Suryachakra Power Corporation Ltd BSE Scrip Code: 532874 Power-Generation/Distribution October 12, 2012 Equity Statistics Current Market Price Rs. 1.73 52 Week High/Low Rs. 10.67/0.94 Market Capitalisation Rs. Crores 25.89 Free Float Rs. Crores 19 Dividend Yield % 0.00 One Year Regression Beta Times 0.84 BSE Volumes Trend - Average = 1132.65 Thousand 15000 10000 Company Summary Suryachakra Power Corporation Limited (SPCL) is a Hyderabad-based independent power producer and the flagship company of the Suryachakra group with interests in Power generation renewable energy (biomass, solar, hydro, wind) and Clean Technology / Super Critical Thermal Power Plants (coal, Gas) and Engineering Consultancy activities. SPCL has set up a 20 MW diesel-based power plant in a remote area near Port Blair at a cost of Rs.85 crore. The same was funded by State Bank of India, SREI Infrastructure Finance Ltd and the equity was provided by Dr. S. M. Manepalli & Associates, Caterpillar and BSES Ltd. The plant was set-up in technical collaboration with Caterpillar Power Ventures, USA and Reliance Energy. 5000 0 160 110 60 10 Relative Returns During the 15 months period ended June 30, 2012, (The Financial Year (FY) in 2011-12, herein referred to as FY12 changed from April 1 March 31 to July 1 to June 30) the company achieved total revenue of Rs.183.85 crore as against Rs.145.16 crore in FY11 (refers to period from April 1 to March 31). The operating loss for FY12 was Rs. 22.73 crore as against Rs.4.03 crore in FY11. The company s 20 MW plant at Port Blair has achieved a Plant Load Factor (PLF) of 80.23% during FY12. SPCL is currently trading at 0.18 times the adjusted book value. Surya Chakra Power Corporation Ltd Sensex Returns 1M 3M 6M 1 Yr Absolute 75% 16% -29% -83% Rel. to Sensex 60% 7% -36% -85% Shareholding Pattern 100% 80% 60% 40% 20% 0% Sep `11 Dec `11 Mar `12 Jun `12 Promoter DII FII Others Board of Directors Person Role Qualification Dr. S.M.Manepalli Managing MBBS Director Mr. K. Vijay Kumar ED - Mrs. B.N. Raja Kumari ED - Mr. K. Satyanarayana NED - Mr. Mahesh Chand ID B.E. Mr. V.S.Murthy ID B.E. Mr. P.K. Bhattacharjee ID PG in Economics Mr. A. Ramesh Kumar ID Masters in Physics, PGDM Source: Annual Report Note: MD: Managing Director, WTD: Whole time Director ED: Executive Director, NED: Non Executive Director, ID: Independent Director 1 Initiative of the BSE Investors Protection Fund
Background SPCL was incorporated in February 1995. Pursuant to a competitive bid floated by the A & N Administration in 1995 for establishing a thermal power plant at Port Blair, the company was awarded the contract to establish and operate a 20 MW diesel-based power plant on a BOOM (Build, Own, Operate and Maintain) basis. During FY12, the performance of its subsidiaries viz, SGEPL*, SAAIL*, MEL*, SPPPL*, which operate biomass-based power plants at Chhattisgarh and Maharashtra has not been satisfactory due to non-availability of quality raw materials at reasonable rates. The prices of biomass like rice husk, cotton stalk etc, increased considerably, which resulted in high cost of production. The company therefore had taken alternatives such as Napier grass for their raw material requirement and has already finalized tie-up arrangements with some napier grass supplying companies on lease/contract farming for energy plantation in Chattisgarh and Maharashtra which was nearly completed. Thus with this continuous feed supply at competitive price in place, the performance of subsidiaries is expected to improve in future. The company also started SECPL*, SGVL* of which the SECPL is a 100% subsidiary of the company and is engaged in setting up to a 350MW coal-based power project at Sapos Village, Chhattisgarh at an estimated project cost of Rs.1,900 crore. SGVL is a wholly owned subsidiary of the company incorporated in Hong Kong. The company through SGVL has decided to acquire coal mines for captive use by other subsidiaries. In the process, the company, out of the proceeds of the GDRs