COMPANY REPORT. The Company BUY. The Company: Industry: Power Transmission & Distribution. Power T&D to remain as the largest contributor in future

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1 06 Oct 2010 Kalpataru Power Transmission Ltd. BUY COMPANY BUY The Company: The Company Kalpataru Power Transmission Ltd. or KPTL is primarily engaged in executing Turnkey projects for EHV Transmission Lines up to and including 800 KV in India and Overseas. As an EPC contractor, its scope of work includes design, testing, fabrication, galvanizing of towers and construction activities from survey, civil works/ foundation, erection to stringing and commissioning of EHV lines, besides procurement of items such as conductors, insulators, hardware accessories etc. It also participates in Substation projects on a partnership basis. KPTL has two fabrication plants with an annual installed capacity of 108,000 MT. Industry: Power Transmission & Distribution Current Pri ce Targ et Price Market Cap (Cr.) 52 Week H/L FV Book Value/Share BSE Sensex NSE Nifty B SE Code NSE Code Reuters Code Bloomber g Code / KALPATPOWR KAPT.NS KPP:IN 16 1 Yr Stock / Index Performance /5/2009 1/12/2010 4/21/2010 7/21/2010 Sensex Kalpataru Power Power T&D to remain as the largest contributor in future In this segment, KPTL provides complete services related to Transmission projects right from design, testing, fabrication, galvanizing of towers, survey, civil works/ foundation, erection to stringing and commissioning of EHV lines, besides procurement of items such as conductors, insulators, hardware accessories etc. Moreover it also undertakes procurement and construction of Power distribution networks in India and overseas. Its scope of work includes setting up 33/11 KV HT Lines, LT Lines with Cables, Installation of Distribution Transformers (DT) and 11/33 KV Substations. Design and Engineering Services - KPTL has state of the art hardware and 3D designing software facility in its Gandhinagar (Gujarat). Herein the company designs and engineer transmission towers based on different variables such as geographical terrain, wind zone, soil type and condition, and transmission capacity. This is carried out by over 45 experienced design engineers who have access to design and three-dimensional drafting and analysis software such as PLS- TOWER, PLS CADD, BOCAD, AUTOCAD and itower. Particulars FY 09 FY 10 FY 11E FY 12E Net Revenue Operating E xp. EBITDA Profit after Tax EPS ROE% ROCE% EV/ EBITDA * EPS based on Fully Diluted Equity Share Capital Institutions 17% Share Holding Pattern as on June 30, 2010 Tapan Trivedi Tel tapan.trivedi@jrg.co.in % 17.3% 12.3% 13.3% 13.9% 18.7% 15.2% 16.2% Other Investors 12% General Public 16% Promoters 55%

2 Tower Testing and Research and Development Services - The company furnishes tower testing services through its tower testing station in Punadra (Gujarat), one of the largest in India. KPTL has successfully tested over 200 towers at this station and has the capacity to test up to 1200KV towers of up to 85 meters in height, up to 95 MTs in weight and up to 27 meters 27 meters of base width. KPTL has tested towers for a number of esteemed international and domestic organizations like Powerlink Queensland (Australia), Sumitomo Corporation (Japan) EEPCO (Ethiopia); EDD Djibouti (USA), Power Grid Corporation of India (India) and ABB (India). Manufacturing Facilities - The company has a total Tower Manufacturing capacity of 108,000 MT at its two plants at Gandhinagar (Gujarat) making it one of the largest fabricators of lattice steel towers. This is done through its main plant of a capacity of 78,000 MT and an EOU of 30,000 MT. Fabrication of towers is done based on KPTL's designs or designs provided by third parties. To cater to the heightening demand for towers in the country, KPTL is expanding its manufacturing capacity by 30,000 MT and should be completed during FY 12E. Construction of Transmission Lines including Survey, Foundation, Erection & Stringing Services - Construction of transmission lines includes conducting surveys over multiple types of terrain, including rivers and other water bodies, hills and deserts, laying of concrete foundations for the towers, erecting towers on the foundations, fitting insulator and other hardware, optical ground wire and stringing of conductors and cables. KPTL has more than 15 years of experience in OHL construction and has completed more than 13,000 KMs of domestic and international power transmission lines varying between KV. (In Rs. Crore) 350 Yearly Revenue growth in Transmission and Distribution Division 89.0% % % % % % % FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E 82.0% Source: Company Data, JRG Research Financial and Operating performance KPTL's experience in the Power T&D segment and its scale of business can be ascertained on the fact that over-time, the company has successfully completed more than 50,500 Km of 11/33 KV lines, over 740,000 poles, over 32,000 distribution transformer centers and over 270,000 individual connections. Additionally it has also established and stepped-up around 30 new and existing 33 KV Substations. During FY 10, the Power Transmission and Distribution segment of KPTL witnessed a Revenue growth of more than 30% from Rs 1664 Crore to Rs 2185 Crore (FY 10). Though segments growth remained strong, its contribution to total revenue came down to 84.1% (FY 10) from 88.3% (FY 09) due to the robust performance by the Infrastructure segment of the company. The Power will continue with its firm performance in the future as well. Over the next two years, the segments revenue is expected to rise at a CAGR of around 17% and cross the Rs 3000 Crore mark.

