1. Power
IPO Note | Power
April 29, 2010
SJVN SUBSCRIBE
Issue Open: April 29, 2010
Hydro Powered Issue Close: May 3, 2010
SJVN is a joint venture between the Government of India and the state government
Issue Details
of Himachal Pradesh, formed to develop and operate the 1,500MW Nathpa Jhakri
Hydro Power Station (NJHPS). NJHPS is currently the largest operational hydroelectric Face Value: Rs10
power (HEP) generation facility in India based on installed capacity. SJVN is also Present Equity Capital: Rs4,109cr
currently constructing a 412MW plant at a cost of Rs2,047cr at Rampur in Himachal
Pradesh, and is located downstream of the NJHPS. The company also has seven Post Issue Equity Capital: Rs4,109cr
projects of 3,588MW under development. All projects except for the Tipaimukh Issue size (Shares): 41.5cr
project are 'Run of the River' projects. The projects under implementation also include
Issue size (amount): Rs940cr-1,063cr**
a 900MW project in Nepal. We have arrived at a fair value of Rs30 for the stock
and recommend a Subscribe to the IPO. IPO. Issue Price: Price Band of Rs23 -26
Rationale for our Subscribe recommendation Promoters holding pre-issue: 100.0%
SJVN to enjoy a stable revenue stream from NJHPS: SJVN is expected to enjoy a
NJHPS: Promoters holding post-issue:90.0%
stable revenue inflow from its currently operational NJHPS project. It has entered
**at Lower and Upper price band
into ten power purchase agreements with state utilities in the Northern region,
under which all of the power generated by the NJHPS is sold to state electricity
boards. The steady cash flows from the company's existing operations at the NJHPS Book Building
are sufficient to fund its equity contribution portion for the existing pipeline of projects.
QIBs At least 60%
Favourable Industry Dynamics: According to the Hydro Power Policy 2008, India Non-Institutional At least 10%
has an enormous untapped potential for hydroelectric generation, equivalent to
Retail At least 30%
84,000MW at an optimum 60% load factor, which translates to 148,700MW in
terms of installed capacity. We believe that SJVN, with its expertise in operating
India’s largest HEP generation facility is well placed to make use of this opportunity.
Post Issue Shareholding Pattern
Strategic Location of Power Plants: Most of the SJVN's upcoming projects are
Location Power
Promoters Group 90%
strategically located in India's Northern region, which are bestowed with perennial
MF/Banks/Indian
rivers with a continuous water supply. The strategic location of the plants is expected
FIs/FIIs/Public & Others 10%
to enable the company to maintain a high operational efficiency. The company has
been able to operate its NJHPS plant at capacity index levels (CI) in excess of 90%
(barring FY2006), well above the normative levels fixed by CERC.
Outlook and Valuation: We believe that the issue has been attractively priced,
Valuation:
considering the fact that the company has 1,500MW of operational assets, which
provides it with good near-term revenue visibility and a steady cash flow. At the
lower and higher end of the price band, the stock would trade at Price to Book
multiples of 1.2x and 1.3x, respectively, on the basis of FY2012E financials. The
company’s public sector peer NHPC, with operational capacity of 5,175MW is
trading at a P/BV multiple of 1.4. The Angel ROIC for SJVN stood at 16% in FY2009
higher than 11% for NHPC, due to better operating performance and financial
leverage; hence, the SJVN stock deserves a premium to NHPC. At the issue price, Rupesh Sankhe
the stock would trade at a substantial discount to its private sector peers such as +91 22 4040 3800 Ext: 319
Jaiprakash Power Ventures (P/BV of 4.1)and KSK Energy Ventures (P/BV of 1.9), Email: rupeshd.sankhe@angeltrade.com
with operational assets of 700MW and 279MW, respectively. We recommend a
V Srinivasan
IPO.
Subscribe to the IPO.
+91 22 4040 3800 Ext: 330
Email: v.srinivasan@angeltrade.com
Please refer to important disclosures at the end of this report
2. SJVN | IPO Note
Company Background
SJVN is a joint venture between the Government of India and the state government of
Himachal Pradesh, formed to develop and operate the 1,500MW Nathpa Jhakri Hydro
Power Station (NJHPS). The company was initially incorporated as a private limited
liability company in 1988; it officially took over the construction and operation of the
NJHPS from the Himachal Pradesh State Electricity Board (HPSEB) in August 1991.
