Jaiprakash Associates

Transcription

1 Jaiprakash Associates The wheel of fortune Aashiesh Agarwaal, CFA h l October 2012

2 Investment Rationale Stock presents 78% upside from CMP: The Jaiprakash Associates (JPA) stock presents 78% upside against CMP of INR82/share, powered by earnings growth; assuming an EV/EBITDA multiple close to 5 year low EV to surge to ~INR855bn in FY14E from ~INR721bn in FY13E EBITDA surges 99% to INR107bn in FY15E from INR54bn in FY12 driven by power and cement Debt to peak in FY13/14 as most of the planned capex has been commissioned We estimate JPA to generate INR290bn fromits operations over FY13 15E broadly 15E broadly split among real estate, cement and power assets against interest obligations of INR157bn over same period Equity value jumps to ~INR304bn from INR171bn, a 78% increase EV/EBITDA assumed at near 5 year low for our target price! Scaled up to one of the largest infrastructure players in its key segments: JPA has emerged as the third largest cement manufacturer, largest real estate developer, largest private hydro power generation company, operator ofindia s longest expressway and the only owner off1 sports track in the country Proven track record of strong execution capability and on time delivery: JPA has a proven execution record of developing world class assets with commendable timeliness given the operating environment Additional triggers: Debt reduction: The company has guided to asset sales / debt reduction of INR100bn over the next 6 12 months. We have not assumed any of these in our estimates. Any progress on this front will be an additional trigger for the stock 2

3 Strong upside

4 Stock presents robust upside The stock is trading at historically low valuation multiples driven by weak debt servicing metrics EBITDA to catapult 38% over FY13E 15E driven by cement and power businesses, which will drive EV expansion over forecast period At current trough valuation multiples, the stock presents 78% upside from CMP Improvement in debt servicing metrics due to operationalisation of assets to drive re rating of multiples, which will provide further upsides FY08 12: Story so far FY13 15E: What future holds Debt increases Debt stable Execution concerns heighten risk perception Mcap crashed EBITDA rise slower Execution concerns abate Stock performance EBITDA surging EV/EBITDA declines EV/EBITDA stable to rising 4

5 Stock trading at historically low valuation multiples EV/EBITDA (EV/EBITDA A) P/CEPS 84 Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 EV/EBITDA range (%) year distribution 5 year distribution P/CEPS range 19.2 (P/CE EPS) Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Source: Bloomberg, Edelweiss research Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 1 Aug 11 1 Dec 11 1 Apr 12 Aug 12 (% %) year distribution 5 year distribution EBITDA to surge 38% over FY13E 15E driven by cement and power businesses, which will drive EV expansion over forecast period at constant valuation multiples 5

6 EBITDA to catapult 38% over FY13E 15E EBITDA 120,000 96,000 EV/EBITDA ) (INR mn 72,000 48,000 (EV/EBITDA A) , FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E Enterprise Value (INR mn) ,000, , , , ,000 0 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E Source: Bloomberg, Edelweiss research (INR mn) 0.0 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E MCAP rises as Debt stabilizes 600, , , , ,000 0 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E MCAP Net Debt Mcap surge driven by strong earnings growth Headwinds turn into tailwinds as most planned capex gets commissioned and EBITDA expands 6

7 Valuation summary: Earnings based FY10 FY11 FY12 FY13E FY14E FY15E Sales 65, , , , , ,427 Sales growth (%) EBITDA 21,917 47,397 53,645 77,532 91, ,927 EBITDA growth PBT 20,127 25,891 16,260 8,704 21,799 38,956 PAT 11,192 13,823 6, ,707 19,433 PAT growth 23.5 (54.2) (91.2) 1, EPS EPS growth 23.4 (54.2) (91.2) 1, CEPS CEPS growth 27.4 (21.9) BVPS BVPS growth (2.6) Net Debt 267, , , , , ,787 MCAP 317, , , , , ,286 EV 585, , , , , ,072 EV/EBITDA Particulars FY14E EBITDA 106,927 EV/EBITDA(x) 8 EV 855,420 Debt 558,650 Less: FCCB conversion (8,025) Net Debt 550,625 MCAP (A) 304,794 no. of shares* 1,970 Add: FCCB conversion 108 Total no. of shares(b) 2,077 Target Price (A/B) 147 Source: Edelweiss research *ex treasury shares 7

8 Valuation summary: SOTP SEGMENT Valuation rationale EV/EBITDA () (x) INR mn INR/ (x) share Standalone EV Cement 8x EV/EBITDA multiple to FY15 earnings 25, , Construction FY14E EV/EBITDA of 5x , Real Estate Jaypee Greens real estate NPV 20,755 5 Hospitality Hotels at 6x FY13E EV/EBITDA 2, ,781 4 Wind Power At capital employed 21,637 6 Total standalone EV 313,882 FY14E net debt 145,815 Target standalone equity Value 168, Jaypee Infratech Real estate 101,501 BOT Yamuna Expressway 1,577 Tolling rights Noida Greater Noida Espressway (1,032) JAL's stake in Jaypee Infratech 83.10% Holding company disount 20% Jaypee Infratech for JAL 67, Jaiprakash Power Ventures Ltd Equity value Total Equity Value of JPVL 89,087 JAL's stake in JPVL 78.2% Holding company disount 20% JPVL value for JAL 55, Jaypee South and West Cement Capacities 9.8 mtpa at replacement cost at USD 110/t ,056 Cement Less: Debt 35,000 Equity value 21,056 Holding company disount 20% JCCL value for JAL 16,845 8 Jaypee Sports City, Gr. Noida 5,828 JPSI stake 91% Holding company disount 20% JPSI value for JAL 4,220 2 Jaypee Himalayan Expressway Book Value 2,345 JAL's stake in JHL 100% Holding company disount 20% JHL for JAL 1,876 1 TOTAL JAL EQUITY VALUE 297, Source: Edelweiss research 8