3 Infrastructure to remain a consistent performer going forward The second business segment of KPTL (Standalone) is Infrastructure which includes the construction of cross-country oil and gas pipelines. KPTL has gained immense experience in laying crude and gas pipeline and executed pipeline projects aggregating to over 1,800 Km. Moreover, it plans to target higher end business in the oil and gas sector, including EPC contracts for setting up pipelines and related facilities in India and overseas, contracts for onshore and offshore oilfield facilities such as gas gathering stations, gas collection stations and oil collection stations, and contracts for the operation and maintenance of cross-country pipelines and related facilities. (In Rs. Crore) 60 Yearly Revenue growth in Infrastructure Division 16.0% % % % % % 4.0% % FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source: Company Data, JRG Research % Financial and Operating performance The growth of this segment can be attributed to the large-scale investment by KPTL in specialized pipeline equipment consisting of 50 pipe layers, 28 excavators, 6 dozers and 139 welding machines among others. This enables it to take advantage of opportunities for EPC contracts for oil and gas pipelines for in India and overseas. During the previous fiscal year, this division recorded solid growth wherein its revenues more than doubled to Rs 361 Crore (FY 10) from Rs 172 Crore (FY 09). The segments contribution too, increased by around 500 bps to 13.9% (FY 10). By FY 12E, revenue from this segment is expected to surpass the Rs 500 Crore mark rising at a CAGR of over 18%. Bio-mass Energy, a small but high margin business Other than Power T&D and Infra, KPTL has diversified into Power generation using renewable and non-conventional energy sources. Currently the company operates two biomass energy generation plants, each having a generation capacity of 7.8 MW. One plant is located in Ganganagar (Rajasthan) which uses MCR and cotton stalks as raw material while the other is present in Tonk (Rajasthan) which uses only MCR. (In Rs. Crore) 6 Yearly Revenue growth in Biomass Division 3.0% % % % 2 1.0% 1 0.5% FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source: Company Data, JRG Research %

4 Financial and Operating performance The company has entered into long-term power purchase agreements (PPA) and wheeling and bankings agreements (WBA) for all the power generated at its plants. Following the fixed nature of business in Power generation, the plants registered a healthy growth rate of around 6% from Rs 48 Crore (FY 09) to Rs 51 Crore (FY 10). The plants run at a strong PLF of 97% (excluding shut down) and together generated 118 Mln units of power wherein 108 Mln units were exported. While the division has been a small contributor to the Top-line, it has maintained higher EBIT margins in the range of 25%-30% adding more value towards the bottom-line. However, in the past two quarters, margins have come off significantly due to the higher costs of Raw materials meanwhile as the Tonk plant was shut in the last quarter because of the water scarcity. A good monsoon should alleviate some pressure on the margins in the coming quarters but, overall we expect the revenue from Bio-mass segment should decline by around 14% to Rs 44 Crore in FY 11E. The Company: Investment Rationale Order book firm, expected to ameliorate further KPTL current order backlog stands at over Rs 5200 Crore (excluding L1 contracts) which is well diversified into Domestic (65%) and International (35%) orders. During the previous quarter, the Company bagged Orders worth Rs 272 Crore in the Infrastructure division for OIL. Though the order book pick-up during the period was moderately lower than anticipated, we expect the same to register strong growth in the coming quarters. Our belief was bolstered by the recent Rs 550 Crore worth of orders won by the company in the T&D space. KPTL has secured two orders aggregating Rs 450 Crore from Kenya Electricity Transmission Co. Ltd. (KETRACO) and one order worth Rs 100 Crore from Parbati Koldam Transmission Co. Ltd.; a JV of Power Grid Corporation and Reliance ADAG. The current order has upped the share of the Transmission segment to more than 90% while the balance is constituted by the Infrastructure and the Distribution segment respectively. (In Rs. Crore) 800 Yearly Trend in Order Book & Sales of KPTL 2.5 Distribution of Order Book w.r.t. Domestic and Overseas Segments Overseas 35% Domestic Overseas FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E 0.5 Domestic 65% Source: Company Data, JRG Research Order Book Sales Book to Bill Ratio We expect that the investments lined up by PGCIL and a number of State Electricity Boards will create huge opportunity for various players in T&D segment while KPTL led by its strong track record and firm execution capability is seen as one of the biggest beneficiary of the same. The Order backlog of the company is expected to witness a firm grow and rise over Rs 6800 Crore in the next two years, while the Book to bill ratio is expected to remain around 1.9X.