NJHPS is currently the largest operational hydroelectric power generation facility in
India based on installed capacity, and is located on the Sutlej River in Himachal Pradesh.
The first 250MW hydroelectric power generation unit was commissioned at the NJHPS
In October 2003, and by May 2004 all six power generating units at the NJHPS were
operational. Currently, the NJHPS is the only operational power project of the company.
The power generated in this plant is being supplied to various states in the northern
region, through ten different Power Purchase Agreements (PPAs).
Exhibit 1: SJVN Snapshot
Particulars Projects
No. of Projects MW
Generation Projects Completed 1 1,500
Generation Projects under Construction 1 412
Generation Projects under Development/ Implementation 7 3,588
Transmission Joint Venture 1 -
Source: Company RHP Angel Research
,
The NJHPS has always continued to maintain a healthy Plant Availability Factor (PAF),
barring FY2006, which is in excess of the normative level fixed by the CERC for the
plant. Thus, the NJHPS plant has continued to show a growth in its overall power
generation since FY2007.
Exhibit 2: SJVN Power Generation
7,000 120
6,000 100
5,000
80
(MU)
4,000
60 (%)
3,000
40
2,000
1,000 20
0 0
FY2005 FY2006 FY2007 FY2008 FY2009 9MFY2010
Generation (LHS) PAF (RHS)
Source: Company RHP Angel Research
,
April 29, 2010 2
3. SJVN | IPO Note
Upcoming Project Portfolio
The company is currently constructing a 412MW plant at a cost of Rs2,047cr at Rampur
in Himachal Pradesh. This Project is located downstream of the NJHPS on the Sutlej
River, and is a tailrace arrangement, which is expected to use the de-silted water
discharged from the NJHPS. The Rampur Project is currently expected to be completed
by 2013. The company signed the implementation agreement for the Rampur Project
with the state government of Himachal Pradesh in October 2004, and the project was
approved by the CCEA in January 2007. The construction work on the Rampur Project
commenced in February 2007. SJVN has not entered into offtake arrangements with
respect to power generated by the Rampur Project. However, pursuant to Government
policies, the company is required to supply 12% of the aggregate power generated by
the Rampur Project, when completed and operational, to the state of Himachal Pradesh,
free of- charge, while 1% will be supplied to a state-established local development
fund.
The company also has seven projects of 3,588MW under development. All projects
apart from the Tipaimukh project are 'Run of the River' Projects. The projects under
implementation also includes a 900MW project in Nepal.
Exhibit 3: SJVN Project Portfolio
Under Constn Location MW Proj. Cost Cost/ MW Project
(Rs cr) (Rs cr) Type
Rampur Himachal 412 2,047 5.0 Pumped Storage
Total 412
Under Dev/impl.
Luhri Himachal 775 4,795 6.2 ROR*
Dhaulasidh Himachal 50 403 8.1 ROR
Devasri Uttarakhand 252 1,341 5.3 ROR
Naitwar Mori Uttarakhand 60 474 7.9 ROR
Jakhol Sankri Uttarakhand 51 359 7.0 ROR
Arun -III Nepal 900 4,460 5.0 ROR
Tipaimukh Manipur 1,500 NA Storage
Total 3,588
Source: Company RHP; Note: *refers to Run of the River
IPO Details: SJVN has set a price band of Rs23-26 a share for its initial public offer of
41.5cr shares, which will be open for subscription between April 29 - May 3, 2010.
The issue offers 5% discount to retail investors. The current issue, which involves a
central government disinvestment of 10.03%, does not involve any fresh issue of
equity and will comprise 10.03% of the fully-diluted post-issue paid-up capital of the
company. At the lower and upper end of the price band the company will raise
Rs940-1,063cr. SJVN's IPO, a part of the government's disinvestment programme
follows that made by India's Hydro Power major NHPC in August 2009, which raised
Rs6,000cr in the primary market.
