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Lanco Infratech Ltd.
Concerns priced in, Buy
„Focus on execution; Reiterate Buy with PO Rs65/sh
Key takeaways from the management meeting include: (a) Capacity expansion
plan is progressing well, barring few months delays, with fully funded capex (b)
Coal supply from Coal India is a constraint, hence procurement through e-auction
and imported coal is imperative and (c) change in depreciation policy – back to
SLM method (earlier WDV) – was to bring in line with peers and avoid book
losses in initial years of operation. We believe Lanco is well poised for 76% power
sales volume CAGR over FY10-13E, amongst the highest vs peers, due to
capacity enhancing from 2.1GW currently to 4.7GW by FY13E. Further, there is a
structural shift towards long-term sales (¾ by FY13E vs ½ today) and about twothirds of capacities have fuel cost inflation recoverable in tariff. We raised our EPS
by 61-147% during FY11E-13E but cut PO to Rs65. Our revised earnings CAGR
is 63% over FY10-13E and ROE of 23-29%.
Dec-Q results: Profit up 50%yoy on chg in dep. policy
While the E&C order book rose by 8%qoq to Rs275bn driven by external orders,
the E&C revenue increased by 54%yoy on execution. EBITDA margins declined
to 14% - amongst the lowest in last two years on higher expenses. While ST tariff
and UI realization declined by 18%qoq and 27%qoq for Kondapalli Phase II and
Amarkantak Unit II respectively, the ST tariff increase 9%qoq for Amarkantak Unit
I at Rs4.1/unit. Change in depreciation policy to SLM (earlier WDV) resulted in the
power plants reporting profits at Rs1.2bn for Amarkantak and Rs792mn for
Kondapalli. The Udupi project reported a loss of Rs156mn owing to lower
realization vs cost plus tariff as per interim order.
SoTP based PO, key risks
Our SoTP gives a PO of Rs65/sh based on a combination of DCF and exit P/BV
and P/E (power Rs46/sh, EPC Rs20/sh). Downside risks are a significant fall in
ST prices, shortfall in fuel supply, regulatory risk, significant delays in capacity
addition & rise in interest rate, aggressive bids and worsening SEB financials.
Sum-of-the-parts value at Rs65/sh
Our SOTP-based methodology yields a value of Rs65/share (after a
conglomerate discount of 10%). This comprises:
1. Power assets - operating as well as construction – Rs46/share (71%) valued
using DCF with varying COE 12.5-15% and exit P/B of 1.5x FY12E for
regulated assets.
2. EPC business - Rs20/share (31%) valued using exit P/E of 12x FY12E - in
line with other mid-cap construction companies.
3. The balance of Rs3/sh comprises road BOT projects, power trading, realty
and cash at book value
Trading band
Lanco’s stock has a limited trading history since it was listed in November 2006.
After the initial euphoria until early 2008, the stock corrected quite sharply and
has gradually moved toward the lower end of trading bands. At the current
juncture, Lanco is trading in lower quartile of the 1-year forward trading band (P/E
of 7x FY12E and EV/EBITDA of 3.9x FY12E).
Lanco has underperformed market, peers
The stock has underperformed the broader market as well as the mid-cap index
by 39% and 27% respectively in the last six months including several other
infrastructure companies in India.
Comparative valuations
Table 2 gives comparative valuations for various power utilities within the Asian
and Indian BofAML coverage universe. The Indian utilities are currently trading at
an average P/E of 13x FY12E and P/B of 1.8x FY12E, at a premium to its Asian
peers since Indian utilities are vertically integrated, enjoy fuel security and are
beneficiaries of significant supply-demand gap, which boosts overall ROE in the
medium term.
Sensitivity and risk analysis
While there are many parameters that affect Lanco’s financials, we have
performed a sensitivity analysis on the following key variables to gauge their
impact on earnings and price objective.
„ Trading tariffs: If the merchant tariff realization is Rs1/unit lower vs our base
case estimates, earnings could potentially fall by 30% in FY12E, and the PO
could go down 29%. However, if the realization is Rs1/unit higher vs our
base case, earnings could rise 30% in FY12E, and PO by 28%.
„ E&C revenue: If revenue from the E&C business falls by 10% vs our base
case estimates, earnings could decline by 8% in FY12E and PO by 8%.