5 KPTL consistently expanding its business in different geographies Over the past few years, KPTL has increased its international presence by gathering number of orders from Africa, the Middle East and Southeast Asia. Outside India, the company has successfully executed transmission line tower projects in Africa, US, Australia, Middle East and Southeast Asia. Adding, it has also supplied transmission line towers to international EPC contractors and Power utilities in more than 28 countries. For taking the full advantage of the opportunities presented by the global Power Transmission and Distribution markets, the company has consistently formed consortia and joint ventures with local and international partners and has set-up projects offices in Algeria, Djibouti, Ethiopia, the Philippines, UAE, Kenya, South Africa, Nepal and Kuwait. (In Rs. Crore) Yearly Trend in Gross and Export Sales of KPTL 5% 45.0% 4% 35.0% 3% 25.0% % 15.0% 1% 5.0% FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Gross Turnover Export Turnover (Incl Overseas Proj.) Source: Company Data, JRG Research % On the financial side, Export revenue accounted for more than 25% of the gross Sales of the company between FY 06 to FY 09 while surged to more than 40% in FY 10. In numeric terms, KPTL's Revenue from the international operations jumped significantly during the last FY and rose to more than Rs 1000 Crore. KPTL is gathering more and more international orders and we expect the growth momentum to continue in the future wherein its Export revenue are expected to surpass the Rs 1400 Crore mark by FY 12E. International Power Capex to witness strong uptick over the next few years Since KPTL started tapping the huge investment opportunities in the global Power transmission segment, it has consistently enhanced its share of Orders and revenue contribution from the overseas markets. Post the slump of 2008 when the global economy went for a tail-spin, things are normalizing currently and most of the nations which had withheld their capex programs during that period are starting the process once again. Projected Capacity Addition and Investment needs in Power Infrastructure (WEO, 2008) Units: in Rs Crore Region Units: in Rs Crore OECD E. Europe Asia Capacity Additions (GW) Power Generation ($Bln) Yearly Financials - Punj Lloyd Limited Middle East Africa Yearly Financials - Punj Lloyd Limited Latin America World Transmission ($Bln) % Distribution Growth ($Bln) As per the WEO, the total installed Power generation capacity worldwide is expected to rise from 4344 GW in 2006 to 5697 GW in 2015 leading into gross capacity additions

