gammon India will be given a show cause to be blacklisted for two years,” Reddy said in Parliament.
Gammon has refused to comment, says will react only after going through the DMRC report.
The metro rail deadline remains 2010.
The committee headed by A K Nagpal of the Indian Institute of Technology-Delhi probed the collapse of an under-construction beam meant to support the elevated rail track connecting central Delhi to Badarpur in the south of the Capital.
In the last 10 years, more than 69 people have lost their lives in various metro accidents but none of them have received compensation packages as per the Workmans' Compensation Act of 1923.
The DMRC set up a labour welfare fund in 2003, but lawyers say it seems that this was done to evade civil liability.
Till date, the DMRC has been lauded for completing most projects before stipulated deadlines but statistics show that it needs to do a lot more to uphold the safety and concerns of its employees.
Investment Strategy: Buy JK Lakshmi Cement Ltd.- Price Target: Rs 158
We are recommending a Buy on JK Lakshmi cement with a price target of Rs.158.
Investment Highlights
Topline up by 30.20%: Net sales for the Q1FY10 increased by 30.20% to
Rs. 350.81 Cr compared to Rs. 269.43Cr during the corresponding quarter
previous year. This is on the back of 11% increase in production and 14 %
growth in despatches.
Net profit increased by 102.87%: The company posted a robust growth
in its profit to Rs.78.49 Crores for Q1FY10 an increase of 103% (YoY).
This is mainly on the back of higher realizations.
Increase in operating margin: The operating margin of the company
improved to 34% in Q1FY10 from 24% in Q1FY09. Lower fuel, power cost
and higher realizations resulted in improved operating margins.
Full year performance: For the full year FY09 the company saw a 10%
growth in its topline to Rs.1223.90crores (YoY). The bottomline of the
company saw a decline of 25% to Rs.175.27 Crores due to increase in
input cost particularly in fuel cost.
Capacity addition to drive volumes: The production capacity of the
company increased from 3.65 million tpa to 4.75 million tpa in FY09, an
increase of over 30%. The full capacity will be on stream during FY10,
which will add to the higher volumes.
Greenfield expansion: The company is setting up a green field cement
plant at durg in the state of chattisgarh, with an annual capacity of 2.7
million tonnes and is expected to be commissioned by 2011.
Captive power plant to save cost: The company is setting up a waste
heat recovery power plant with an estimated outlay of Rs. 125 crore. The
project is aimed to generate 12 mw of power and it will be commissioned
by March 2011.Further the company is also planning to set up 18 mw
power plant at sirohi. Both the above-mentioned capacity along with
existing capacity will take the total capacity of the company to 66mw.This
will minimize cost for the company.
Valuation
We expect a stronger topline and bottomline growth on the back of improved
demand, higher price realization, capacity expansion and savings from captive
power plant. At the CMP of Rs. 131.55, JK Lakshmi is trading at 3.03x its TTM
earnings. We recommend a BUY on the stock with a (3-6 month) price target of
Rs.158.
Industry: Cement
Price Data
Current Price (Rs) 131.55
52 wk range (Rs) 133.00-31.00
Stock Data
Mkt Cap (Rs Cr) 804.82
No. of shares o/s(Cr) 6.118
Free float (%) 54.49
Key Indicators
TTM EPS (Rs) 43.39
PAT Margin (%) 22.37%
Code
NSE JKLAKSHMI
BSE 500380
Reuters JKCR.BO
Bloomberg JKLC.IN
Investment Highlights
Topline up by 30.20%: Net sales for the Q1FY10 increased by 30.20% to
Rs. 350.81 Cr compared to Rs. 269.43Cr during the corresponding quarter
previous year. This is on the back of 11% increase in production and 14 %
growth in despatches.
Net profit increased by 102.87%: The company posted a robust growth
in its profit to Rs.78.49 Crores for Q1FY10 an increase of 103% (YoY).
This is mainly on the back of higher realizations.
Increase in operating margin: The operating margin of the company
improved to 34% in Q1FY10 from 24% in Q1FY09. Lower fuel, power cost
and higher realizations resulted in improved operating margins.
Full year performance: For the full year FY09 the company saw a 10%
growth in its topline to Rs.1223.90crores (YoY). The bottomline of the
company saw a decline of 25% to Rs.175.27 Crores due to increase in
input cost particularly in fuel cost.