„ E&C RM/sales: If the raw-material / sales ratio of the E&C business falls by
100 bps vs our base case estimates, earnings could potentially fall by 4% in
FY12E and the PO could go down 5%.
„ Fuel price: If the price of gas used in power plants falls US$1/mmbtu vs our
base case, earnings and PO could rise 2% in FY12E and 3% respectively.
Likewise, if the cost of coal used is Rs100/t higher than our base case,
earnings go potentially decline by 2%.
„ Capital cost: If the capital cost of the projects under construction increases
by 10% vs our base estimates, earnings could potentially decline by 2% in
FY12E while the PO may fall by 5%. Likewise, if the capital cost of the
projects under construction decreases by 10% vs our base estimates,
earnings could go up 2% and PO could increase by 3%.
„ Interest rate: If the interest rate rises 100bps vs our base estimates,
earnings could potentially decline by 6% in FY12E while the PO may fall by
5%. Likewise, if the interest rate falls100bps vs our base estimates, earnings
could go up 6% and PO could increase by 3%.
„ Plant load factor (PLF): If the PLF of power plants rises/falls by 100bp vs
our base case, earnings could be 2% higher/lower in FY12E.
Key takeways from the management meeting
The key takeaways from the meeting with the management post the Dec-Q
results and 17% fall in stock price last week were:
„ Capacity addition largely on track: While the commissioning of Unit II of
Udupi project of 600MW is delayed owing to the delay in the construction of
the transmission line by Karnataka SEB, we have assumed that the COD
would be declared by 2QFY11. Other projects like 1200MW Anpara project,
732MW gas based Kondapalli Phase III project are progressing well. We
have assumed that Lanco would touch installed capacity base of 4.7GW by
FY13E from 2.1GW currently.
„ Coal supply is constraint: The management indicated that the linkage coal
supply from Coal India would remain constrained especially from 2014
onwards. Hence it would be imperative to blend the linkage coal with the coal
procured via e-auction in the domestic market and imported coal. Hence,
while in the interim period, the linkage coal would be supplied marginally
below the contracted quantity, beyond 2013, the management is looking for a
sustainable mix of 50:20:30 of coal supply (domestic coal linkage : domestic
coal e-auction : imported coal). Note that Lanco enjoys fuel cost escalation
as pass-through in tariff for about 66% of FY13E capacity. Also, the gas
supply would remain constrained and potentially need to be blended with
other sources including short-term LNG market.
„ Change in depreciation policy: The management has once again changed
the depreciation policy to Straight Line method (SLM) vs earlier Written Down
Value method (WDV) for new power plants. This was done to bring the
depreciation policy in line with peers and to avoid book losses in the initial
years of operation.
„ Others: Regarding the sale of power from 300MW Amarkantak Unit II, the
management reiterated that the unit would continue to supply power via the
UI mechanism till the resolution of the dispute with Haryana SEB over the
fuel cost pass-through is resolved. More clarity on the Griffin coal mine
acquisition will be provided by April 2011.
3QFY11 results review
Lanco’s consolidated net sales during the 3QFY11 were Rs15.6bn – a marginal
decline of 3% due to significant jump in inter-company elimination (Rs13.5bn in
3QFY11 vs Rs2.2bn in 3QFY10). But the consolidated recurring net profit
increased by 50%yoy to Rs1.8bn. This was primarily due to the change in
depreciation policy to SLM method led to a –ve depreciation adjustment of
Rs765mn for current year and other income of Rs1.8bn for depreciation
adjustment for previous years. The consolidated networth increased by 5%qoq to
Rs45.3bn while the consolidated debt (incl debt of major associates) was up
2%qoq to Rs187.5bn.
Division-wise results
Lanco has two main lines of business – Engineering & construction at the parent
company level and power generation assets through various subsidiaries and
associates. While the revenues from the power division were up 66%yoy to
Rs8.5bn, E&C revenue increased 54%yoy to Rs20.3bn. Revenue from power
division are not strictly comparable on yoy basis owing to starting of 600MW
Amarkantak project, full operation of Kondapalli Phase II and Udupi Unit I which
were not there in 3QFY10.
Engineering and Construction
The engineering and construction (E&C) reported 53%yoy jump in revenues on
the back of strong execution especially of new projects. The order book of
Rs275bn was up 8%qoq on the back of an external order worth Rs40bn from
Moser Bear. EBITDA margins were at 14% in 3QFY11, lowest in the last two
years, owing to higher expenses. Overall the net profit for the construction
division was up 17%yoy to Rs1.3bn due to significant increase in interest outgo.
