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SJVN is India’s largest Hydropower generator. SJVN Ltd was incorporated on May 24, 1988 as a joint venture of
the Government of India (GOI) and the Government of Himachal Pradesh (GOHP) to plan, investigate, organize,
execute, operate and maintain Hydro-electric power projects. It was formerly known as Nathpa Jhakri Power
Corporation Limited, The Nathpa Jhakri Hydro – Electric Power Station– NJHPS (1500 MW) was it’s first project
undertaken. Besides funding from the World Bank, SJVN has also been financed as loan by a Consortium of
European Banks, the Power Finance Corporation (PFC) and other domestic commercial banks. The present
authorized share capital of SJVN is Rs 7000 crores.
Out of the total energy generated at SJVN’s main station, 12% is supplied free of cost to the home state i.e.
Himachal Pradesh. Of the remaining 88% energy generation, 25% is supplied to HP. Balance power has been
allocated to the beneficiary states / UTs of Northern Region by Ministry of Power, Government of India.
Shareholding Pattern
The shareholding pattern as on 30th Sep 2010 is as follows:
1. Promoter Group – 89.97%
2. FII – 1.12%
3. DII – 2.95%
4. Rest of the public – 5.96%
· Net sales of the company have increased by 13% CAGR since 2006 while its net profits have also
grown by 13% CAGR during the same period. In FY10, the net sales were flat due to noncommissioning
of projects in FY0910. The net profit margin of the company is ~55% in FY10 and is one
of the best in this industry.
· On the balance sheet front, the company has reduced its debt levels substantially and now has healthy
financial position.
· The company has improved its returns on equity by managing operations efficiently. ROE has improved
from 12% in FY06 to almost 15% in FY10. SJVN is also consistently dividend payer and has almost 33%
as its payout ratio. The dividend yield at current market price stands at 3.3% which is quite decent for
the utility company.
Future developments
SJVN is currently constructing the 412 MW Rampur Hydro Electric Project in the state of Himachal Pradesh. It is
also implementing three hydro projects 252 MW Devsari, 60 MW Naitwar Mori and 51 MW Jakhol Sankri) in the
state of Uttarakhand. Further, SJVN has also been allocated Luhri Hydro Electric Project 775 MW and
Dhaulasidh HEP 66 MW in the state of Himachal Pradesh for preparation of Detailed Project Report and
subsequent execution. Further, SJVN is entering into a Joint Venture for the implementation of 1500 MW
Tipaimukh HE Project in Manipur with an equity participation to the extent of 26%.
The company has now gone across the borders and has bagged a 900 MW hydroelectric project in Nepal, “Arun
III” through, competitive bidding. In addition, the corporation has also been assigned the task of
updating/preparing DPRs of two Hydro Electric Projects 900 MW Wangchu HE Project and 486 MW Kholongchu
HE Project in Bhutan by Govt. of India.
SJVN proposes to add 5000 MW additional capacity by 2014-15. This would require an additional investment of
about Rs. 29,000 Crores to be met mainly from internal accruals and loans from domestic /multi literal funding
agencies.
To achieve the target of setting up of additional 5000 MW SJVN is exploring the possibilities of taking up new
projects in Himachal Pradesh, Arunachal Pradesh, Nepal and Bhutan.
Moreover, the Company is set to gain from the revised CERC tariff where the guaranteed rate of return on equity
(RoE) is set at 15.5% as against 14% under the previous regime.
Risk and concerns
Dependence on single project - SJVNL has only one project which is in the operation. The Rampur project is
expected to commission by Sept 2013. Other operational hazards are due to technical difficulties, low water flow
and occurrence of any natural calamities like floods etc will hamper the operations and could impact the
financials strongly.
Implementation and execution of the projects - Hydropower projects have long gestation periods due to the
process involved in commissioning power projects. The timely execution of the projects is very important for
avoiding cost overrun and generating revenues.
Valuation and recommendation
Like most of the PSU’s, SJVN also has strong and stable balance sheet. It has cash balances of Rs.1500 crores
and has 0.25 x debt / equity ratio. It is also a consistent dividend payer, has yield of 3.3%, and has decent ROE
of 15%. With generation projects getting executed over the next 3-4 years, the company has better revenue
visibility –thereby adding to the bottomline.
While SJVN is quoting a PE 10x and P/B of 1.5x, its nearest competitor NHPC (it is also a government owned
company) has a PE of 18x and P/B of 1.5x on FY10 numbers. The strong government backing, improving ROE,
consistent dividends, and good prospects makes this stock an attractive BUY.
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