9 Improvement in debt service metrics to drive re rating Between FY08 and FY12, JPA s net debt rose sharply while EBITDA lagged EV/EBITDA and net debt / EBITDA depict an inverse relationship Going forward, we expect debt to remain stable as most of the assets have been commissioned EBITDA likely to surge 38%, helping net debt / EBITDA correct sharply Stronger cash flows and abated execution concerns can potentially drive re rating Our target does not take into accountany any potential ofre rating rating EBITDA and debt: A tale of two halves 600, ,000 Possible re rating of EV/EBITDA as debt/ebitda declines ,000 96, (INR mn) 360, , ,000 72,000 48,000 24,000 (IN NR mn) (EV V/EBITDA) ? (De bt/ebitda) 0 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E 0.0 Net Debt EBITDA (RHS) EV/EBITDA Debt/EBITDA Source: Bloomberg, Edelweiss research Sensitivity analysis indicates comfortable cushion 9

10 Sensitivity analysis: Favourable risk reward Our scenario analysis indicates a valuation range of INR based on: 7% variation in EBITDA driven by variation in cement volumes / margins Cement volumes range of26 32 tonnes and 20% variation in EBTIDA/tonne EV/EBITDA range of 7.4 8x Net debt overshooting our estimate by INR100bn At CMP, downside is 15% while upside is 125%, indicating risk reward in favour Sensitivity of target price to EBITDA and EV/EBITDA EBIT TDA EV/EBITDA multiple , , , , , Source: Bloomberg, Edelweiss research Sensitivity of price to variation in Debt levels (constant EV/EBITDA) EBIT TDA Net Debt , , , , ,625 99, , , , ,

11 EBITDA set to surge

12 EBITDA to catapult EBITDA is likely to surge 99% between FY12 and FY15E, 26% CAGR Diversified earnings stream; no division contributes more than 40% to EBITDA Karcham Wangtoo and new cement capacities will add to EBITDA in FY13/FY14 Bina/Nigrie thermal power plants will add to EBITDA in FY15 Real estate remains a steady contributor EBITDA surge led by hydro power, real estate and cement 120,000 96,000 (IN NR mn) 72,000 48,000 24,000 0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Hydro Power Thermal Power Real Estate Cement others Source: Company, Edelweiss research Assets well positioned to post strong earnings growth 12

13 Well positioned assets Asset wise features Cement Real estate Hydro power Thermal power Third largest playerin India Largest land bank in NCR amongst all real estate players 1,700 MW of operationalhydro power assets 500 MW operationalwith Volume CAGR at 33% for the past 5 years, leading the industry Emerged as a pan India player with commissioning of South capacities EBITDA of INR 72 bn over FY13 15E Cash generation of INR 74 bn over FY13 15E 15E Established brand and credentials sold 68 msf and collected INR78 bn over past 3 years, more than any other in the country 632msf of developable area still in inventory Balanceland land parcelsalong along the high growth corridor of the newly commenced Yamuna Expressway and largely part of the Jaypee Sports City Design energy of 7600 MW in 50% dependable year Assured RoE projects with incentives for higher plant availability / secondary generation Plant availability historically at 99% Generation well over the design capacity historically EBITDA of INR 63 bn over FY13 15E additional 3300 MW under various stages of construction Overall 74% to be sold under PPA with 26% to be sold on merchant basis EBITDA of INR 28 bn over FY13 15E Operating cash generation of INR 26 bn between FY13E and FY15E Operating cash generation of INR 114 bn between FY16E and FY18E EBITDA of INR 103 bn over FY13 15E Cash generation of INR 54bn over FY13 15E Cash generation of INR 67bn over FY13 15E Source: Company, Edelweiss research 13

14 Debt to stabilise

15 Debt to stabilise Operational cash flows of INR 290 bn over FY13 15E Capex of INR 176 bn over FY13 15E Yamuna Expressway, 250 MW Bina unit 1, 5 MTPA cement plant in Balaji was commissioned in H1FY Bina unit 2, 2.6 MTPA cement grinding plant, 1,320 MW Nigrie TPP to be commissioned in H2FY13 FY15E 1,980MW Bara TPP to be commissioned in FY16E Interest payment of INR157bn Debt to stabilise FY13 onwards 600, ,000 (INR mn) 360, , , FY 08 FY 09 FY 10 FY 11 FY 12 FY 13E FY 14E FY 15E Source: Company, Edelweiss research 15

