December 28, 2007 |Power

Initiating Coverage
Current price Target price
Rs 1,530
Tata Power Company (TATPOW) Rs 1,370
Potential upside Time Frame
11.7% 12 Months
Time frame
Potential 12 months
upside 13%
Time frame 12 months
PERFORMER
Powered for growth …
Tata Power Company, India’s largest private sector power utility, has Analysts’ Name
unveiled an aggressive expansion plan to enhance its generation capacity.
The company has bagged the bid to set up a 4,000 MW UMPP (ultra mega Rupesh Sankhe
power plant) at Mundra, Gujarat. Combined with a huge investment book, [email protected]
these factors make the stock an excellent play on emerging opportunities Sheetal Malpani
in the power sector. [email protected]

ƒ Power sector: Huge investments, huge opportunities

In an effort to boost generation and facilitate increased investment in the himani.s
Sales & EPS trend
power sector, the Central government has unveiled a slew of initiatives. 8000 70
These include moves to improve fuel supplies to private players, and 7000 60
approval for setting up UMPPs. We believe these measures would open up 4,000
6000 100
50
3,000
huge opportunities for private players. 5000 40
2,000
4000 50
ƒ Expansions to boost capacity, drive future growth 3000
1,000 30
Tata Power has drawn up an aggressive plan to augment its generation 2000 - 20 0
capacity to 10,131 MW by 2012 from the current 2,300 MW. Expansion 1000 FY06 FY07 FY08 FY09 10
projects currently underway include the 120-MW expansion at the Jojobera 0 0
plant near Jamshedpur in Jharkhand, and 250-MW expansion at Trombay, FY06 FY07Sales
FY08E FY09E
EPSFY10E
near Mumbai. The additional generation capacity would boost the
company's earnings visibility.
ingh@icicidire
Sales EPS
ƒ Mundra UMPP to add value to company
Stock Metrics
The company won the bid for setting up a 4,000-MW UMPP at Mundra,
Promoters holding (%) 35.48
Gujarat. The cost of the project is estimated at Rs 20,000 crore with a 70:30
debt-equity ratio. We estimate the project value at Rs 83 per share. ct.com
Market Cap (Rs crore) 28561
ƒ Huge investment book to give stability to earnings 52 Week H/L 1449/483
The current value of Tata Power's investments in listed companies
Sensex 20192
translates into Rs 80.6 per share. The balance cost of its unquoted
investment (excluding investment in Tata Teleservices) is Rs 1,300 crore. Average volume 441700
This huge investment book adds muscle to its financial strength and gives
stability to earnings. We have valued the total quoted and unquoted Comparative return metrics (%)
investments at Rs 485 per share. Stock return 3M 6M 12M
Valuations Tata Power 76.4 118.1 132.3
We believe Tata Power's aggressive capacity addition, coupled with higher NTPC 25.0 51.7 59.7
PLF and income from its investment would drive earnings at a CAGR of Reliance Energy 101.4 244.1 238.6
19% over FY06-10E, and boost RoE to 14.21%. At the current price of
Rs 1,370, the stock trades at a significant discount to peers. We value the
stock at Rs 1,530 based on a SOTP valuation. At the target price, the stock Price trend
would trade at P/E multiple of 21x its FY10E EPS of Rs 62.06.
1800 Absolute sell
Exhibit 1: Key Financials
1600
Year to March 31 FY07 FY08E FY09E FY10E 1400
Target price
Net profit (Rs crore) 696.80 874.89 1,037.90 1,222.50 1200
Shares in issue (crore) 19.70 19.70 19.70 19.70 1000
800
EPS (Rs) 35.37 44.41 52.69 62.06
600
% Growth 14.13 25.56 18.63 17.79 400 Absolute buy
P/E (x) 38.73 30.85 26.00 21.11 200
Price/Book (x) 4.47 4.02 3.57 3.13 0
EV/EBIDTA 24.03 14.72 12.48 9.99
25 0 06