Power
In 3QFY11, 600MW Udupi Unit I was declared commercial operations but is
consolidated on the basis of “Associate” company.
„ 734 MW Kondapalli power plant: Overall, the revenue declined 6%qoq (yoy
not comparable since Phase II was not operational in 3QFY10) to Rs3.8bn
on the back of 5%qoq fall in tariff and 1%qoq fall in sales volume. But change
in depreciation policy has led to 65%qoq jump in net profit to Rs792mn. The
short-term tariff realization for the Kondapalli Phase II was down by 18%qoq.
„ 120 MW Aban power plant: The revenue were up 28%yoy to Rs670mn on
account of 31%yoy volume growth but 2%yoy fall in realization. The
profitability looks lower on yoy basis as the revenue for 3QFY10 included
income from carbon credit to the tune of Rs127mn. Adjusting for this, the net
profit for the Aban power plant declined marginally by 4%yoy.
„ 600 MW Amarkantak power plant: While the Unit I (300 MW) continued to
operate on merchant basis (bilateral as well as exchange), the company is
yet to schedule the power from Unit II which continued to operate in UI.
Sales volume was up 2%qoq to 889 MUs largely driven by 18%qoq increase
in sales volume from Unit I (which has take maintenance shutdown of 18
days in 2QFY11). While the short-term realization from Unit I was up 9%qoq
to Rs4.1/unit, the realization from the UI sales was down for second
consecutive quarter by 27%qoq to Rs2/kWh. Overall, the revenue remained
flat at Rs2.8bn, net profit jumped to Rs1.16bn owing to change in
depreciation method from WDV to SLM.
„ 600 MW Udupi power plant: Lanco declared commercial operations at Unit I
of Udupi power plant of 600MW on Nov’11, 2010. This unit reported a loss of
Rs156mn on account of lower realization based on interim tariff orders vs the
cost-plus tariff. Management reiterated that the under-recovery in tariff would
get reversed in Mar-Q
Change in Assumptions and forecast
Table 8 gives the snapshot of the key changes in assumptions. We have shifted
the COD for Unit II of Udupi project from 1QFY11 to 2QFY11 and depreciation
method from WDV to SLM.
We estimate consol revenues to be Rs246bn by FY13E (45% CAGR in FY10-
FY13E). Likewise, the consolidated net profit after minority interest/associates at
Rs16.8bn in FY13E implies a CAGR of 63% in FY10-FY13E. Accordingly, we
have raised the consolidated earnings by 61-147% during FY11-13E.
Note that according to the latest annual report, the major projects are developed
through “Associate” companies. These include: 1,200MW of Udupi power,
1,200MW of the Anpara project, and the two BOT road projects. As a result, the
consolidated numbers do not reflect the funding and CWIP till the time these
projects are commissioned. Management has guided that this project will become
a subsidiary once a commercial operation date is achieved.
The revenue share from the power segment would increase from 45% in FY09-10
to about 50% in FY11-13E. But at the EBITDA level, the power segment’s share
would increase from around 50% in FY10 to 64% in FY11E and 72% in FY12E.
ROE is likely to go up sharply from 23% in FY11E to 29% in FY12E but would fall
to 25% in FY13E owing to fall in short-term tariff in FY13E vs FY12E. However,
ROCE would remain at about 10-12% during the forecast period. Cash flow from
operations shows a quantum jump in FY11E vs FY10 due to the commissioning
of new projects.
Price objective basis & risk
Lanco Infratech Ltd. (LNIFF)
We have used sum-of-the-parts (SOTP) to arrive at the PO of Rs65/sh is primarily
based on DCF, mutiples and conglomerate discount of 10%. It comprises:
1) Power assets - operating as well as construction - Rs46/sh (71%) valued using
DCF with varying CoE 12.5-15% and exit P/BV of 1.5x FY12 for regulated assets.
2) EPC business - Rs20/sh (31%) valued using exit P/E of 12x FY12E - in line
with other mid-cap construction companies
3) Balance Rs3/sh consists of road BOT projects, power trading, realty and liquid
investments + cash at book value
Downside risks: significant delay in execution, sharp decline in short-term tariff,
regulatory risk, higher interest rate and worsening SEB financials.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech Ltd.