16 FY12 H1FY13: Most planned capex commissioned 1,000MW Karcham Wangtoo HEP Fomula 1 racing track 214km power transmission line between Abdullapur and existing Baspa Jhakri double circuit link Enhanced cement capacity 3.3x over past 5 years INR133bn 165 km 6 lane access controlled Yamuna Expressway 500MW Bina thermal power project Projects commissioned in FY12/FY13 Project Size Completion Cost (INR bn) Karcham Wangtoo hydro electric plant 1000 MW H1FY13 69 Bina thermal pwer plant 500 MW Q2FY13/Q3FY Jaypee power grid 214 km transmission project Q4FY12 10 Yamuna Expressway 165 km 6 lane concrete expressway Q2FY Formula 1 race track 5.14 km track with an initial seating Q3FY12 17 capacity of 110,000 Balaji cement plant 5 MTPA Q1FY Grinding units Bokaro, Baga, Bhilai, 6.3 MTPA Q1FY Sikandarabad Source: Company, Edelweiss research Financially closed projects Nigrie, Bara to drive balance capex over FY

17 JPA to start generating cash FY14 onwards Operating cash flows to expand 112,000 84,000 Capex reduces as assets get commissioned 160, ,000 (INR mn) 56,000 28,000 (INR mn) 96,000 64, ,000 (28,000) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Interest payments remain stable 60, ,000 0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Debt levels stabilize 600, ,000 (INR mn) 36,000 24,000 R mn) (IN 360, ,000 12, ,000 0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E 0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Source: Company, Edelweiss research Estimated to generate INR290bn operating cash between FY13 and FY15 driven by hydro power, real estate and cement 17

18 Hydro power, cement, real estate to drive cash flows Cement to contribute INR74bn over FY13 15E Thermal power to contribute INR26bn over FY13 15E Hydro power to contribute INR53bn over FY13 15E15E Real estate to contribute INR67bn over FY13 15E Assets well positioned to generate robust cash flows INR mn) ( 25,000 Hydro power 25,000 20,000 20,000 15,000 10,000 5,000 0 FY12 FY13E FY14E FY15E (INR mn) 15,000 10,000 5,000 0 Thermal power FY12 FY13E FY14E FY15E 30,000 24,000 Real Estate 30,000 24,000 Cement (INR mn) 18,000 12,000 6,000 (INR mn) 18,000 12,000 6,000 0 FY12 FY13E FY14E FY15E 0 FY10 FY11 FY12 FY13E FY14E FY15E Source: Company, Edelweiss research 18

19 Scaled up to one of the largest infrastructure players in key segments

20 Scaled up to one of the largest players in key segments Owner operator of India s longest expressway Project Length (km) Current ownership Year of completion Yamuna Expressway 165 Jaypee Infratech completed in 2012 Western Peripheral Expressway 136 DS Construction Apollo Enterprises Under Development Eastern Peripheral Expressway 135 Proposed Proposed Ahmedabad dvadodara d Expressway 95 IRB Infra Initial ii 2004, Current Upgradtion di FY16E Mumbai Pune Expressway 93 IRB Infra completed in 2002 Delhi Gurgaon Expressway 28 DS Construction completed in 2008 Delhi Noida Direct Flyway 9 Noida Toll Bridge Company completed in 2001 Largest real estate area sold in the past 3 years (msf) JPA DLF GPL Unitech Prestige Sobha FY 10 FY 11 FY 12 Largest land dbank kin the country f) (ms JPA DLF GPL Prestige Sobha Largest private producer of hydro power in the country FY 12 Generation Project MW Program Actual Jaiprakash Power Ventures 1,700 4,225 6,093 Tata Power Company 447 1,450 1,531 LNJ Bhilwara 378 1,236 1,065 Bhandardhara Total 2,559 6,969 8,806 3 rd largest cement capacity in the country FY08/ FY09/ FY10/ FY11/ FY12/ CY07 CY08 CY09 CY10 CY11 Ambuja ACC Ultratech Jaiprakash Associates India Cements Shree Cements Rapid attainment t of scale a testimony to robust execution capability Source: Company, Edelweiss research 20

21 Proven track record of strong execution capability Indicative list of projects Project Characteristics Client Scope of work Sardar Sarovar Dam: 1.2km long concrete gravity dam Largest concrete dam in A proposed final height of 163m against India current height hihtof 121.9m Its construction required pouring of about 7 mn cubic metres of chilled concrete It is expected to supply water for irrigation to 1.84 mn ha across 15 districts and 73 suburbs It is also expected to supply drinking water to 29 mn inhabitants across 131 towns and 9,633 villages in Gujarat Tehri Dam: Largest Tehri Dam is the third tallest rockfill dam in the rockfill dam in India world and the largest in Asia SSNN, Gujarat THDC, Uttranchal Main dam and power house Rockfill dam and spillways Nathpa Jhakri: Largest A 1,500MW power house is the largest SJVNL, Himachal Pradesh Power house and penstocks underground underground power house in India powerhouse in India Yamuna Expressway: India s longest 6 lane access controlled concrete expressway Power house and penstocks JPIN, Uttar Pradesh JPA s 83.1% subsidiary JPIN is owner and JPA is the EPC contractor Source: Company, Edelweiss research 21