Capacity addition to drive volumes: The production capacity of the
company increased from 3.65 million tpa to 4.75 million tpa in FY09, an
increase of over 30%. The full capacity will be on stream during FY10,
which will add to the higher volumes.
Greenfield expansion: The company is setting up a green field cement
plant at durg in the state of chattisgarh, with an annual capacity of 2.7
million tonnes and is expected to be commissioned by 2011.
Captive power plant to save cost: The company is setting up a waste
heat recovery power plant with an estimated outlay of Rs. 125 crore. The
project is aimed to generate 12 mw of power and it will be commissioned
by March 2011.Further the company is also planning to set up 18 mw
power plant at sirohi. Both the above-mentioned capacity along with
existing capacity will take the total capacity of the company to 66mw.This
will minimize cost for the company.
Valuation
We expect a stronger topline and bottomline growth on the back of improved
demand, higher price realization, capacity expansion and savings from captive
power plant. At the CMP of Rs. 131.55, JK Lakshmi is trading at 3.03x its TTM
earnings. We recommend a BUY on the stock with a (3-6 month) price target of
Rs.158.
Industry: Cement
Price Data
Current Price (Rs) 131.55
52 wk range (Rs) 133.00-31.00
Stock Data
Mkt Cap (Rs Cr) 804.82
No. of shares o/s(Cr) 6.118
Free float (%) 54.49
Key Indicators
TTM EPS (Rs) 43.39
PAT Margin (%) 22.37%
Code
NSE JKLAKSHMI
BSE 500380
Reuters JKCR.BO
Bloomberg JKLC.IN
SECTOR REPORT - SUGAR INDUSTRY
INDUSTRY OVERVIEW
Sugar Industry in 2008-09 witnessed a rapid shift in Sugar cycle signifying reversal of
high supply - low prices scenario. With the trend reflecting falling production in the
current and next Sugar year, sugar prices firmed up in the second half of the year.
The country's sugar production declined from 26.3 mn MT in 2007-08 to 15 mn MT in
2008-09. Consumption of sugar in India is likely to increase by 1.4 mn MT during 2008-
2009. This mismatch between supply & demand resulted in Sugar deficit.
FACTORS THAT LED TO LOWER SUGAR PRODUCTION ARE AS FOLLOWS
Shrinkage in the area under sugarcane led to lesser availability of sugarcane
and in turn lower sugar production. Data released by the Ministry of Agriculture
shows 9.8 % shrinkage in area under sugarcane in 2008 – 2009.
Increasing sugarcane arrears to farmers from sugar mills and the dispute
between sugar mills and some of the State Governments regarding cane
pricing are likely to further reduce the availability of sugarcane for the
manufacture of sugar.
Alternative crops are more remunerative than sugarcane in major sugarcane
producing states. Farmers therefore appear to be shifting to alternatives. This
year, the higher price offered by jaggery manufacturers, also led to a significant
drop in sugarcane supply to mills.
The cane prices have increased significantly over last 10 years, while sugar
prices have remained volatile resulting in declining spread for the sugar
companies.
Sugarcane and sugar production in India typically follows a 6 to 8 year cycle,
wherein 3 to 4 years of higher production are followed by 2 to 3 years of lower
production.
ATTRACTIVE INDUSTRY DYNAMICS
The increasing demand for Sugar, co-generation and Ethanol favor the sugar industry.
Deregulation of sugar business in developed countries lead to reduction of import
restriction. Migration of people to urban areas results in increase in per capita
consumption. Global environmental concerns favor renewable fuels like ethanol.
Consolidation of mills leads to increase in scale and lower production cost. Finally, ever
growing demand for energy creates opportunity for biomass power generation.
All the above said points result in
Significant sugar export opportunities
Potentially higher international price
Strengthen Indian industry's financial performance
Additional and stable revenue from co-generation and Ethanol
SUGAR PRODUCTION OUTLOOK
After two consecutive years of decline in sugar production, and the consequent
increase in sugar and sugarcane prices, Indian sugar production is set to recover in
marketing year (MY) 2009/10 (October/September). India’s total sugar production in
MY 2009/10 is forecast at 20.8 million tons from 15 million tones in MY2008/09
estimate on improved sugarcane supplies due to expected higher cane planting and
yields.