Concerns priced in, Buy
„Focus on execution; Reiterate Buy with PO Rs65/sh
Key takeaways from the management meeting include: (a) Capacity expansion
plan is progressing well, barring few months delays, with fully funded capex (b)
Coal supply from Coal India is a constraint, hence procurement through e-auction
and imported coal is imperative and (c) change in depreciation policy – back to
SLM method (earlier WDV) – was to bring in line with peers and avoid book
losses in initial years of operation. We believe Lanco is well poised for 76% power
sales volume CAGR over FY10-13E, amongst the highest vs peers, due to
capacity enhancing from 2.1GW currently to 4.7GW by FY13E. Further, there is a
structural shift towards long-term sales (¾ by FY13E vs ½ today) and about twothirds of capacities have fuel cost inflation recoverable in tariff. We raised our EPS
by 61-147% during FY11E-13E but cut PO to Rs65. Our revised earnings CAGR
is 63% over FY10-13E and ROE of 23-29%.
Dec-Q results: Profit up 50%yoy on chg in dep. policy
While the E&C order book rose by 8%qoq to Rs275bn driven by external orders,
the E&C revenue increased by 54%yoy on execution. EBITDA margins declined
to 14% - amongst the lowest in last two years on higher expenses. While ST tariff
and UI realization declined by 18%qoq and 27%qoq for Kondapalli Phase II and
Amarkantak Unit II respectively, the ST tariff increase 9%qoq for Amarkantak Unit
I at Rs4.1/unit. Change in depreciation policy to SLM (earlier WDV) resulted in the
power plants reporting profits at Rs1.2bn for Amarkantak and Rs792mn for
Kondapalli. The Udupi project reported a loss of Rs156mn owing to lower
realization vs cost plus tariff as per interim order.
SoTP based PO, key risks
Our SoTP gives a PO of Rs65/sh based on a combination of DCF and exit P/BV
and P/E (power Rs46/sh, EPC Rs20/sh). Downside risks are a significant fall in
ST prices, shortfall in fuel supply, regulatory risk, significant delays in capacity
addition & rise in interest rate, aggressive bids and worsening SEB financials.
Sum-of-the-parts value at Rs65/sh
Our SOTP-based methodology yields a value of Rs65/share (after a
conglomerate discount of 10%). This comprises:
1. Power assets - operating as well as construction – Rs46/share (71%) valued
using DCF with varying COE 12.5-15% and exit P/B of 1.5x FY12E for
regulated assets.
2. EPC business - Rs20/share (31%) valued using exit P/E of 12x FY12E - in
line with other mid-cap construction companies.
3. The balance of Rs3/sh comprises road BOT projects, power trading, realty
and cash at book value
Trading band
Lanco’s stock has a limited trading history since it was listed in November 2006.
After the initial euphoria until early 2008, the stock corrected quite sharply and
has gradually moved toward the lower end of trading bands. At the current
juncture, Lanco is trading in lower quartile of the 1-year forward trading band (P/E
of 7x FY12E and EV/EBITDA of 3.9x FY12E).
Lanco has underperformed market, peers
The stock has underperformed the broader market as well as the mid-cap index
by 39% and 27% respectively in the last six months including several other
infrastructure companies in India.
Comparative valuations
Table 2 gives comparative valuations for various power utilities within the Asian
and Indian BofAML coverage universe. The Indian utilities are currently trading at
an average P/E of 13x FY12E and P/B of 1.8x FY12E, at a premium to its Asian
peers since Indian utilities are vertically integrated, enjoy fuel security and are
beneficiaries of significant supply-demand gap, which boosts overall ROE in the
medium term.
Sensitivity and risk analysis
While there are many parameters that affect Lanco’s financials, we have
performed a sensitivity analysis on the following key variables to gauge their
impact on earnings and price objective.
„ Trading tariffs: If the merchant tariff realization is Rs1/unit lower vs our base
case estimates, earnings could potentially fall by 30% in FY12E, and the PO
could go down 29%. However, if the realization is Rs1/unit higher vs our
base case, earnings could rise 30% in FY12E, and PO by 28%.
„ E&C revenue: If revenue from the E&C business falls by 10% vs our base
case estimates, earnings could decline by 8% in FY12E and PO by 8%.