April 29, 2010 3
4. SJVN | IPO Note
Exhibit 4: Shareholding Pattern
Pre-Issue
Pre
re-Issue Post-Issue
Post
ost-Issue
No. of shares % No. of shares %
Promoter
President of India, actingthrough the MoP (incl. nominees) 308,16,11,700 74.5 266,66,11,700 64.5
Governor, State of HP (Incl. nominees)
, 105,50,14,800 25.5 105,50,14,800 25.5
Public (including Eligible
Employees) 0 0 41,50,00,000 10.0
Total 413,66,26,500 100.0 413,66,26,500 100.0
Source: Company RHP
Industry Overview
According to the Hydro Power Policy 2008, India has enormous untapped potential
for hydroelectric generation, equivalent to 84,000MW at a 60% load factor, which
translates to 148,700MW in terms of installed capacity. In addition to the above,
6,782MW of installed capacity has been assessed from small, mini and micro
hydroelectric schemes (i.e., schemes of capacity up to 25MW). Further, according to
the India Investment Centre, 56 potential pumped storage sites, with an aggregate
installed capacity of 94,000MW, have also been identified. The hydro power capacity
addition was 7,886MW during the Tenth Plan, which was 54.8% of the targeted addition
of 14,393.2MW. In the Eleventh Plan, the proposed capacity addition is 15,627MW,
of which only 3,470 MW has been commissioned and 12,157 MW is under construction.
Exhibit 5: Hydro Power Potential in India
Basin/River Potential at 60% Load
Load Probable Installed
Factor (MW) Capacity (MW)
Indus 19,988 33,832
Ganga 10,715 20,711
Central Indian Rivers 2,740 4,152
West-Flowing Rivers 6,149 9,430
East-Flowing Rivers 9,532 14,511
Brahmaputra 34,920 66,065
Total 84,044 1,48,701
Source: Company RHP
Despite the benefits of hydroelectric projects, hydropower's share in the Indian power
market has steadily declined. At the end of the First Five-Year Plan (1951-56),
hydropower constituted 37% of the total installed capacity in the power sector, and
rose to more than 45% by 1963. Until the late 1970s, hydropower continued to
represent more than 40% of India's power supply, which is considered to be the ideal
hydro-thermal generation mix for meeting demand in an efficient manner. However,
in the 1980s, hydropower's share began declining sharply, and in FY2009 hydropower
constituted only about 25% of the overall installed capacity in the country. As a result
of the decreasing share of hydropower, thermal generation, which should
ideally be used only for base load operations, is also being used to meet peak
requirements. This leads to sub-optimal utilisation of economic and non-renewable
resources. The development of India's hydroelectric potential is a high priority of the
Government of India (GOI), and it has taken a number of policy initiatives to address
April 29, 2010 4
5. SJVN | IPO Note
the issues impeding hydropower development. The GoI has increased efforts to
encourage hydropower development through public as well as private sector
participation.
Exhibit 6: Proposed Hydro Power Capacity Addition
Period
Plan Period Hydro power capacity Total Hydro capacity at the end
addition (MW) of the Plan period
Eleventh 15,627 50,280
Twelfth 30,000 80,280
Thirteenth 31,000 1,11,280
Fourteenth 36,494 1,47,774
Source: CEA, Hydro Power Policy, MOP,2008
Open Access
The National Electricity Policy (NEP) has laid stress on the implementation of Open
Access. Open Access in transmission will promote competition, and, in turn, lead to
the availability of cheaper power. NEP has emphasised that the CERC and SERCs
need to provide a facilitative framework for non-discriminatory open access at the
earliest, including technological upgradation of the State Load Dispatch Centres by
June 2006 to ensure data acquisition capability on a real-time basis. Implementation
of Open Access is a major positive for hydro power generators, as it would increase
their potential consumer base and ensure demand for power.
Hydro Power Policy 2008
The Hydro Power Policy of 2008 lays emphasis on increasing private investment in the
development of hydroelectric projects. The policy aims at attracting private funds by
encouraging joint ventures with private developers and the use of the Independent
Power Producer (IPP) model, besides promoting power trading and speeding up the
availability of statutory clearances. This policy also provides special incentives for
merchant sales of up to 40% of the saleable energy for the projects meeting the time
lines, and an additional 1% free power from the project to be provided and
earmarked for the local area development fund, aimed at providing a regular stream
of revenue for income generation and welfare schemes, creation of additional
infrastructure, and common facilities on a sustained and continued basis over the life
of the project. It has been further recommended that the host State government would
also provide a matching 1% from their share of 12% free power towards this
corpus fund.