22 Timeliness commendable in operating environment Tracking deliveryv/sguidancev/s Power projects May 09 Aug 09 Nov 09 Mar 10 Sep 10 Feb 11 May 11 Nov 11 Jan 12 Jun 12 Aug 12 Comments Karcham Wangtoo Commissioned in Sep 2011 Bina Commissioned in June 2012 Nigrie Maintaining guidance of 2013 commissioning i i Kannur NM NM NM NM 2013 NM NM NM NM NM NM Bara Maintaining guidance of 2014 commissioning Karchana Suspended due to land acquisition issues Lower Siang Under planning Hirong Under planning Kynshi Stage II Under planning Umngot Stage I Under planning Cement May 09 Aug 09 Nov 09 Mar 10 Sep 10 Feb 11 May 11 Nov 11 Jan 12 Jun 12 Aug 12 Capacity target Achieved 22.8 MTPA capacity Achieved MTPA capacity in Feb Achieved 33.6 MTPA capacity in June Source: Company, Edelweiss research Other key projects commissioned Yamuna Expressway with a 10 month delay, due to farmer violence in the vicinity Formula 1 race track delivered on time for India s maiden F1 race 22

23 Annexures

24 Debt profile (consolidated) Debt repayment of ~INR252bn and interest of ~INR166bn due during FY13 15E Annual repayment shedule Debt Book value FY13E FY14E FY15E FY13E 15E JPA standalone 210,387 53,255 36,609 41, ,514 Jaypee Infratech 71,096 4,561 4,561 4,561 13,683 JPVL 174,173 24,411 16,260 33,311 73,981 others 76,086 10,869 10,869 10,869 32,608 Total 531,743 93,096 68,299 90, ,787 Interest JPA standalone 22,391 22,879 21,634 66,903 Jaypee Infratech 8,015 7,488 6,961 22,464 JPVL 17,947 18,843 18,299 55,088 others 8,478 7,174 5,870 21,522 Total 56,832 56,384 52, ,977 Source: Company, Edelweiss research Operating cash flows of INR290bn between FY13E and FY15E to service interest payments 24

25 Debt servicing (Standalone) Debt servicing Annual repayment shedule Debt Book value FY13E FY14E FY15E FY13E 15E Non Convertible Secured Debentures 47,550 6,950 12,247 13,617 32,814 Secured Term Loans from Banks, Financial Institutions & Others are given as under 95, ,583 13,832 16,957 40,373 Loan from State Government [Interest Free] 2, Advance from clients Foreign Currency Convertible Bonds 18,284 26,997 26,997 Foreign Currency Loans from Banks [ECB] 13,487 2,524 3,389 3,389 9,302 Unsecured loans From Banks 2, ,019 Fixed Deposits Scheme 20,401 6,800 6,800 6,800 20,401 Add: Short Term Borrowings 10,793 Total 210,387 53,255 36,609 41, ,514 Interest Non Convertible Secured Debentures 4,608 3,699 2,381 10,689 Secured Term Loans from Banks, Financial Institutions & Others are given as under 11,580 10,112 8,213 29,906 ECB ,838 Unsecured loans From Banks Fixed Deposits Scheme 2,338 1, ,463 Total 19,616 16,162 11,849 47,627 Add: Interest ton refinanced dbt debt , , ,785 19,277 Total Interest payment 22,391 22,879 21,634 66,903 Source: Company, Edelweiss research 25

26 Debt servicing (JPVL) Strong INR53bn cash flow from 1,700MW hydro power projects Bina and Nigrie TPPs to contribute INR27bn Capex and interest payments to result in outflow of INR195bn Additional funding requirement of INR9bn between FY13E and FY15E JVPL Cash Flow Summary FY13E FY14E FY15E Total Annual repayment schedule Hydro power Debt Book value FY13E FY14E FY15E FY13E 15E Baspa 2,388 2,099 1,915 6,402 Non Convertible Vishnuprayag 3,677 3,523 3,523 10,723 Series I 10,000 14,049 14,049 Karcham Wangtoo 8,645 14,193 13,641 36,479 Series II 9,826 3,660 7,970 11,630 Total 14,710 19,815 19,078 53,604 19,826 14,049 3,660 7,970 25,679 Thermal power Secured Term Loans from Banks, Financial Institutions & Others Bina 1,048 4,758 4,803 10,608 Baspa 4, ,060 Nigrie i ,282 15,670 Vishnuprayag 14,667 1,222 1,222 1,222 3,667 Bara I Karcham Wangtoo 45,612 3,041 3,041 3,041 9,122 Total thermal power 1,048 5,147 20,084 26,279 Bina 17, ,503 1,503 3,382 Power Transmission 1,945 1,643 1,591 5,179 Nigrie ( Total to be Emmission Reduction credits ,225 drawn INR 56.7bn) 22,317 2,835 2,835 Total operating cash flows 18, ,995 41, ,286 Nigrie , Capex 73,300 33,040 32, ,220 Other loans 10,000 3,333 4,444 2,222 10,000 Free cash flows to firm (55,170) (6,045) 8,281 (52,934) FCCB 11,000 11,703 11,703 Debt repayments / (increase) (51,947) (17,326) (14,599) (83,872) 133,987 8,326 10,564 23,305 42,194 Interest payments 9,604 11,916 17,357 38,876 Add: Subsidiary debt 20,360 2,036 2,036 2,036 6,108 Free cash flows to equity (12,826) (635) 5,523 (7,938) Total Debt 174,173 24,411 16,260 33,311 73,981 Interest Interest standalone 15,625 16,765 16,465 48,855 Interest subsidiaries 2,322 2,078 1,833 6,233 Total 17,947 18,843 18,299 55,088 Source: Company, Edelweiss research 26