6 of 1691 GW by The investment in the Power sector during the period is seen at Generation ($2197 Bln), Transmission ($867 Bln) and Distribution ($1941 Bln). Over time, KPTL has made strong tie-ups with a number of overseas players specifically in Middle East and Africa. As per WEO estimates, both of these regions taken together are estimated to create an investment opportunity of more than $185 Bln (Rs 8.7 Lac Crore). With the resurgence of Crude oil demand in the major consuming nations like the US, different nations in the Middle East are witnessing strong revival in their Capex spending. Besides this, with the financial conditions easing around the world, revivification in demand is also coming from Africa for lump-sum turnkey Transmission work. This should be appended by the huge replacement demand for Transmission networks from developed nations like the US and Europe post FY 12. Logistics and Warehousing, playing on volumes KPTL has a subsidiary, Shree Shubham Logistics Ltd. (80% Holding). Through this, the company has presence across the entire logistics and warehousing value chain including warehousing, cold chains, commodity funding, collateral management, testing and certification, fumigation, pest control, commodity trading, exports, retail and other business support services. SSLL owns and operates 12 agricultural logistics parks in Rajasthan and Gujarat with a total storage capacity of more than 189,000 MT. Prompted by the huge opportunity in the Agri-business space, the company plans to further enhance its footprint in different states in India and targets total owned storage capacity of approximately 10,00,000 MT over the next few years. In FY 10, the segment clocked firm Top-line growth of around 60% to Rs 88 Crore (FY 10) in comparison to Rs 56 Crore (FY 09) however, the Bottom-line was negative at a loss of Rs 5 Crore (FY 10). This was mainly due to the delay in operation at all warehousing facilities and higher interest expenses. Though, on the positive side, KPTL has entered into strategic partnership with the Rajasthan State Warehousing Corporation (RSWC) wherein it shall operate 38 agricultural logistics parks with a total storage capacity of 405,000 MT on a revenue sharing basis. Considering the untapped opportunity in the logistics and warehousing segment in the country and it being largely unorganized; KPTL's overall storage capacity is anticipated to register healthy growth rate over the next few years. In FY 11E, the management is expecting SSLL to cross Rs 170 Crore in turnover while should be able to clock 5% margins at PBT levels. JMC to register healthy Operating and Financial performance over the next few years KPTL is also present into Civil contracting projects through its subsidiary JMC (53% Holding). It is involved in executing EPC projects in infrastructure, power, industrial and residential & commercial real estate. JMC has an esteemed client base ranging from both Public and private institutions like BHEL, Larsen & Toubro, Alstom Projects India Ltd. and government bodies like Delhi Metro Rail Corporation, Bangalore Development Authority, Maharashtra State Road Development Corporation etc. Recently, JMC was awarded its first road contract by the NHAI. JMC, in consortium with SREI Infrastructure. The project costing Rs 1,000 Crore will be executed on DBFOT (Toll) basis with a concession period of 27 years including construction period of 36 months. Currently, the Total Order book of the company stands at around Rs 4,200 Crore which is more than 3X its FY 10 Top-line of Rs 1320 Crore.

7 (In Rs. Crore) 6000 Yearly Trend in Order Backlog and Sales of JMC 3.5 Order Book Distribution w.r.t. different Segments of JMC 5000 Investment The Company: Rationale Power 19% FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E 0.5 Infrastructure 26% Buildings and Industrial 55% Order Book Sales Book to Bill Ratio Source: Company Data, JRG Research Over the past 4 years, JMC has registered prominent financial performance wherein the Top-line of the company jumped at a CAGR of more than 38% to 1320 Crore (FY 10) as compared to Rs 500 Crore (FY 07). Operating performance was also firm as the margins of the company witnessed slow but steady improvement towards 8.5% levels (FY 10). During the period under review, its EBITDA jumped at a CAGR of around 42% to Rs 149 Crore (FY 10) from Rs 38 Crore (FY 07). The management has guided for a Top-line growth of more than 20% in JMC during the current fiscal. We too expect the company to post superior financial and operating performance in the future and register a CAGR of more than 17% in Operating Income rising to over Rs 1800 Crore by FY 12E. QIP proceeds provide decent comfort w.r.t required investment in BOOT projects KPTL in consortium with Techno Electric and Engineering Co Ltd, Kolkata has secured a project from Haryana Vidyut Prasaran Nigam (HVPNL) to evacuate power from the upcoming 2 x 660 MW Thermal power plant coming in Jhajjar, Haryana. The project to be executed on a DBFOT (Design, Build, Finance, Operate and Transfer) Annuity basis involves construction of two 400 Kv Sub-stations in Rohtak and Sonepat along with 400 Kv Double circuit Jhajjar-Kabulpur-Deepalpur Transmission line at an estimated cost of Rs 475 Crore. The project having a concessionaire period of 25 years with an opportunity for further extension by 10 years will have a fixed annuity of 4.5 Crores per month, escalated for inflation index every year. Other than this, KPTL's subsidiary, JMC Projects (India) Ltd. in consortium with SREI infrastructure has won recently a National Highway Authority of India (NHAI) project to construct a four-lane highway over a stretch of 83 Km between Rohtak to Bawal section in Haryana. The project under the NHDP III is the first BOOT project of JMC and has a concession period of 27 years. The project is to be executed on a DBFOT (Toll) basis and its total cost is estimated in the range of Rs 1,000 Crores. Thought we are awaiting the exact investment in terms of equity contribution in the above projects, which could be decided only after the financial closure is done; as per general estimates by the management, taken together both projects will need an equity investment of around Rs 150 to Rs 175 Crore. Aided by the QIP issue in May 2010 wherein KPTL raised around Rs 450 Crore, the company has sufficient cash to invest in its two BOT projects (Jhajjar as well as the Rohtak Bawal) while is well positioned to fund the equity contribution in any of the fresh contracts in both Power and Road space.