7
07

/1 07
15 0 07

7
28 0 07

7
12 0 07
03 20 0

20 20 0

24 20 0

11 20 0
20

0
2

2
2/

1/

2/

5/

1/

6/

7/

8/

9/

2/

7/

RoE (%) 10.99 13.02 13.71 14.21

/1

/0

/0

/0

/0

/0

/0

/0

/0

/0
22

04

05

RoCE (%) 11.06 15.57 14.21 13.90

ICICIdirect | Equity Research Source: ICICIdirect Research

1|Page
 Company Background Shareholder % holding
Promoters 35.48
Incorporated in 1919, Tata Power Company (TPC) was promoted by the Institutional investors 43.75
Tatas. It has worked in tandem with its sister companies, the Tata Hydro Other investors 1.25
Electric Power Company and the Andhra Valley Power Supply Company General public 19.52

A pioneer in the Indian power sector, Tata Power is rated as one of the
country's largest private power utilities. The company installed and
40
commissioned India’s first 500 MW power plant at Trombay. The
35
company has provided economical and reliable power for the last 80 30
years to Maharashtra and Mumbai. 25
20
The company has an installed generation capacity of 2,323 MW. Its 15
thermal power stations located at Trombay in Mumbai, Jojobera in 10
5
Jamshedpur (Jharkhand), and Belgaum (Karnataka). Its hydropower 0
stations are located in Raigad, and the wind farm in Ahmednagar, both Q3 FY07 Q4 FY07 Q1 FY08 Q2 FY08
inModel
Maharshtra. A combination of hydel and thermal generation enables
the company supply power at a lower tariff rates. It incurs low T&D Promoter Holding Institutional Holding
(transmission and distribution) losses due efficient management of the
network.

Exhibit 2: Business model

Tata Power

Jojobera plant Wind Power Ultra Mega Power

Mumbai license area Plant (Mundra)

RoE: 16-19% plus RoE: 18-20% RoE 19%

RoE: 14% plus incentive
performance incentive

Source: Company. ICICIdirect Research

2|Page
Investment Rationale

ƒ Power sector: Huge investments, huge opportunities

India would require an additional 100,000 MW of power by 2012 to provide enough
electricity to propel its economic growth. The 11th Five-Year Plan (2007-11) has
been fixed additional power generation capacity at 78,577 MW. According to the
CEA (Central Electricity Authority), the total installed capacity amounted to 132,329
MW as on March 31, 2007. Central government undertakings accounted for
approximately 34.10% of total generation capacity, state government entities for
52.97% and private sector companies for approximately 12.93%.

Exhibit 3: Proposed capacity additions (in MW) during the 11th Five-Year plan
Hydro Thermal Nuclear Total %
Central govt entities 9,685 26,800 3,380 39,865 50.7
State govt entities 3,605 24,347 0 27,952 35.6
Private players 3,263 7,497 0 10,760 13.7
Total 16,553 58,644 3,380 78,577 100 Out of 78,577 MW of planned
Source: Working Group on Power, ICICIdirect Research capacity additions, 2,515-MW
projects have already been
Despite the steep target of over 78,000 MW capacity addition planned, the 11th Five- commissioned and 52,430-MW
Year Plan could see higher achievement at around 70% compared 50% achieved in (66.7% of the proposed
10th Five-Year plan (FY02-07). This stems from the fact that of the 78,577 MW of capacity) projects are under
planned capacity additions, 2,515 MW projects have already been commissioned construction
and 52,430 MW (66.7% of the proposed capacity) projects are under construction
for which required contracts have been already placed.

Consumption level
India’s per capita power demand has been rising due to increasing incomes and
growing access to power in villages. However, it is still low compared to
developing countries such as China or Brazil, and much lower than levels in the
developed nations. Per capita consumption is expected to rise to 1,000 units per
year by 2012.

Exhibit 4: India’s per capita power consumption is rising …

1200

1000 1000

800
592
600
606
400

200 131 238

15 84
35
0
1950 1960 1970 1980 1990 2004 2005 2012

Units/Year

Source: ICICIdirect Research

3|Page
Exhibit 5: But is still low compared to other countries (FY07)

14000
12000 12187
10000
7424
8000 5906
6000 5679
4000 2140
2000 606
0
US Japan EU Rus s ia China India

U nits /Year

Source: ICICIdirect Research

Demand-supply scenario
With power generation falling short of demand, India has been facing a power
deficit for several years. The deficit varies across the country, with the western
region facing a shortage estimated at 26.5% of its peak demand requirements.