27 Cash flow summary (JPIN) Cash Flow Summary FY12 FY13E FY14E FY15E Total Real Estate Noida 8,958 13,421 17,020 19,312 58,711 Greater Noida (675) 277 1,684 1,736 3,022 Agra (225) (54) Yamuna Expressway (690) (3) 348 (344) Total operating cash flows 8,283 12,783 18,647 21,980 61,693 Capex 18,108 16,079 (50) 34,137 Free cash flows to firm (9,825) (3,296) 18,697 21,980 27,556 Debt repayments / (increase) (4,599) 5,473 5,473 5,473 11,821 Interest payments 8,351 8,015 7,488 6,961 30,815 Free cash flows to equity (13,577) (16,784) 5,736 9,546 (15,080) Source: Company, Edelweiss research 27

28 Cement: Industry margins to remain stable Due to capacity additions, industry ultilisation is estimated to remain below 80% till FY15 (assuming 9% demand growth from FY13 to FY15). However, post the CCI order, the industry has shown great resilience by being able to keep prices firm. Hence, we expect margins for FY14/FY15 to stabilise at higher h levels l expected in FY13 All India Capacity utilisation AllIndia (mn tonnes) FY09 FY10 FY11 FY12 FY13E FY14E FY15E Installed capacity at the year end exit capacities Non operative Capacities (a) Effective Capacity (b) Operative Effective capacity ( c) = (b) (a) Consumption domestic (d) % change YoY Cement + clinker exports (e) Total demand (f) = (d) + (e) % change YoY Capacity utilisation (f)/ ( c ) (%) Source: Company, Edelweiss research 28

29 Cement cash flows key assumptions We expect the company to continue to outperform the industry with volume growth of 16% CAGR between FY12 FY15E While industry EBITDA / Ton is expected to remain flat, EBITDA/t for JPA is likely to increase moderately di driven by improving i operating leverage Operating cash flow of ~INR 74bn over FY13 15E FY10 FY11 FY12 FY13E FY14E FY15E Capacity Volume EBITDA / T 1, ,000 EBITDA 13,693 12,696 10,845 19,711 24,424 28,280 Depreciation 3,132 4,853 6,042 7,933 8,579 9,035 EBIT 10,561 7,844 4,803 11,778 15,845 19,246 Notional Interest 9,720 18,000 19,800 21,492 21, ,064 Notional PBT 841 (10,156) (14,997) (9,714) (5,432) (1,818) Notional PAT 564 (6,805) (10,048) (6,508) (3,640) (1,218) Operating cash flow PAT 564 (6,805) (10,048) (6,508) (3,640) (1,218) Interest 9,720 18,000 19,800 21,492 21,277 21,064 Depreciation 3,132 4,853 6,042 7,933 8,579 9,035 Operating cash flow before WC changes 13,416 16,048 15,794 22,916 26,217 28,881 Working Capital Changes 937 1,350 1,485 1,382 Operating cash flow after WC changes 13,416 16,048 14,857 21,566 24,732 27,498 Source: Company, Edelweiss research 29

30 Hydro power: Baspa The 300MW Baspa II hydro electric plant located at Himachal Pradesh is expected to generate INR6.4bn over FY13 15E Commissioned in FY04, this is as assured returns project with 16% RoE with incentives for higher plant availability and secondary energy generation. JPVL has inked a PPA with HPSEB for off take of energy from the project Past record of plant availability and secondary energy generation present upsides to our cash flow estimates Assumptions and operational details (M MU) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Secondary energy Plant availability Baspa FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant Capacity (MW) Design Energy (MU) 1,213 1,213 1,213 1,213 1,213 1,213 1,213 1,213 Primary saleable energy capacity (MU) 1,050 1,050 1,050 1,050 1,050 1,050 1,050 1,050 Approved capex 15,340 15,340 15,340 15,340 15,340 15,340 15,340 15,340 Approved equity 4,602 4,602 4,602 4,602 4,602 4,602 4,602 4,602 Plant availability (%) Generation 1,402 1,274 1,274 1,274 1,274 1,274 1,274 1,274 Net saleable energy 1,233 1,121 1,121 1,121 1,121 1,121 1,121 1,121 Revenues 3,341 2,858 2,757 2,677 2,659 2,684 2,709 2,736 EBITDA 3,036 2,534 2,413 2,313 2,274 2,275 2,276 2,277 Depreciation EBIT 2,376 1,874 1,754 1,653 1,614 1,615 1,616 1,617 Interest t PBT 1,923 1,550 1,550 1,550 1,550 1,550 1,550 1,550 Tax PAT 1,289 1,039 1,039 1,039 1,039 1,039 1,039 1,039 RoE on approved equity (%) Operating cash flow , ,099 1, , , , , ,756 Source: Company, Edelweiss research (%) 30