8 Domestic Power Industry Review KPTL operates in the highly growing EPC (Engineering Procurement Construction) business in Power Transmission, Distribution and Substation sector. Development of Power and Power related sector in essential for the sustained growth of various Industries in a nation as, directly or indirectly; smooth functioning of any Industry, whether Manufacturing, Construction, Services, Agriculture etc. is dependent on the availability of Power. Historically, the Indian power sector has been characterized by energy shortages which have continuously increased over the years. Average peak shortages excluding scheduled load shedding was estimated at 13% and average energy shortages at 11 % in To meet the unmet demand for power as it exists today and to cope up with incremental demand created with economic growth, the Government of India (GoI) has identified key inputs for accelerated development of Indian power sector for XI Plan & beyond. As per the Planning Commission of India, about $220 Bln (Rs 10.6 Lac Crore) worth of investment is required to enhance the Generation capacity upto desired levels and to develop & strengthen the T&D networks. The share of public investment out of the total is likely to be 76%. This amounts to Rs 8 Lac Crore with private sector contributing the balance investment of Rs 2.5 Lac Crore. GoI Targets a minimum 37 GW of Generation capacity addition in FY 11 & FY 12 As of Aug 2010, the total installed Power Generation capacity of India stood at over 164,000 MW. GoI has come out with an ambitious goal of Power for All By 2012 and to realize that goal, it envisaged a plan to add upto 78,800 MW of generation capacity by that time. For catering the heightening demand of Power in India, the country also plans to set up an additional capacity of 100,000 MW during the XII Plan. Current Domestic Power Generation Capacity w.r.t. Fuel (In MW) Revised Power Generation Capacity Addition Target in 11th Plan Nuclear, 4,560 Renewable, 16,429 Coal, 87,858 Hydro 8,237 13% Thermal Hydro, 37,086 Gas, 17,375 Thermal 50,757 81% Nuclear 3,380 6% Oil, 1,200 Source: CEA India, Planning Commission ## As per the Revised Mid-term appraisal Target, Planning Commission (GoI) Considering the weak capacity addition performance in the past, it is likely that we will once again miss the targeted addition by a wide margin. During the XI five year plan, the government initially planned a capacity addition of more than 78,800 MW of which nearly 20% was expected to come from Hydel, 76% from Thermal and the rest from Nuclear. During the first three years of the current Plan period, it could add only 22,300 MW against the Target of 41,900 MW. As per the revised Mid-term Appraisal Report by the Planning Commission, only 80% (62,374 MW) of the current Plan of 78,700 MW will be possible by FY 12. We are a little circumspect whether we shall be able to achieve that and expect the total addition in the range of 57,000 MW. The silver lining is, even if we do 57,000 MW of capacity addition;

9 we will be clocking a capacity addition of more than 70% of targeted, which is way higher than the average 45% which we clocked over the past three five year plans and shall be th around 2.7X of the capacity addition witnessed in 10 five year plan. (In GW) 9 Trend in Power Generation Capacity addition w.r.t. Five Year Plans 120% % 6 80% % 3 40% % 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th** 0% Source: CEA India Target Achievement % Achievement Power Transmission & Distribution (T&D); historically, a neglected segment Transmission of electricity is defined as bulk transfer of power over a long distance at high voltage, generally of 132 KV and above. In India, bulk transmission has increased from 3,708 CKm in 1950 to 170,800 CKm (Circuit Kilometers) in and to more than 265,000 CKm currently. The entire country has been divided into five regions for transmission systems, namely, Northern Region, North Eastern Region, Eastern Region, Southern Region and Western Region. The Interconnected transmission system within each region is also called the regional grid. Source: Ministry of Power As per the general estimates, investment breakup in the Power sector should be in the ratio of 50:25:50 for Generation, Transmission and Distribution; though in India, the historical investment in T&D put together has been pegged at around 30-35% of the total investment in generation. The huge peak power deficit which has sustainability remained around the 10% level for decades is one of the key reasons for the government to allocate more investment towards generation. However, this inclination towards generation has left the T&D segment underinvested resulting in higher losses and disequilibrium between the transfer of power from a power surplus region to a power deficit one. On a brighter side, the segment has been attracting higher investment over the past few years as the government has realized the need for strong Inter-regional transmission networks. Healthy T&D networks are required as power generation sources are unevenly distributed in India, and it needs to be carried over large distances to areas where demand exist. During the XI five year plan, the segment has been identified as an integral part of the value chain for power development and hence matching investments have been planned in the same. Investment of Rs 4.5 Lac Crore in T&D (XI Plan) For the first time, government has emphasized large scale investment in the T&D segment of the country. During the current plan, huge targets have been set up for the development of transmission lines in HVDC, 765 Kv, 400 Kv and 220 Kv both in the Central and State sectors. Under this, the combined investment in T&D is seen at around 80% (Rs 4.5 Lac Crore) of the investment in generation (Rs 5.9 Lac Crore). This is lower than the global average but still way above the historical investment in India. Out of the total investment in T&D around Rs 55,000 Crore will be coming from PGCIL while the rest will come from various state and central government utilities and also from the private players. This