„ E&C RM/sales: If the raw-material / sales ratio of the E&C business falls by
100 bps vs our base case estimates, earnings could potentially fall by 4% in
FY12E and the PO could go down 5%.
„ Fuel price: If the price of gas used in power plants falls US$1/mmbtu vs our
base case, earnings and PO could rise 2% in FY12E and 3% respectively.
Likewise, if the cost of coal used is Rs100/t higher than our base case,
earnings go potentially decline by 2%.
„ Capital cost: If the capital cost of the projects under construction increases
by 10% vs our base estimates, earnings could potentially decline by 2% in
FY12E while the PO may fall by 5%. Likewise, if the capital cost of the
projects under construction decreases by 10% vs our base estimates,
earnings could go up 2% and PO could increase by 3%.
„ Interest rate: If the interest rate rises 100bps vs our base estimates,
earnings could potentially decline by 6% in FY12E while the PO may fall by
5%. Likewise, if the interest rate falls100bps vs our base estimates, earnings
could go up 6% and PO could increase by 3%.
„ Plant load factor (PLF): If the PLF of power plants rises/falls by 100bp vs
our base case, earnings could be 2% higher/lower in FY12E.
Key takeways from the management meeting
The key takeaways from the meeting with the management post the Dec-Q
results and 17% fall in stock price last week were:
„ Capacity addition largely on track: While the commissioning of Unit II of
Udupi project of 600MW is delayed owing to the delay in the construction of
the transmission line by Karnataka SEB, we have assumed that the COD
would be declared by 2QFY11. Other projects like 1200MW Anpara project,
732MW gas based Kondapalli Phase III project are progressing well. We
have assumed that Lanco would touch installed capacity base of 4.7GW by
FY13E from 2.1GW currently.
„ Coal supply is constraint: The management indicated that the linkage coal
supply from Coal India would remain constrained especially from 2014
onwards. Hence it would be imperative to blend the linkage coal with the coal
procured via e-auction in the domestic market and imported coal. Hence,
while in the interim period, the linkage coal would be supplied marginally
below the contracted quantity, beyond 2013, the management is looking for a
sustainable mix of 50:20:30 of coal supply (domestic coal linkage : domestic
coal e-auction : imported coal). Note that Lanco enjoys fuel cost escalation
as pass-through in tariff for about 66% of FY13E capacity. Also, the gas
supply would remain constrained and potentially need to be blended with
other sources including short-term LNG market.
„ Change in depreciation policy: The management has once again changed
the depreciation policy to Straight Line method (SLM) vs earlier Written Down
Value method (WDV) for new power plants. This was done to bring the
depreciation policy in line with peers and to avoid book losses in the initial
years of operation.
„ Others: Regarding the sale of power from 300MW Amarkantak Unit II, the
management reiterated that the unit would continue to supply power via the
UI mechanism till the resolution of the dispute with Haryana SEB over the
fuel cost pass-through is resolved. More clarity on the Griffin coal mine
acquisition will be provided by April 2011.
3QFY11 results review
Lanco’s consolidated net sales during the 3QFY11 were Rs15.6bn – a marginal
decline of 3% due to significant jump in inter-company elimination (Rs13.5bn in
3QFY11 vs Rs2.2bn in 3QFY10). But the consolidated recurring net profit
increased by 50%yoy to Rs1.8bn. This was primarily due to the change in
depreciation policy to SLM method led to a –ve depreciation adjustment of
Rs765mn for current year and other income of Rs1.8bn for depreciation
adjustment for previous years. The consolidated networth increased by 5%qoq to
Rs45.3bn while the consolidated debt (incl debt of major associates) was up
2%qoq to Rs187.5bn.
Division-wise results
Lanco has two main lines of business – Engineering & construction at the parent
company level and power generation assets through various subsidiaries and
associates. While the revenues from the power division were up 66%yoy to
Rs8.5bn, E&C revenue increased 54%yoy to Rs20.3bn. Revenue from power
division are not strictly comparable on yoy basis owing to starting of 600MW
Amarkantak project, full operation of Kondapalli Phase II and Udupi Unit I which
were not there in 3QFY10.
Engineering and Construction
The engineering and construction (E&C) reported 53%yoy jump in revenues on
the back of strong execution especially of new projects. The order book of
Rs275bn was up 8%qoq on the back of an external order worth Rs40bn from
Moser Bear. EBITDA margins were at 14% in 3QFY11, lowest in the last two
years, owing to higher expenses. Overall the net profit for the construction
division was up 17%yoy to Rs1.3bn due to significant increase in interest outgo.