issued during the year, has advanced an amount of Rs.85.01 crore to SGVL. SGVL has entered into an MOU with Symphony Trading and Investments Limited (STIL) for acquiring interests in coal mines in Indonesia. Note: * Suryachakra Global Enviro Power Limited (SGEPL), South Asian Agro Industries Limited (SAAIL), MSM Energy limited (MEL), Sri Panchajanya Power Private Limited (SPPPL), Suryachakra Energy(chhattisgarh) Private Ltd (SECPL), Suryachakra Global Ventures Ltd (SGVL) Business overview SPCL derives its revenue primarily from sale of electricity. During FY12, the company achieved the gross turnover of Rs.183.85 crore as against Rs.145.16 crore for FY11. The operating loss for the current period was Rs. 22.73 crore for FY12 as against Rs.4.03 crore in FY11. Bio-mass and coal are the key raw materials which formed nearly 78% of the total cost of raw materials consumed in FY12. Strengths and growth drivers Considerable increase in demand for power expected in the medium to long-term Private sector investment will be the key constituent of the industry s growth. Risk and concerns During the 15 months period ended June 30, 2012 M/s. SBI Global Factors Limited an unsecured Creditor has filed a petition with High Court of Andhra Pradesh for winding up of the Company u/s 433 (1) (e) of the Companies Ac, 1956. The Honorable High Court of Andhra Pradesh had admitted the petition. The company has appealed against the said petition which is pending for hearing. The company s revenue from sale of electricity is based on the Power Purchase Agreement (PPA) entered into with Andaman and Nicobar (A & N) Administration. Such billings as per the terms of the PPA include a fixed charge payment, a variable charge payment, incentive payment, foreign exchange adjustment and charge in law adjustment. However, the company up to the year ended March 31, 2011 has an accrued interest of Rs.12.75 crore; the reason being various bills raised by the company were rejected/ withheld by the A & N Administration on the grounds of the technical interpretation of the formulae for computation of such charges. However, the company believes that the amounts billed including interest thereon are recoverable based on the interpretation that can be inferred from the factors contained in the PPA. Natural calamities and drought may reduce the bio-mass availability which is the source of raw material for some of SPCL s subsidiaries and higher input costs of bio-mass, coal etc may reduce the profitability of the company and its subsidiaries. Future strategy and expansion plans The company is focusing on entry into Urban infrastructure development activities and also had signed MOU with Zecon Engineering Berhad, Malaysia. The Suryachakra group is also entering into the bio-diesel sector. It has been granted Power Trading license by Central Electricity Regulatory Authority for carrying out interstate sale (trade) of power. 2 Initiative of the BSE Investors Protection Fund
Industry outlook The world energy scenario witnessed significant changes during the year 2011-12 some of which can have long-term and structural implications, first after the incident of Japan nuclear fuel as a source of energy faced considerable uncertainty; secondly the political tensions in middle east and north Africa have increased the risk of disruption of oil supplies and prices in the short to medium term, and raised questions about the regions investment plan; thirdly, economic concerns have diverted attention from energy policy and added difficulties to energy efficiency for the second consecutive year. The Energy policy of India is largely defined by the country s burgeoning energy deficit and increased focus on developing alternative sources of energy particularly nuclear, solar and wind energy. About 70% of India s energy generation capacity is from fossil fuels, with coal accounting for 40% of India s total energy consumption followed by crude oil and natural gas at 24% and 6% respectively. The growth of electricity