10 will appended by huge investment by the flagship programs of GoI like the Re-APDRP, RGGVY and the Bharat Nirmaan. (In Units: Rs. Crore) in Rs Crore Generation Transmission Distribution Other XIth Plan XIIth Plan Source: CEA India Planned Investment in different Segments of Power Total 5,91,734 1,40,000 3,09,077 18,104 10,59,515 4,95,082 2,40,000 4,00,060-11,35,142 The government initially planned to enhance the Inter-regional transmission capacity from 14,100 MW by the end of X plan to 37,700 MW in the XI plan. Moreover, to accelerate the development in the aforesaid segment, the government further plans to enhance the capacity to 75,500 MW by the XII plan. Although the projections have been on the higher side, our past performance doesn't warrant the same. Over the past three years, we have been able to upgrade our Interregional transmission capacity to only 20,800 MW, leaving a gap of around 17,000 MW to be added in the next two years (Reduced plan Mid-term appraisal Report by the Planning Commission stands at 32,650 MW). Adding to this, we are short of our targeted 765 Kv lines by more than 50%; however the growth in 200 Kv, 400 Kv and 500 Kv lines had been pretty strong between FY 08 to FY 10. On a positive note, for even attaining this, the sector would attract around Rs 30,000 Crore of investment from PGCIL alone. (In CKm) Trend of Growth in Transmission Lines in India th Plan 7th Plan 8th Plan 9th Plan 10th Plan 11th Plan* 400 kv 200 kv Targets and Current state: Transmission FY 10 Capacity E Add (In Circuit Km) 765 Kv 500 KV HVDC 400 Kv 220 Kv Total Transmission **Note: Targets as per Original Estimates XI Old Plan Current New % Deficit Change New % % % % % Source: CEA India, JRG Research Rs 55,000 Crore Investment planned by PGCIL between In India, Power Grid Corporation of India Ltd (PGCIL) is the only major transmission company, which owns Inter-state transmission system. As of FY 10, the total transmission network of the company spreads over 75,000 Ckm of EHV (Extra High Voltage) transmission lines with 124 Nos. of EHVAC & HVDC Sub-stations with a transformation capacity of more than 83,000 MVA. Currently, its transmission network handles interregional power transfer of over 22,400 MW which includes one of the largest synchronous grid in the world with installed generation capacity of over 1,15,000 MW. (In Rs. Crore) Planned and Actual Investment by PGCIL FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source: PGCIL Planned Actual