April 29, 2010 5
6. SJVN | IPO Note
Investment Positives
SJVN to enjoy a stable revenue stream from NJHPS
SJVN is expected to enjoy a stable revenue inflow from its currently operational NJHPS
project. It has entered into ten power purchase agreements with state utilities in the
Northern region, under which all of the power generated by the NJHPS is sold to state
electricity boards, except for 12% of the annual generation, which is allocated to
Himachal Pradesh free-of-charge, and an additional 1% of annual generation from
projects located in Himachal Pradesh, which is allocated to a state-established local
development fund.
Payments for the sale of electricity to these state utilities are secured by forms of credit
support, such as letters of credit issued by reputable financial institutions or by state
government guarantees. Further, according to the company, it has not experienced
any significant delays in payments by customers in the past, and maintains strong
working relationships with them. Since its full commissioning in May 2004, NJHPS
has consistently achieved a monthly plant availability factor in excess of the normative
annual Plant Availability Factor (PAF) of 82%, set by the CERC for the plant under the
new tariff regulations, which are effective from April 1, 2009 to March 31, 2014.
Maintaining the PAF in excess of the normative level in the future as well, will enable
the company to recover the full amount of capacity charges as well as qualify for
certain performance-based incentives, under the new tariff regime based on excess
generation and normative annual PAF .
Exhibit 7: Operational Details of NJHPS
FY2005 FY2006 FY2007 FY2008 FY2009 9MFY2010
Inst. Cap(MW) 1,500 1,500 1,500 1,500 1,500 1,500
Gross Gen. (MU) 5,170.8 4,401.4 6,014.5 6,449.0 6,608.7 6,332.4
Ex-bus Gen(MU) 5,108.8 4,055.2 5,942.3 6,385.3 6,547.8 6,275.2
Saleable Energy (MU) 4,467.6 3,533.9 5,179.1 5,564.7 5,759.5 5,521.9
PAF/Capacity Index (%) 94.5 69.2 92.4 96.7 96.1 102.6
Normative PAF (%) 85.0 88.8 85.0 85.0 85.0 82.0
Source: Company RHP
Assured Rate of return: SJVN's earnings are governed by the tariff norms fixed by the
CERC, which assures it a guaranteed rate of return on the equity invested by it. For the
previous tariff regime in effect from April 1, 2004 to March 31, 2009, the guaranteed
rate of return on equity was 14%, and under the new tariff regime currently in effect
from April 1, 2009 to March 31, 2014, the guaranteed rate of return on equity is
15.5%. While, under Government policies and prevailing regulations, up to 30% of
the aggregate project cost in relation to a project is eligible for the guaranteed rate of
return on equity, the company has obtained a special dispensation for the NJHPS,
under which the tariff rate charged for power supplied from the NJHPS incorporates a
guaranteed rate of return on equity on 50% of the project cost (those financed by
equity contributions).
April 29, 2010 6
7. SJVN | IPO Note
Strong cash position to support project development and operations: The steady
cash flows from the company's existing operations at the NJHPS are sufficient to fund
its equity contribution portion for the existing pipeline of projects, and also support its
working capital requirements and debt servicing, while maintaining a healthy level of
cash in the balance sheet. For the years ended FY2007, FY2008 and FY2009 and the
nine months ended 9MFY2010, the cash and cash equivalents were approximately
Rs621cr, Rs694cr, Rs1,271cr and Rs1,487cr, respectively.
No issues related to fuel
SJVN is exclusively into the development of Hydro Power Projects. Developing
hydropower enhances energy security, as there is no fuel cost during the life of the
project. Additionally, hydropower generation is unaffected by issues concerning fuel
supply, particularly the volatile price fluctuations which affect imported fuels, and
hydroelectric power stations are capable of instantaneously starting or stopping
operations, and are able to accommodate various loading alternatives. Hence,
hydroelectric power stations improve the reliability of power systems and are ideal for
meeting demand during peak times.
Strategic Location of Power Plants
SJVN's upcoming projects are strategically located in India's Northern and North Eastern
regions, which are bestowed with perennial rivers with continuous water supply. The
strategic location of the plants is expected to enable the company to maintain a high
operational efficiency. The company has been able to operate its NJHPS plant at
capacity index levels (CI), which are above the normative levels for most of the years
since installation. Moreover, many of the states in the north are currently facing
considerable power shortages, and are expected to face healthy demand in the future.