31 Hydro power: Vishnuprayag The 400MW Vishnuprayag hydro electric plant located at Uttarakhand is expected to generate INR11bn over FY13 15E Commissioned in FY07, this is as assured returnsproject with 16% RoE with incentives for higher plant availability and generation of secondary energy. JPVL has inked a PPA with UPPCL for off take of energy from the project Past record of plant availability and secondary energy generation present upsides to our cash flow estimates Assumptions and operational details (M MU) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Secondary energy Plant availability Vishnuprayag FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant Capacity (MW) Design Energy (MU) 1,774 1,774 1,774 1,774 1,774 1,774 1,774 1,774 Primary saleable energy capacity (MU) 1,534 1,534 1,534 1,534 1,534 1,534 1,534 1,534 Approved capex 16,940 16,940 16,940 16,940 16,940 16,940 16,940 16,940 Approved equity 5,147 5,147 5,147 5,147 5,147 5,147 5,147 5,147 Plant availability (%) Generation , ,863 1, , , , , ,863 Net saleable energy 1,916 1,639 1,639 1,639 1,639 1,639 1,639 1,639 Revenues 3,441 3,292 3,143 2,994 2,198 2,061 1,925 1,789 EBITDA 3,183 3,030 2,877 2,725 1,914 1,761 1,608 1,455 Depreciation 1,186 1,186 1,186 1, EBIT , ,844 1, , , , , ,201 Interest (23) (176) (328) (481) PBT 1,409 1,409 1,409 1,409 1,682 1,682 1,682 1,682 Tax PAT 1,127 1,127 1,127 1,127 1,127 1,127 1,127 1,127 RoE on approved equity (%) Operating cash flow 3,000 2,825 2,669 2,514 1,426 1,258 1, Source: Company, Edelweiss research (%) (

32 Hydro power: Karcham Wangtoo The 1,000MW Karcham Wangtoo hydro electric plant located at Himachal Pradesh is expected to generate INR36bn over FY13 15E Commissioned in FY12, this project has a assured return of 14% at a plant availability of 85%, with incentives i at 0.65% of annual fixed charge for each percentage availability higher h than normative capacity Past record of plant availability and secondary energy generation present upsides to our cash flow estimates Assumptions and operational details Karcham Wangtoo FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant Capacity (MW) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Design Energy (MU) 90% dependable year 4,261 4,261 4,261 4,261 4,261 4,261 4,261 4,261 Design Energy (MU) 50% dependable d year , ,596 4, , , , , ,596 Primary saleable energy capacity (MU) 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 Approved capex 69,000 69,000 69,000 69,000 69,000 69,000 69,000 69,000 Approved equity 20,100 20,100 20,100 20,100 20,100 20,100 20,100 20,100 Plant availability (%) Generation , ,429 4, , , , , ,429 Net saleable energy 4,044 3,897 3,897 3,897 3,897 3,897 3,897 3,897 Revenues 16,814 16,219 16,002 15,788 15,577 15,369 15,165 14,963 EBITDA 15,738 15,099 14,838 14,577 14,318 14,060 13,803 13,547 Depreciation 2,128 2,128 2,128 2,128 2,128 2,128 2,128 2,128 EBIT 13,610 12,971 12,710 12,449 12,190 11,932 11,675 11,419 Interest 6,721 6,304 5,919 5,534 5,150 4,766 4,382 3,999 PBT 6,889 6,668 6,791 6,915 7,040 7,166 7,292 7,420 Tax 1,378 1,334 1,358 1,383 1,408 1,433 1,458 1,484 PAT 5,511 5,334 5,433 5,532 5,632 5,732 5,834 5,936 RoE on approved equity (%) Operating cash flow 8,645 14,193 13,641 13,354 13,068 12,783 12,499 12,215 Source: Company, Edelweiss research 32

33 Thermal power: Key projects and their status 3,700 MW thermal power projects to be commissioned between FY13 and FY16 Cumulative estimated capex of INR253bn against INR91bn spent till FY12 Operational cash flow of INR26bn between FY13E and FY15E Operational cash flow of INR114bn Project Size (MW) Fuel supply Capex (INR bn) Capex completed (FY12) Funding Cost (INR mn per MW) Expcted COD Bina I 500 FSA executed for unit I : Operational Nigrie 1,320 Pithead located captive coal block JV between JAL and MPSPMC Karchana I :70 Edel estimate of 65 v/s company guidance of 61.4 Currently on hold April 2014 v/s company guidance of CY 2013 Bara I 1,980 FSA to be executed :75 Edel estimate of 68 v/s April 2015 v/s company guidance of company guidance of 54.5 CY 2014 Source: Company, Edelweiss research 33