11 During the XI Plan, PGCIL had targeted to double its network by adding about 60,000 Ckm of transmission lines. This would result into capital investment of over Rs 55,000 Crore by year 2012 for doubling the inter-regional transmission capacity to 37,700 MW (Reduced plan Mid-term appraisal Report by the Planning Commission stands at 32,650 MW). The overall investment is meant for the developing and elevating the National Grid including inter-regional transmission systems, system strengthening schemes, transmission system for evacuation of power from generation projects under central sector and Ultra Mega Power Projects (UMPPs). During first 3 years of XI plan, the company has already invested Rs 25,440 Crore (46% of planned investment). For the FY 11, an outlay of Rs 12,900 Crore has been kept while the balance expenditure of about Rs 16,700 Crore is envisaged to be made in FY 12 based on the generation capacity addition. Based on general estimates, this should results into Transmission line orders of around Rs 4,500 Crore in FY 11 and Rs 5,500 Crore in FY 12 respectively. High Capacity Power Transmission Corridors; Investment opportunity of Rs 58,000 Crore Other than the PGCIL's Rs 55,000 Crore planned investment for the development and strengthening of regional grids which will be gradually integrated to form a national grid; the company wants to float nine numbers of High Capacity Power Transmission Corridors which are expected to create an additional investment opportunity of around Rs 58,000 Crore. We expect PGCIL to start with the order tendering during the current financial year wherein the whole process could extend upto FY 13. On general estimates, the order flow from PGCIL due to these corridors could easily step-up by an additional Rs 6,400 Crore for Transmission lines each year. High Capacity Power Transmission Corridor (Phase I - IX) Phase State / Region Rs. Crore Section-I Section-II Section-III Section-IV Section-V Section-VI Section-VII Section-VIIII Section-IX Generation Projects in Orissa IPP projects in Jharkhand IPP projects in Sikkim IPP projects in Chattisgarh & Madhya Pradesh IPP projects in Chattisgarh IPP projects in Andhra Pradesh IPP projects in Tamil Nadu IPP projects in Andhra Pradesh IPP projects in Southern Region to Others These HPTC's will evacuate power from a various IPP's (Independent power producers) having a total generating capacity of more than 49,000 MW and located in the states of Orissa, Jharkhand, Chhattisgarh, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Sikkim. These corridors will have high voltage lines with the capacity to withstand variations of surge and decline in power transmission of the order of 800 Kv. The construction work of corridors will be completed in the next five years, in phases. The first phase will be launched in Orissa, Chhattisgarh and Tamil Nadu. 8,752 5,709 1,304 1,243 28,824 2,065 2,357 2,986 4,821 T&D and AT&C losses putting financial pressure on Central & State Elect. boards Power distribution is the most critical link between power generation, power transmission and the end users of power. Though critical, it is also the weakest segment in the domestic power sector. The continuously high T&D and AT&C losses which have remained around the high 30% range for past many years are causing huge financial strain on the central and

12 the state electricity boards. As per the Planning Commission, the loss incurred by the distribution companies, taken together is estimated at about Rs. 40,000 Crore in FY 10. 4% Yearly Trend in All India Transformation, T&D and AT&C losses 35.0% 3% 25.0% 2% 15.0% 1% 5.0% % FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 Source: CEA India T&D losses AT&C Losses To improve the distribution system, the government has formulated Re-APDRP (Revised Accelerated Power Development Reform Programme). The objectives of this programme is to improve the financial viability of state power utilities, reduce aggregate technical and commercial losses to around 15%, improve customer satisfaction and increase the reliability and quality of the power supply. Other than this, GoI has also taken some noteworthy steps like 100% metering policy, National Electricity Policy, Bharat Nirman Yojna, Rajiv Gandhi Gramin Vidyutikaran Yojna etc for the development of the sector and for strengthening the segments effectiveness, reach and efficiency. During the current plan, the sector is expected to have an investment of more than Rs Crore from the RGGVY and Re-APDRP projects. Other than the large scale investment planned from PGCIL and GoI's initiatives like Re- APDRP and RGGVY, we expect huge order flows from the State and Private power utilities as well. All this shall ascertain higher growth in the domestic T&D segment and KPTL being one of the most efficient and experienced player is anticipated to be one of the biggest beneficiaries of the same.

13 Financial Valuation and Recommendation We recently had a Tele-con with the management of KPTL wherein despite some hiccups in the previous quarter, they are confident of clocking around 20% growth on the Top-line in FY 11E. Taking a conservative scenario we are expecting the company to clock a revenue growth of around 16% in FY 11E while record a CAGR of more than 17% between FY 10 and FY 12E. KPTL's Net Sales is expected to rise to Rs 3562 Crore (FY 12E) as equated to Rs 2588 Crore (FY 10). Financial Projections - Kalpataru Power Transmission Limited Units: in Rs Crore FY 09 FY 10 FY 11E FY 12E Net Sales Operating Exp EBITDA OPM Other Income Depreciation Interest Taxes Net Profit NPM % 11.7% 11.8% 12.0% % 6.5% 6.5% 6.7% Post the spectacular show on the margins front in Q1, 11; yearly Operating margins are seen nearing the 12% mark and eventually driving the EBITDA at a CAGR of around 19% to Rs 430 Crore (FY 12E). We believe that, improving OPM's coupled with moderate growth in depreciation and interest costs is expected to accelerate the Bottom-line performance of the company. The Net Profit is seen surging upto Rs 243 Crore (FY 12E) as compared to Rs 170 Crore (FY 10) while the NPM's are expected to register slow but steady amelioration above the 6.5% levels. Company Kalpataru Power Transmission Ltd. Standalone business of KPTL JMC Projects (India) Ltd. Market Capitalization KPTL's Shareholding Net Value additon Total Value of KPTL Valuation Multiple Share Value (15x FY12E EPS) % Holding Recommendation KPTL is present in the highly growing Transmission & Distribution segment of the Power sector in India and is a strong player for executing EPC contracts in the segment. In addition to this, the company is also present in the Infrastructure sector through its subsidiary JMC Projects. At the Trailing market price of Rs 192, the stock is trading at 14.9X and 12.1X its FY 11E and FY 12E EPS of Rs 12.9 and Rs 15.9 respectively. Considering the scale of its business, healthy order backlog, superb execution track record and moreover firm growth opportunity in the domestic and overseas power sector; KPTL should trade at higher multiples. We have valued KPTL based on the SOTP valuation. We have valued its Standalone Business at 15X its FY12E EPS (Rs 238) while the stake in its Infrastructure subsidiary is valued at Rs 13 (20% Holding company discount). We recommend a Buy rating on the stock for a Target price Rs 251 in Twelve months.