Exhibit 8: Power Deficit in Northern States (%)
State FY2007 FY2008 FY2009 FY2010
Chandigarh (0.1) 0.0 0.0 (3.1)
Delhi (1.7) (0.6) (0.6) (0.8)
Haryana (11.3) (12.6) (8.5) (4.5)
Himachal Pradesh (2.6) (3.0) (0.3) (3.5)
J&K (31.3) (29.0) (24.1) (23.1)
Punjab (9.9) (8.4) (10.6) (13.8)
Rajasthan (4.5) (3.1) (1.1) (2.4)
Uttar Pradesh (16.0) (18.0) (21.5) (21.7)
Uttaranchal (5.8) (2.9) (1.0) (6.5)
Northern Region (10.9) (10.8) (11.1) (11.6)
Source: CEA
April 29, 2010 7
8. SJVN | IPO Note
Concerns
Long Gestation of Hydro Power Projects resulting in cost overruns
Power projects in general have a significant gestation period. Further, these projects
are also prone to delays related to the Obtaining of environment clearance, land
acquisition, procurement of equipments and fuel supply, among others. Although
SJVN, being a hydro power generator, is not affected by issues related to fuel supply,
the company is bound to face problems related to land acquisition and environment
clearance. Additionally, hydro projects get delayed due to unfavourable climatic
conditions and the difficult geographic terrains in the project locations. The resettlement
and rehabilitation costs involved in these projects are also high. Many of the works
related to projects are allotted to various contractors under competitive bidding, which
are prone to cost overruns. Further, any increase in the cost has to be borne by SJVN,
unless it is approved by the CERC. The increase in the project cost also leads to an
increase in tariff rates, when approved by the CERC, which reduces the company's
competitiveness.
Exhibit 9: Status of Under Development Projects
Project Status
Luhri Detailed project report submitted to the CEA on November 29, 2008. This was resubmitted on September 9,
2009 with further geological data as requested by the CEA.
Dhaulasidh Feasibility study report submitted to the state government of Himachal Pradesh on August 31,2009.
Devasri Detailed project report submitted to the CEA on January 14, 2009. Further geological explorations currently
being undertaken pursuant to comments received from the CEA on April 21, 2009.
Naitwar Mori Detailed project report submitted to the state government of Uttarakhand on July 17, 2008.
Jakhol Sankri Detailed project report under preparation.
Arun-III Feasibility study report submitted to the CEA on September 30, 2009.
Tipaimukh In negotiations with respect to the establishment of the joint venture company.
Source: Company RHP
The accumulation of silt in waterways could affect power generation
The company's operations may be affected by silt build-up and sedimentation levels.
Silt and sediment may accumulate behind dam walls and not get washed further
downriver. High concentrations of silt in water can cause erosion, corrosion or cavitation
damage in the hydroelectric turbines of a hydroelectric generation facility or may lead
to blockages in the turbines. Any such damage or blockage could result in suspension
of power generation, which may lead to reductions in revenues, including the associated
efficiency incentives. In addition, the company may be required to incur additional
costs from time to time to carry out dredging and repairs or replacements of affected
equipment or parts. Since 2007, the company has adopted a policy of shutting down
generation operations at the NJHPS where the silt load exceeds 4,000 parts per million
in the river upstream of the reservoir or dam. The company had shut down, operations
at NJHPS during FY2007, FY2008 and FY2009 for 32, 10 and 12 days respectively,
due to high silt levels. Excess levels of silt may occur in waterways due to factors such
as changes in environmental conditions, exacerbated by human activities such as
agriculture and construction occurring upstream from the dam, which are beyond the
control of the company.
April 29, 2010 8
9. SJVN | IPO Note
Earning potential capped due to CERC regulations: The company's tariff rates are
bound by CERC regulations, which have been currently capped at 15.5% of Equity.
Hence, the company does not enjoy unrestricted Earnings potential as in the case of
many other players in the private power space, who run a substantial portion of their
plant on merchant power basis.
Outlook and Valuation
SJVN's upcoming projects are strategically located in India's North and North Eastern
regions, which are bestowed with perennial rivers with continuous water supply.
Moreover, many of the states in the north are currently facing considerable power
shortages and are expected to face healthy demand in the future as well. SJVN is
expected to enjoy stable revenue inflow from its currently operational NJHPS project,
which has assured offtake along with guaranteed returns. Further, maintaining PAF in
excess of the normative level will enable the company to recover the full amount of
capacity charges as well as qualify for certain performance-based incentives, based
on excess generation and normative annual plant availability factor. The steady cash
flows from the existing plant are sufficient to fund its equity contribution portion for the
existing pipeline of projects, and also support its working capital requirements and
debt servicing, while maintaining a healthy level of cash in the balance sheet.