Power
In 3QFY11, 600MW Udupi Unit I was declared commercial operations but is
consolidated on the basis of “Associate” company.
„ 734 MW Kondapalli power plant: Overall, the revenue declined 6%qoq (yoy
not comparable since Phase II was not operational in 3QFY10) to Rs3.8bn
on the back of 5%qoq fall in tariff and 1%qoq fall in sales volume. But change
in depreciation policy has led to 65%qoq jump in net profit to Rs792mn. The
short-term tariff realization for the Kondapalli Phase II was down by 18%qoq.
„ 120 MW Aban power plant: The revenue were up 28%yoy to Rs670mn on
account of 31%yoy volume growth but 2%yoy fall in realization. The
profitability looks lower on yoy basis as the revenue for 3QFY10 included
income from carbon credit to the tune of Rs127mn. Adjusting for this, the net
profit for the Aban power plant declined marginally by 4%yoy.
„ 600 MW Amarkantak power plant: While the Unit I (300 MW) continued to
operate on merchant basis (bilateral as well as exchange), the company is
yet to schedule the power from Unit II which continued to operate in UI.
Sales volume was up 2%qoq to 889 MUs largely driven by 18%qoq increase
in sales volume from Unit I (which has take maintenance shutdown of 18
days in 2QFY11). While the short-term realization from Unit I was up 9%qoq
to Rs4.1/unit, the realization from the UI sales was down for second
consecutive quarter by 27%qoq to Rs2/kWh. Overall, the revenue remained
flat at Rs2.8bn, net profit jumped to Rs1.16bn owing to change in
depreciation method from WDV to SLM.
„ 600 MW Udupi power plant: Lanco declared commercial operations at Unit I
of Udupi power plant of 600MW on Nov’11, 2010. This unit reported a loss of
Rs156mn on account of lower realization based on interim tariff orders vs the
cost-plus tariff. Management reiterated that the under-recovery in tariff would
get reversed in Mar-Q
Change in Assumptions and forecast
Table 8 gives the snapshot of the key changes in assumptions. We have shifted
the COD for Unit II of Udupi project from 1QFY11 to 2QFY11 and depreciation
method from WDV to SLM.
We estimate consol revenues to be Rs246bn by FY13E (45% CAGR in FY10-
FY13E). Likewise, the consolidated net profit after minority interest/associates at
Rs16.8bn in FY13E implies a CAGR of 63% in FY10-FY13E. Accordingly, we
have raised the consolidated earnings by 61-147% during FY11-13E.
Note that according to the latest annual report, the major projects are developed
through “Associate” companies. These include: 1,200MW of Udupi power,
1,200MW of the Anpara project, and the two BOT road projects. As a result, the
consolidated numbers do not reflect the funding and CWIP till the time these
projects are commissioned. Management has guided that this project will become
a subsidiary once a commercial operation date is achieved.
The revenue share from the power segment would increase from 45% in FY09-10
to about 50% in FY11-13E. But at the EBITDA level, the power segment’s share
would increase from around 50% in FY10 to 64% in FY11E and 72% in FY12E.
ROE is likely to go up sharply from 23% in FY11E to 29% in FY12E but would fall
to 25% in FY13E owing to fall in short-term tariff in FY13E vs FY12E. However,
ROCE would remain at about 10-12% during the forecast period. Cash flow from
operations shows a quantum jump in FY11E vs FY10 due to the commissioning
of new projects.
Price objective basis & risk
Lanco Infratech Ltd. (LNIFF)
We have used sum-of-the-parts (SOTP) to arrive at the PO of Rs65/sh is primarily
based on DCF, mutiples and conglomerate discount of 10%. It comprises:
1) Power assets - operating as well as construction - Rs46/sh (71%) valued using
DCF with varying CoE 12.5-15% and exit P/BV of 1.5x FY12 for regulated assets.
2) EPC business - Rs20/sh (31%) valued using exit P/E of 12x FY12E - in line
with other mid-cap construction companies
3) Balance Rs3/sh consists of road BOT projects, power trading, realty and liquid
investments + cash at book value
Downside risks: significant delay in execution, sharp decline in short-term tariff,
regulatory risk, higher interest rate and worsening SEB financials.
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