34 Thermal power: Bina 500MW coal based thermal power plant located at Madhya Pradesh Unit 1 of the project commissioned in Q2FY13; unit 2 expected in Q3FY13 30% of the electricity generated will be sold on merchant basis Project expected to generate INR11bn over FY13 15E Assumptions and operational details Bina FY12 FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant capacity (MW) % of year when operational PLF (%) Auxiliary consumption (%) Gross Generation (mn KwH) 1,533 3,854 3,854 3,865 3,854 3,854 3,854 3,865 Net Generation (mn KwH) , , , , , , , ,594 Calorific value of coal 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 Plant heat rate 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 Coal required (Mn Tons) Coal cost per ton 1,350 1,418 1,488 1,563 1,641 1,723 1,809 1,900 1,995 Total Revenues 3,227 10, , ,448 10,444 10,470 10,752 10,811 Total opex 2,347 4,934 5,180 5,452 5,711 5,997 6,297 6,627 EBITDA 880 5,218 4,990 4,996 4,733 4,473 4,455 4,184 Depreciation 855 1,711 1,711 1,711 1,711 1,711 1,711 1,711 EBIT 24 3,508 3,279 3,285 3,022 2,762 2,744 2,473 Interest 1,184 2,269 2,059 1,853 1,642 1,430 1,224 1,011 PBT (1,159) 1,238 1,220 1,432 1,380 1,332 1,520 1,462 Tax (232) Profit After Tax (927) ,146 1,104 1,066 1,216 1,169 Cash flow from operations 1,048 4,758 4,803 4,730 4,519 4,271 4,176 3,962 Source: Company, Edelweiss research 34

35 Thermal power: Nigrie 1,320MW coal based thermal power plant located at Madhya Pradesh Project expected to be commissioned in FY15 50% of the electricity generated will be sold on merchant basis Project expected to generate INR15bn over FY13 15, all of it in FY15 Cash generation in the project FY16 onwards will be ~INR20bn annually Assumptions and operational details Nigrie FY12 FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant capacity (MW) 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 % of year when operational PLF (%) Auxiliary consumption (%) Gross Generation (mn KwH) 8,094 10,203 10,176 10,176 10,176 10,203 Net Generation (mn KwH) 7,609 9,591 9,565 9,565 9,565 9,591 Calorific value of coal 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 Plant heat rate 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 Coal required (Mn Tons) Coal cost per ton ,042 1,094 1,149 1,206 1,266 1,330 Total Revenues 23,789 30,258 30,458 31,149 31,455 31,853 Total opex 6,665 8,219 8,613 9,044 9,496 9,991 EBITDA 17,124 22,039 21,845 22,105 21,958 21,862 Depreciation 4,530 4,530 4,530 4,530 4,530 4,530 EBIT 12,594 17,509 17,315 17,575 17,428 17,332 Interest 1,944 8,305 7,667 6,774 5,889 4,995 4,100 PBT (1,944) 4,288 9,841 10,541 11,686 12,434 13,232 Tax (389) 858 1,968 2,108 2,337 2,487 2,646 Profit After Tax (1,555) 3,431 7,873 8,433 9,349 9,947 10,586 Cash flow from operations ,282 19,908 19,837 19,803 19,578 19,326 Source: Company, Edelweiss research 35

36 Thermal power: Bara 1,980MW coal based thermal power plant located at Uttar Pradesh Project expected to be commissioned in FY16 90% of the electricity generated will be sold on PPA Pending capex on the project is estimated at INR109bn Cash generation in the project FY16 onwards likely to be ~INR15bn annually Assumptions and operational details Bara I FY12 FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Plant capacity (MW) 1,980 1,980 1,980 1,980 1,980 1,980 1,980 1,980 % of year when operational PLF (%) Auxiliary consumption (%) Gross Generation (mn KwH) 8,522 15,263 15,263 15,263 15,305 Net Generation (mn KwH) 8,011 14,348 14,348 14,348 14,387 Calorific value of coal 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 Plant heat rate 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 Coal required (Mn Tons) Coal cost per ton , , , , , , , , ,960 Total Revenues 20,079 37,425 37,115 38,076 37,890 Total opex 11,713 20,100 21,331 22,639 24,086 EBITDA 8,366 17,325 15,784 15,436 13,804 Depreciation 4,995 7,135 7,135 7,135 7,135 EBIT 3,371 10,189 8,649 8,301 6,668 Interest 7,710 10,167 9,184 8,227 7,240 PBT (4,338) 22 (535) 74 (572) Tax (868) 4 (107) 15 (114) Profit After Tax (3,471) 18 (428) 60 (458) Cash flow from operations 8,150 16,590 16,177 15,509 14,225 Source: Company, Edelweiss research 36

37 Real Estate Largest land bank in NCR amongst all real estate players bulk of it in Jaypee Infratech Established brand and credentials sold 68 msf, more than any other in the country, and collected INR78 bn over past 3 years 632msf of developable area still in inventory between JPIN and JPSI; Balance land parcels along the high growth corridor of the newly commenced Yamuna Expressway and largely part of the Jaypee Sports City EBITDA of INR 103 bn over FY13 15E, Cash generation of INR 67bn over FY13 15E Location wise performance JPA (consolidated) Company/ Location Cumulative area Cumulative sales Cumulative Average sold (msf) value (INR mn) collections realisations JAL Greater Noida ,790 20, ,036 JAL Noida ,896 30,519 5,870 Jaypee Infratech ,580 86,213 3,197 Jaypee Sports Int l ,196 2,966 3, msy 6,592 18, , , ,576 Annual sales performance JaypeeInfratech Period No. of units sold Area sold (msf) Average rate (INR/sf) Sales value Advances received FY ,328 3, FY , ,540 51,705 16,699 FY2011 7, ,308 40,953 31,455 FY2012 5, ,162 45,450 29,378 Q1FY ,724 9,310 8,050 27, , ,580 86,212 Source: Company 37