generation in India has been hindered by domestic shortages and as a consequence, India s coal imports for electricity generation are increasing. The power sector, ranked 6th among the leading sectors of the Indian Economy, has attracted large amount of FDI investment. Managing growth and price stability are the major challenges of macroeconomic policymaking. In FY 2011-12, India found itself in the heart of these conflicting demands. Peer comparison Year ended March 31, 2012 Income statement (Rs. Crore) SPCL KSKEVL GVKPIL SJVNL Total income 188.6 2,151.6 2,580.7 2,136.8 Net sales 187.8 1,947.6 2,491.8 1,927.5 EBITDA (67.2) 665.5 694.1 1,638.0 Ordinary PAT (106.6) 131.4 61.5 1,068.7 Adjusted PAT (116.6) 69.0 77.3 1,078.3 Per share data (Rs.) Adjusted BVPS 9.0 82.1 23.1 18.9 Diluted EPS - 1.9 0.5 2.6 Growth (Y-o-Y) (%) Growth in total income 5.3 85.6 32.8 8.0 Growth in net sales 8.2 77.6 30.1 5.3 Growth in EBITDA NM 30.8 35.0 5.2 Growth in adjusted PAT NM (62.0) (48.0) 18.0 Growth in EPS* NM (62.0) (48.0) 18.0 Profitability ratio (%) EBITDA margin NM 34.2 27.9 85.0 Adjusted PAT margin NM 3.2 3.0 50.5 Valuation ratios (Times) Price/EPS (P/E) NM 36.1 29.7 7.6 Price/Book value (P/BV) 0.2 0.8 0.6 1.0 Enterprise value (EV)/EBITDA NM 18.1 21.4 4.9 Note: KSKEVL: KSK Energy Ventures Ltd., GVKPIL: GVK Power & Infra. Ltd., SJVNL: SJVN Ltd. Quarterly financials Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 31.3 33.8 40.9 40.3 39.3 Net sales 31.3 38.3 39.2 38.8 37.4 EBITDA (16.4) 4.4 3.7 4.7 4.3 Ordinary PAT (19.3) (5.2) 0.2 0.3 0.2 Adjusted PAT (18.7) (5.2) 0.2 0.3 0.2 Growth (Q-o-Q) (%) Growth in net sales (18.2) (2.5) 1.1 3.9 Profitability ratio (%) EBITDA margin NM 11.6 9.5 12.2 11.5 Adjusted PAT margin NM NM 0.4 0.8 0.5 NM: Non Meaningful; NA: Not Available 3 Initiative of the BSE Investors Protection Fund
Financial analysis In FY12, SPCL reported net sales of Rs.187.80 crore up 8.2 % from the previous year. Total income witnessed a growth of 5.3% during the same period. Raw materials (especially HSD- High Speed diesel) form the largest portion of cost for SPCL. In FY12, raw materials cost as a percentage of net sales was at around 86%. SPCL had high levels of leverage as on the end of FY12. The total debt as on the end of FY12 was Rs.261.7 crore compared to an adjusted networth of Rs.135 crore. Operating cash flows for the company have been negative in the last two years. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 115.0 173.2 255.8 179.0 188.6 Net sales 106.8 168.6 251.5 173.6 187.8 EBITDA 12.0 16.4 27.4 23.6 (67.2) Depreciation and amortization 6.4 8.1 12.4 13.4 19.6 EBIT 5.6 8.4 15.0 10.1 (86.8) Interest 5.9 9.2 14.6 23.7 47.2 PBT 4.3 2.0 (1.0) (8.8) (136.9) Ordinary PAT 3.8 1.8 (1.3) (6.7) (106.6) Adjusted PAT 3.8 1.8 2.1 (6.7) (116.6) Balance sheet (Rs. crore) Adjusted networth 130.0 141.0 170.1 213.3 135.0 Total debt 106.5 186.0 208.4 273.3 261.7 Cash and bank 4.3 19.4 3.2 4.3 0.7 Investments - - 0.0 0.0 0.0 Net fixed assets (incl. CWIP) 184.0 258.0 340.0 410.1 297.6 Net current assets (excl. cash, cash equivalents) 48.2 49.6 35.3 72.1 85.5 Per share data (Rs.) Adjusted BVPS 17.0 18.4 22.2 27.8 9.0 Diluted EPS* 0.5 0.2 0.3 - - DPS - - - - - Growth (Y-o-Y) (%) Growth in total income 50.6 47.7 (30.0) 5.3 Growth in net sales 57.8 49.2 (31.0) 8.2 Growth in EBITDA 36.5 66.8 NM NM Growth in adjusted PAT (53.1) 18.4 NM NM Growth in EPS* (53.1) 18.4 NM NM Key financial ratio EBITDA margin (%) 11.3 9.8 10.9 13.6 NM Adjusted PAT margin (%) 3.3 1.0 0.8 NM NM RoCE (%) 2.9 4.2 NM NM RoE (%) 1.3 NM NM NM Gross debt - equity (times) 0.8 1.3 1.2 1.3 1.9 Net debt - equity (times) 0.8 1.2 1.2 1.3 1.9 Interest coverage (times) 0.9 0.9 1.0 0.4 NM Current ratio (times) 2.7 2.9 1.7 1.7 2.0 Inventory days 21.6 20.3 27.9 12.5 Receivable days 78.1 74.9 200.9 166.5 Note: Financial Year (FY) refers to period from April 1 to March 31 NM: Not Meaningful 4 Initiative of the BSE Investors Protection Fund
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