Strong sugar prices during 2008/09, resulted in high cane prices and timely cane price
payment mills encouraged farmers to plant more cane this season. Relatively strong
sugarcane prices vis-à-vis competing food crops (rice, wheat, maize, pulses) also
supported cane planting. Consequently, 2009/10-cane area is forecast to increase by
9 % to 4.8 million hectares.
CONSUMPTION
The recent slowdown in economy and expected strong sugar prices due to forecast
tight supplies should contain any growth in consumption in MY 2009/10 to 23.0 million
tons, unchanged from last year. Bulk consumers such as bakeries, makers of candy
and local sweets, and soft-drink manufacturers account for about 60 percent of mill
sugar demand.
TRADE
After a gap of 3 years, India has emerged as a net sugar importer in 2008/09. Due to
the forecast tight domestic supplies, imports of sugar in 2009/10 is estimated to
increase to a record 2.5 million tons as the government is expected to continue with
the relaxed import policy. Most of the exports should be raw sugar for further
processing to white sugar for sale in the domestic market. However, there may be
some imports of white sugar in the first half of the season as the government may
allow duty free sugar imports by the private trade. Forecast tight domestic supplies
preclude any significant commercial exports of sugar in the near future, and 2009/10
exports will be limited to quota countries. The 2008/09-import estimate is revised
higher to 1.8 million tons; exports are lowered to 140,000 tons based on information
from the industry sources.
PRICES AND STOCKS
Due to tight domestic supplies, sugar prices have been on the rise since July 2008.
Prices have flared up significantly since December 2008 after the shortage of
sugarcane and sugar became more evident.
Sugar prices are expected to gain in the coming months and remain firm during MY
2009/10. However, international prices and policy measures to be taken by the
government could impact future domestic price movements.
INTERNATIONAL MARKET
World sugar production for the 2009/10 marketing year is forecast at 159.9 million
tons, raw value, up 11.2 million from the revised 2008/09 estimate. Consumption is
forecast at 159 million tons, up 1.5 million from a year earlier. Exports are forecast at
51.3 million tons, up 3 million; and ending stocks are forecast at 31.2 million tons,
down 800,000 tons.
Forecast changes in 2009/10-world production and trade are highlighted by higher
production in Brazil, at 36.9 million tons, up 4.5 million. Brazil accounts for 23 percent
of world production, but Asia accounts for 37 percent. Forecasted production in Asia
is up by 5.8 million tons to total 59.2 million. Production in India for 2009/10 is
forecast at 20.8 million tons, up 4 million, China at 14.5 million tons, up one million,
and Thailand at 7.5 million tons, down 300,000. Production in the EU-27 is forecast
at 17 million tons slightly above last year’s output. In 2009/10, the EU is forecast to
be the world’s largest net sugar importer at 3 million tons.
Exports from Brazil for 2009/10 are forecast at 24.3 million tons, up 4 million from
2008/09. Brazilian exports during the last year were off from expected levels due to
relatively low prices, in relation to production costs, high freight rates, early year
competition from India in Near East markets, high oil prices, and high domestic
ethanol demand and India may import 2.5 million tons, up 700,000 from last year.
Sugar Industry in 2008-09 witnessed a rapid shift in Sugar cycle signifying reversal of
high supply - low prices scenario. With the trend reflecting falling production in the
current and next Sugar year, sugar prices firmed up in the second half of the year.
The country's sugar production declined from 26.3 mn MT in 2007-08 to 15 mn MT in
2008-09. Consumption of sugar in India is likely to increase by 1.4 mn MT during 2008-
2009. This mismatch between supply & demand resulted in Sugar deficit.
FACTORS THAT LED TO LOWER SUGAR PRODUCTION ARE AS FOLLOWS
Shrinkage in the area under sugarcane led to lesser availability of sugarcane
and in turn lower sugar production. Data released by the Ministry of Agriculture
shows 9.8 % shrinkage in area under sugarcane in 2008 – 2009.
Increasing sugarcane arrears to farmers from sugar mills and the dispute
between sugar mills and some of the State Governments regarding cane
pricing are likely to further reduce the availability of sugarcane for the
manufacture of sugar.
Alternative crops are more remunerative than sugarcane in major sugarcane
producing states. Farmers therefore appear to be shifting to alternatives. This
year, the higher price offered by jaggery manufacturers, also led to a significant
drop in sugarcane supply to mills.
The cane prices have increased significantly over last 10 years, while sugar
prices have remained volatile resulting in declining spread for the sugar
companies.