38 Land parcels of JPA s real estate division Company/ Location Total Developable Area (msf) JAL Greater Noida 8 JAL Noida 24 Jaypee Infratech 530 Jaypee Sports Int l. 133 Total 696 Source: Company 38

39 Real estate: JPIN Vast development potential of 530msf over 5 land parcels along the Yamuna Expressway Robust sales of 9.55 msf at an average rate of INR4,141 in FY12 Expected sales of INR133bn (33 msf) at an average rate of INR4,000 over FY13 15E Commencement of Yamuna Expressway expected to enhance connectivity and increase economic activity in the surrounding area JPIN Real estate performance Jaypee Infratech FY12 FY13E FY14E FY15E Area sold Noida Greater Noida Agra Average Rt Rate Noida 4,350 4,568 4,796 5,036 Greater Noida 2,500 2,625 2,756 2,894 Agra 2,205 2,315 2,431 4,141 4,111 3,991 3,910 Cash Inflows Noida 28,364 39,052 45,729 43,977 Greater Noida 909 2,674 5,520 7,856 Agra 514 1,712 3,567 29,273 42,240 52,961 55,401 Cash Outflows Noida 16,551 21,926 24,260 20,817 Greater Noida 1,521 2,230 3,498 5,555 Agra 708 1,656 2,751 18,071 24,864 29,415 29,124 Taxes paid 2,918 3,904 4,896 4,645 Operating cash flow 8,283 13,472 18,650 21,631 Source: Company, Edelweiss research 39

40 Yamuna Expressway: JPIN The 6 lane access controlled expressway has commenced operations from August 9, 2012 With a traffic potential of 45,000 PCUs per day, we expect traffic to ramp up steadily over 5 7 years Currently, the road is generating gdaily toll collection of INR2.5mn per day Yamuna Expressway performance metrics YE Greater Noida Agra FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E Traffic Volume ('000 PCUs) 821 3,548 4,790 9,311 13,408 19,307 22,927 22,927 Toll Rate (INR/km) Toll Revenue (INR mn) ,355 2,793 4,263 6,507 8,191 8,682 Operating Expenditure ,007 1,068 1,132 1,200 1,272 1,348 EBITDA (690) (3) 348 1,725 3,131 5,308 6,919 7,335 Less: Interest 6,384 6,766 6,616 5,983 5,303 4,863 4,424 3,984 Tax Payable/ (Shield) (2,495) (3,406) (3,100) (2,514) (1,930) (1,257) (713) 118 FCFF (4,579) (3,363) (3,167) (1,744) (241) 1,702 3,208 3,232 Less: Debt Repayment 4,507 4,507 4,507 4,507 4,507 4,507 4,507 4,507 FCFE (9,086) (7,870) (7,674) (6,252) (4,749) (2,806) (1,299) (1,275) Source: Company, Edelweiss research 40

41 Financial Summary Particulars FY10 FY11 FY12 FY13E FY14E FY15E Income Statement Revenues 65, , , , , ,427 EBIDTA 21,917 47,397 53,645 77,532 91, ,927 Interest 12,864 18,747 31,341 56,332 53,644 47,237 Profit fitbf before tax 20,127 25,891 16, ,704 21,799 38,956 Core net profit 11,192 13,823 6, ,707 19,433 EPS (INR) Balance sheet Shareholders funds 85, , , , , ,187 Borrowings 352, , , , , ,455 Minority Interest & others 21,635 44,356 47,490 49,691 52,033 54,530 Sources of funds 459, , , , , ,172 Total fixed assets 304, , , , , ,658 Investments 10,586 31,111 32,312 32,312 32,312 32,312 Total current assets 205, , , , , ,314 Total current liabilities & provisions 60,403 83,573 98, , , ,112 Net Current Assets 145, , , ,387 76,995 52,202 Uses of funds 459, , , , , ,172 Cash Flow Metrics (0) (0) 0 Operating cash flow (10,151) 17,517 41,308 99,381 94,168 97,402 Financing cash flow 148,005 90,640 60,257 3,117 (62,087) (64,928) Investing cash flow (92,216) (124,821) (141,145) (96,311) (39,843) (39,837) Net cash flow 45,638 (16,664) (39,580) 6,187 (7,762) (7,362) Capex (105,082) (129,092) (142,889) (99,619) (42,990) (42,880) Ratios ROE (%) NP Margin (%) P/E (x) Price/BV(x) EV/EBITDA (x)

42 Company Structure JPA Cement Power Real estate Standalone (26 mt) JCCL 100% subsidiary (10 mt) JPVL 67.9% Subsidiary Standalone Jaypee Infratech (83.1%subsidiary) JPSI (90.5% subsidiary (133msf) Thermal Power 500 MW Bina 1320 MW Nigrie 1980 MW Bara Hydro Power 300 MW Baspa 400 MW Vishnuprayag 1000 MW Karcham Wangtoo 74% subsidiary 214 kms PGCIL transmission line Noida (24.3msf) Greater Noida Nid (8 msf) Land parcels at Noida, Jaganpur, Mirzzapur, Tappal and Agra of 1,235 acres each Source: Company 42

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