We believe that the issue has been attractively priced, considering the fact that the
company has 1,500MW of operational assets, which provides it with good near-term
revenue visibility and a steady cash flow. At the lower and higher end of the price
band, the stock would trade at Price to Book multiples of 1.2x and 1.3x, respectively,
on the basis of FY2012E financials. The company’s public sector peer NHPC, with
operational capacity of 5,175MW is trading at a P/BV multiple of 1.4. The Angel
ROIC for SJVN stood at 16% in FY2009 higher than 11% for NHPC, due to better
operating performance and financial leverage; hence, the SJVN stock deserves a
premium to NHPC. At the issue price, the stock would trade at a substantial discount
to its private sector peers, such as Jaiprakash Power Ventures (P/BV of 4.1)and KSK
Energy Ventures (P/BV of 1.9), with operational assets of 700MW and 279MW,
respectively.
We have valued the NJHPS and Rampur Hydro projects of the company individually
and have arrived at a DCF value of Rs28.9/share. However, we have excluded all
other projects under implementation, totaling 3,588MW, since these businesses are
yet in nascent stages. By assigning an implied P/BV multiple of 1.55x on the FY2012E
Book Value, we get a value per share of Rs31. Hence, we have arrived at an aggregate
Value
Fair Value of Rs30 per share, by computing the average of the value arrived under
P/BV
the DCF and P/BV methodologies, thereby giving an upside of 15.4% over the
upper-
upper-end of the price band. We recommend a Subscribe to the IPO. IPO.
Exhibit 10: Fair Value Calculation
Projects Project cost NPV Debt/Equity Per Share
(Rs cr) (Rs cr) Value (Rs)
NJHPS 8,000 10,734 50:50 26.1
Rampur Hydro 2,472* 956 70:30 2.3
Equity invt. in Other proj. 111 111 - 0.5
Per Share Value - DCF 28.9
Per Share Value - P/BV 1.55 * FY12E 31.0
Fair Value
Value 30.0
Source:Company RHP, Angel Research; Note: *Estimated project cost
April 29, 2010 9
10. SJVN | IPO Note
Exhibit 11: Valuation under DCF Methodology for NJHPS Project (Rs cr)
Particulars FY2009 FY2010E FY2011E FY2012E FY2013E FY2014E FY1205E FY2017E..
FY2016E FY2017E..
Revenues 1,491 1,932 1,704 1,653 1,642 1,599 1,473 1,430 1,427
EBITDA 1,313 1,801 1,571 1,518 1,515 1,472 1,346 1,303 1,300
Depreciation 234 317 317 317 317 317 317 317 317
Interest 220 296 267 240 213 186 158 131 104
PBT 858 1,188 986 961 985 969 871 855 879
Tax 196 237 197 192 196 193 174 170 175
PAT 663 951 790 770 789 776 697 685 704
Cash flow to Equity
PAT 663 951 790 770 789 776 697 685 704
Add: Depreciation 234 317 317 317 317 317 317 317 317
Less : Capex - - - - - - - - -
Cash Flow to firm 897 1,268 1,107 1,086 1,105 1,093 1,014 1,002 1,020
Less: Debt Raised/(Paid) (267) (267) (267) (267) (267) (267) (267) (267) (267)
Cash Flow to Equity 630 1,001 840 820 839 826 747 735 754
Discounting Rate (%) 11.90
Discounted CF 727 1,001 840 733 670 590 477 419 384
PV of CF 10,647
Terminal Value 87.1
Total PV Value 10,734
No of Shares (cr) 411
Per share value (Rs) 26.1
Source: Angel Research
Exhibit 12: Peer Comparison (Rs cr)
Company Inst. Cap. Under Under M.cap Net P/BV
CWIP P/BV Angel
(MW) Const. Dev and Debt as (x) (RoIC)**
(MW) Imp. (MW) on FY09
SJVN* 1,500 412 3,588 10,600 871 929 1.3 16.0
NHPC 5,152 4,622 7,731 37,455 11,957 9,408 1.4 11.2
JP Power 700 1,000 3,920 15,477 865 251 4.1 13.7
KSK Energy 279 4,313 6,345 7,447 1,056 2,551 1.9 15.5