14 Profit and Loss Statement Units: In Rs Crore Net Sales % Growth Other Oper Income Net Raw Materials % of Sales Erection & Sub Cont % of Sales Other Expenses Employee Cost Operating Expenses % Growth EBIDTA % Growth OPM Other Income Depreciation Interest Profit Before Tax Tax % of Tax Net Profit % Growth NPM FY 09 FY 10 FY 11E FY 12E % 37.6% 16.5% 18.1% % 44.5% 43.1% 43.3% % 28.3% 3% 3% % 36.7% 16.4% 17.8% % 46.3% 17.5% 20.1% 11.0% 11.7% 11.8% 12.0% % 25.1% 25.0% 25.0% % 80.6% 16.1% 22.9% 4.9% 6.5% 6.5% 6.7% Balance Sheet Statement Units: In Rs Crore FY 09 FY 10 FY 11E FY 12E Sources of Funds Share Capital Reserves & Surplus Net Worth Total Debt Deferred Tax Liabilities Capital Employed Application of Funds Gross Block Less: Depreciation Net Block Capital WIP Investments Current Assets Inventories Sundry Debtors Cash and Bank Other Advances Loans and Advances Current Liabilities Provisions Net Current Assets Total Assets Key Ratios Cash Flow Statement FY 09 FY 10 FY 11E FY 12E Units: In Rs Crore FY 09 FY 10 FY 11E FY 12E Valuations (x) Profit Before Tax EPS Depreciation PER Changes in WC CEPS Other income CPER Direct Taxes paid P/BV Cash from Operations Dividend Yield 0.8% 0.8% 0.8% 0.8% Capital Expenditure EV/EBITDA Changes in Investments EV/Sales Other income EV/Total Assets Cash from Investing Profitability % Issue of Equity EBITDA Margin % 11.0% 11.7% 11.8% 12.0% Changes in Debt PAT Margin % 4.9% 6.5% 6.5% 6.7% Dividend Paid (Incl. Tax) RONW 13.9% 18.7% 15.2% 16.2% Other Financing activity ROCE 11.3% 17.3% 12.3% 13.3% Cash from Financing Efficiency Ratio Net change in Cash Debtors Days Opening Cash balance Inventory Days Closing Cash balance Asset Turnover (Total) Leverage Ratio Debt/Equity Debt/EBITDA Interest coverage ratio

15 Capital Benefits Corporate Office: JRG Securities Ltd, JRG House, Ashoka Road, Kaloor, Kochi, Kerala , Tel: Institution Desk: JRG Securities Ltd., Universal Industrial Estate, 210/211, 2nd Floor, J.P. Road, Near Wadia High School, Andheri (W), Mumbai ; Tel: / Disclaimer: This document has been prepared by JRG Securities Ltd. and is meant for the recipient for use as intended and not for circulation. The information presented in this document is not an offer/recommendation to buy or sell securities. Opinions expressed in this article are the independent views of the author(s). The information/s, opinions and analysis contained are collected from sources believed to be reliable, but no representation, expressed or implied, is made as to its accuracy, completeness or correctness. Neither JRG Securities Ltd., nor any person connected with it, accepts any liability arising from the use of this document. It should be noted that price and value of the security/ies referred to in this report may go up or down and that past performance is not a guide for future performance. Investors are urged to exercise their own judgment before investment as security/ies discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. We will be updating you in due course about the positive or negative developments, directly or indirectly affecting the security/ies discussed in this report. But, it should be noted that JRG Securities and its associated companies, their directors and employees do not undertake any obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent JRG Securities from doing so. JRG Securities Ltd., may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to security/ies mentioned herein or inconsistent with any recommendation and related information and opinions.