Sugarcane and sugar production in India typically follows a 6 to 8 year cycle,
wherein 3 to 4 years of higher production are followed by 2 to 3 years of lower
production.
ATTRACTIVE INDUSTRY DYNAMICS
The increasing demand for Sugar, co-generation and Ethanol favor the sugar industry.
Deregulation of sugar business in developed countries lead to reduction of import
restriction. Migration of people to urban areas results in increase in per capita
consumption. Global environmental concerns favor renewable fuels like ethanol.
Consolidation of mills leads to increase in scale and lower production cost. Finally, ever
growing demand for energy creates opportunity for biomass power generation.
All the above said points result in
Significant sugar export opportunities
Potentially higher international price
Strengthen Indian industry's financial performance
Additional and stable revenue from co-generation and Ethanol
SUGAR PRODUCTION OUTLOOK
After two consecutive years of decline in sugar production, and the consequent
increase in sugar and sugarcane prices, Indian sugar production is set to recover in
marketing year (MY) 2009/10 (October/September). India’s total sugar production in
MY 2009/10 is forecast at 20.8 million tons from 15 million tones in MY2008/09
estimate on improved sugarcane supplies due to expected higher cane planting and
yields.
Strong sugar prices during 2008/09, resulted in high cane prices and timely cane price
payment mills encouraged farmers to plant more cane this season. Relatively strong
sugarcane prices vis-à-vis competing food crops (rice, wheat, maize, pulses) also
supported cane planting. Consequently, 2009/10-cane area is forecast to increase by
9 % to 4.8 million hectares.
CONSUMPTION
The recent slowdown in economy and expected strong sugar prices due to forecast
tight supplies should contain any growth in consumption in MY 2009/10 to 23.0 million
tons, unchanged from last year. Bulk consumers such as bakeries, makers of candy
and local sweets, and soft-drink manufacturers account for about 60 percent of mill
sugar demand.
TRADE
After a gap of 3 years, India has emerged as a net sugar importer in 2008/09. Due to
the forecast tight domestic supplies, imports of sugar in 2009/10 is estimated to
increase to a record 2.5 million tons as the government is expected to continue with
the relaxed import policy. Most of the exports should be raw sugar for further
processing to white sugar for sale in the domestic market. However, there may be
some imports of white sugar in the first half of the season as the government may
allow duty free sugar imports by the private trade. Forecast tight domestic supplies
preclude any significant commercial exports of sugar in the near future, and 2009/10
exports will be limited to quota countries. The 2008/09-import estimate is revised
higher to 1.8 million tons; exports are lowered to 140,000 tons based on information
from the industry sources.
PRICES AND STOCKS
Due to tight domestic supplies, sugar prices have been on the rise since July 2008.
Prices have flared up significantly since December 2008 after the shortage of
sugarcane and sugar became more evident.
Sugar prices are expected to gain in the coming months and remain firm during MY
2009/10. However, international prices and policy measures to be taken by the
government could impact future domestic price movements.
INTERNATIONAL MARKET
World sugar production for the 2009/10 marketing year is forecast at 159.9 million
tons, raw value, up 11.2 million from the revised 2008/09 estimate. Consumption is
forecast at 159 million tons, up 1.5 million from a year earlier. Exports are forecast at
51.3 million tons, up 3 million; and ending stocks are forecast at 31.2 million tons,
down 800,000 tons.
Forecast changes in 2009/10-world production and trade are highlighted by higher
production in Brazil, at 36.9 million tons, up 4.5 million. Brazil accounts for 23 percent
of world production, but Asia accounts for 37 percent. Forecasted production in Asia
is up by 5.8 million tons to total 59.2 million. Production in India for 2009/10 is
forecast at 20.8 million tons, up 4 million, China at 14.5 million tons, up one million,
and Thailand at 7.5 million tons, down 300,000. Production in the EU-27 is forecast
at 17 million tons slightly above last year’s output. In 2009/10, the EU is forecast to
be the world’s largest net sugar importer at 3 million tons.
Exports from Brazil for 2009/10 are forecast at 24.3 million tons, up 4 million from
2008/09. Brazilian exports during the last year were off from expected levels due to
relatively low prices, in relation to production costs, high freight rates, early year
competition from India in Near East markets, high oil prices, and high domestic
ethanol demand and India may import 2.5 million tons, up 700,000 from last year.
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
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
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