Source: Company, Bloomberg Consensus Estimates; Note: * at upper end of the price band; **Angel RoIC
= R/Average Invested Capital; where R = Operating EBIT and IC = Cash-Marketable Investments-Good
will-Capital WIP
April 29, 2010 10
11. SJVN | IPO Note
Exhibit 13: RoE Calculation for FY2011E (Rs Per/kwh) for NJHPS
O & M Expenses 0.20
Interest on loan 0.39
Depreciation 0.51
Interest on Working Capital 0.04
Income Tax 0.31
Return on Equity (@ 15.5% regulated ROE) 0.99
Total Annual Fixed Charges
Fixed 2.44
Total Charges (Exc. RoE) 1.45
PAT (incl. incentives) 1.18
Estimated tariff 2.63
Equity Contribution per unit 6.38
RoE (%) 18.5
Source: Angel Research
Exhibit 14: Key Financials
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 1,491 1,932 1,704 1,653
% chg 9.9 29.6 (11.8) (3.0)
Profit
Net Profit 759 1,038 913 887
% chg 5.9 36.7 (12.0) (2.9)
FDEPS (Rs) 1.8 2.5 2.2 2.2
EBITDA Margin (%) 90.2 89 88.1 92.3
P/E (x) 14.1 10.3 11.7 12.1
RoE (%) 12.9 16.1 12.8 11.4
RoCE (%) 13.5 17.1 14.1 12.9
P/BV (x) 1.8 1.5 1.4 1.28
EV/Sales (x) 7.8 5.5 5.7 5.4
EV/EBITDA (x) 8.8 5.9 6.2 5.9
Source: Company RHP Angel Research; Note: Projected valuations are at the upper-end of the price band
,
April 29, 2010 11
12. SJVN | IPO Note
Profit and Loss Statement (Rs cr)
Y/E March FY2006 FY2007 FY2008 FY2009 9MFY2010
Net Sales 1,062 1,409 1,357 1,491 1,423
Other operating income
Total operating income 1,062 1,409 1,357 1,491 1,423
% chg (3.7) 9.9 (4.5)
Total Expenditure 125 138 150 178 110
EBITDA
EBITDA 938 1,271 1,207 1,313 1,313
% chg (20.0) 36 (5.1) 8.8 (0.0)
(% of Net Sales) 88.3 90.2 89.0 88.1 92.3
Depreciation& Amortisation 233 246 240 234 326
EBIT 705 1,026 967 1,079 987
% chg (26.1) 45.5 (5.7) 11.6 (8.5)
(% of Net Sales) 66.4 72.8 71.3 72.4 69.4
Interest & other Charges 342 323 255 221 140
Other Income 289 67 106 144 87
(% of PBT) 44.3 8.7 12.9 14.4 9.3
Share in profit of Associates
Recurring PBT 652 769 818 1,003 934
% chg 6.2 18.0 6.3 22.6 (6.8)
PBT (reported) 652 769 818 1,003 934
Tax 66 119 101 243 159
(% of PBT) 10.1 15.5 12.3 24.3 17.0
PAT (reported) 586 650 717 759 775
ADJ. PAT
ADJ. PA 586 650 717 759 775
% chg (4.6) 10.9 10.3 5.9 2.1
(% of Net Sales) 55.2 46.1 52.8 50.9 54.5
Basic EPS (Rs) 1.4 1.6 1.7 1.8 1.9
Fully Diluted EPS (Rs) 1.4 1.6 1.7 1.8 1.9
% chg (4.6) 10.9 10.3 5.9 2.1
April 29, 2010 12
14. SJVN | IPO Note
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Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
15. SJVN | IPO Note
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG , Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Puneet Bambha Capital Goods, Engineering puneet.bambha@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
Rahul Jain IT, Telecom rahul.j@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Aniruddha Mate Research Associate (Infra, Real Estate) aniruddha.mate@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Sandeep Patil Jr. Derivative Analyst patil.sandeep@angeltrade.com
Institutional Sales Team:
Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
Nitesh Jalan Sr. Manager niteshk.jalan@angeltrade.com
Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
Bharathi Shetty Research Editor bharathi.shetty@angeltrade.com
Dharmil Adhyaru Assistant Research Editor dharmil.adhyaru@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
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