This document analyzes four power generation and distribution companies in India - National Hydroelectric Power Corporation, Reliance Infrastructure Ltd., TATA Power Company Ltd., and Neyveli Lignite Corporation Ltd. It compares their financial metrics like return on assets, return on capital employed, and net profit margins. Using the EBITDA multiple method, it values Neyveli Lignite Corporation and finds it to be undervalued compared to its peers, suggesting it would be profitable to purchase the company at its current price.

1. Focus Sector :
Power Generation/Distribution
Submitted By:
Dhiraj Gaur(15)
Ritesh Gupta(37)
Saral(44)
Prabhujeet Singh(
Adarsh Srivastava(03)
Umesh Raheja(59)

2. 0.00
50,000.00
100,000.00
150,000.00
200,000.00
market captialisation (rs cr.)
market captialisation (rs cr.)
0
0.5
1
1.5
2
2.5
Debt/Equity
Debt/Equity
Same market
capitalization
Same D/E ratio
From above we choose 4 firms having similar D/E ratio and market
capitalization

3. Section 1
The firms we have selected are:-
 National Hydroelectric Power Corporation
 Reliance Infrastructure Ltd.
 TATA Power Company Ltd.
 Neyveli Lignite Corporation Ltd.( firm for valuation)

4. NHPC Ltd
 Incorporated on November 7, 1975
 Converted to a public limited company w.e.f. April 2,
1986
 Name changed to “NHPC Ltd” on March 13, 2008
 2008 - 09 Conferred Mini Ratna Category I status by
the GoI
 Return on Total Assets (ROTA) 3.36%
 Return on capital employed (ROCE) 3.64%
 Net profit margin 33.83%

5. Reliance Infrastructure Ltd
 The Company was incorporated on 1st October 1929, at
Mumbai as "Bombay Suburban Electric Supply Limited”
 In 1992 the name of the Company was changed from
Bombay Suburban Electric Supply, Ltd. to its abbreviated
version "BSES Ltd."
 In 2003, the name of BSES Ltd changed to Reliance Energy
Ltd.
 On 10 March 2008, the name of Reliance Energy changed
to Reliance Infrastructure Ltd
 Return on Total Assets (ROTA) 9.10%
 Return on capital employed (ROCE) 6.37%
 Net profit margin 10.73%

6. TATA Power Ltd
 Incorporated on 18th September 1919
 Set up 'Tala Transmission Line‘ with a JV with PGCIL
for power transfer from Bhutan
 Tata Power Trading Company Ltd (TPTCL), a wholly
owned subsidiary of the Tata Power Company (TPC),
awarded the first power trading licence by the Central
Electricity Regulatory Commission (CERC)
 Return on Total Assets (ROTA) 8.34%
 Return on capital employed (ROCE) 6.63%
 Net profit margin 12.32%

7. Neyveli Lignite Corporation
 Incorporated as a private limited company on 14th
November 1956
 Return on Total Assets (ROTA) 4.68%
 Return on capital employed (ROCE) 6.07%
 Net profit margin 20.47%

8. Board of Directors
NLC
Name Designation
Mr. Shashi Kumar Director
Mr. Y N Apparao Director
Dr. Krishna Kumar Director
Mr. K Sekar Director (Finance)
Mr. P K Choudhury Director
Mr. V Sethuraman Director
Prof. S Sadagopan Director
Mr. B Surender Mohan Director
Mr. A R Ansari Chairman and Managing director
Mr. Ravindra Sharma Director

9. Company Snapshot
Fundamentals
Market Capitalization ( Rs cr ) 23,991.25
Book Value 56.44
Debt / Equity 0.42
P/E 29.22
Dividend Yield % 1.4
EPS 4.89
Return on Net Worth 7.8
Current Ratio 1.9
Quick Ratio 1.77
Interest Cover 7.35

10. Share Prices
NSE BSE
Date 18/12/2009 18/12/2009
Open Price 146 145
High Price 146.25 146.25
Low Price 142.8 142.65
Close Price 143.35 143
Number of Trades 4,709.00 1,338.00
Traded Quantity 349,635.00 94,859.00
Traded Value 50,552,281.90 13,699,353.00
52 Week High 162.7 162.7
52 Week Low 60.4 60.4

11. Price Chart

13. No of Shares 1677709600
Face Value 10
Domestic ( in %age )
Promoters 93.56
Directors 0
Subsidiary Companies 0
Other Companies 0.37
State Govt 0
Central Govt 0
Govt Companies 0
Govt Others 0
NBanks Mutual Funds 0.21
Holding Companies 0
General Public 1.56
Employees 0
Person Acting in Concert 0
Total 95.71
Institutions ( in %age ) 3.85
Foreign ( in %age ) 0.38
Others ( in %age ) 0.07
Shareholding Pattern

14. NHPC NTPC NLC TATA Reliance
ROTA 3.36% 8.86% 4.68% 8.34% 9.10%
ROCE 3.64% 8.76% 6.07% 6.63% 6.37%
Net Profit
Margin
33.83% 18.11% 20.47% 12.32% 10.73%

15. EBITDA Multiple Methodology
 Step 1: Calculate Debt-Equity Ratio for all comparable companies
 Step 2: Find the 5 competitors which have comparable D/E Ratios
 Step 3: Find the 3 competitors which have comparable Growth Rates
We choose National Hydroelectric Power Corporation, Reliance Infrastructure Ltd. ,TATA
Power Company Ltd.
 Step 4: Find out interest bearing debt
 Step 5: Find common equity of each firm
 Step 6: Find EBITDA & EBITDA multiple of each firm
 Step 7: Take the average of the 3 EBITDA multiples
 Step 8: Do backward calculation to find the share price of the concerned
company.

16. EBITDA multiple method
Reliance Infrastructure
Interest Bearing debt 7332.18
Common Equity 23,185.94
Firm Value 30,518.12
Cash & Equivalents 249.97
Enterprise value 30,268.15
EBITDA 1,715.59
EBITDA Multiple 17.64299745
NHPC Ltd.
Interest Bearing debt 12234.03
Common Equity 39,423.88
Firm Value 51,657.91
Cash & Equivalents 1,899.95
Enterprise value 49,757.96
EBITDA 2,268.21
EBITDA Multiple 21.93710459
Tata Power Company Ltd.
Interest Bearing debt 5247.06
Common Equity 31,256.00
Firm Value 36,503.06
Cash & Equivalents 45.5
Enterprise value 36,457.56
EBITDA 1,780.62
EBITDA Multiple 20.47464366

17. Neyveli Lignite Corporation Ltd.
Interest Bearing debt 4057.7
Common Equity 30,126.27
Firm Value 34,183.97
Cash & Equivalents 38.64
Enterprise value 34,145.33
EBITDA 1,705.71
Price Per Share= 179.5678273
EBITDA MULTIPLIER AVERAGE 20.01824857
Neyveli Lignite Corporation Ltd.( Actual)
Interest Bearing debt 4057.7
Common Equity 23,991.25
Firm Value 28,048.95
Cash & Equivalents 38.64
Enterprise value 28,010.31
EBITDA 1,715.59
EBITDA Multiple 16.32692543
Share Price= 143.0000162
Thus we see that Price per share of Neyveli Lignite is undervalued
and it will be profitable to purchase the company at the current price.