Exhibit 6: Peak power deficit (in MW)

Fiscal MW
2001-02 10,293
2002-03 9945
2003-04 9508
2004-05 10,254
2005-06 11,463
2006-07 13,897
April-July 2007 13,686
Source: CEA, ICICI direct research

Exhibit 7: Power deficit (in MW) by region

Region Demand Supply Deficit %
Northern 32,072 29,414 8.3
Western 36,371 26,732 26.5
Southern 25,682 24,194 5.8
Eastern 10,874 10,562 2.9
North-East 1589 1343 15.5
Total 102,428 88,742 13.4
Source: CEA, ICICI direct research

A study by the CEA has projected a peak demand of 113,059 MW in FY08 and
152,746 MW in FY12. Peak demand for FY17 is projected to be at 218,209 MW.
This represents a need for the substantial augmentation of power generation
capacity.

4|Page
ƒ Expansions to boost capacity, drive future growth
Tata Power has drawn up an aggressive plan to augment its generation
capacity to 10,131 MW by 2012 from the current 2,300 MW. Expansion
projects currently underway include the 120-MW expansion at the Jojobera
plant near Jamshedpur in Jharkhand, and 250-MW expansion at Trombay,
near Mumbai.

Exhibit 8: Capacity expansion

14000

12000 4700

10000 2000

8000

6000 5763 5763

Projects in pipeline include
713
coastal power plant in
4000 Maharashtra, captive power
2000 plants for Tata Steel and wind
1940 2278 2278 2323 2368 2368 2368 2368 2368 farms
0
2000 2002 2004 2006 2007 2008 2010 2012 2014

Installed Planned Pipeline

Source: Company, ICICIdirect Research

Exhibit 9: Revenue assumptions

Operational Parameters FY07 FY08E FY09E FY10E
Total capacity (thermal) MW 1,330 1,330 1,580 1,580
Availability % 95 96 96 97
PLF % 79 90 90 93
Gross generation MU 9,211.01 10,508.61 12,417.06 12,826.21
Total capacity (hydro) MW 447 447 447 447
PLF % 60 58 55 57
Net generation MU 1983 1827 1860 1952
Average revenue per unit Rs 2.96 3.42 3.2 3.4
Source: ICICIdirect Research

The following are Tata Power’s major expansion projects.

250-MW power plant at Trombay: The company is setting up a 250-MW

coal-based plant at Trombay to meet the future requirements of licensed
area (mainly Mumbai). The project has received all clearances and work is on
at the project site. The plant would become operational project during FY09.

Coast-based power plant: The company plans to set up a 1,000 MW coal-

based power plant in coastal Maharashtra. It has approached the state
government to facilitate the acquisition of land for the project.

5|Page
Maithon Power: This is a joint venture between Tata Power and DVC
(Damodar Valley Corporation) to develop a 1,050-MW thermal power plant.
Tata Power will have a 74% equity stake in Maithon Power, and the
balance 26% will be held by DVC. About 55% of the land has already been
acquired. Coal linkage has been provided for around 50% of the total
requirement. The project has been targeted for commissioning in April
FY10.

120-MW power plant in Jamshedpur: Tata Power is setting up a 120-MW

power plant for Tata Steel in Jamshedpur, Jharkhand. The plant will use
waste gases from the steel making process. The estimated project cost is
Rs 490 crore, and the project period is expected to become operational in
Sep FY08. The company is in discussions with Tata Steel for setting up
more captive power plants near their proposed plants in Chhattisgarh,
Orissa and Jharkhand.

ƒ Mundra UMPP to add value to company

Tata Power won the bid for setting up a 4,000-MW UMPP at Mundra at a
levelised tariff of Rs 2.26 per unit. The company has already signed a
contract for complete boiler on an EPC basis with Doosan Heavy Industries
& Construction, South Korea. It is in the process of finalising contract for
turbines with Toshiba. The cost of the project is likely to be Rs 20,000
crore. The debt equity ratio for the project is likely to be 70:30. By signing
the equipment contracts with international players, the company hopes to
get the benefit of rupee appreciation together with firm price contract.

Exhibit 10: Details of Mundra UMPP

Project size (MW) 4,000
Capital cost (Rs crore) 20,000
Debt:equity 70:30
Debt (Rs crore) 14,000
Equity (Rs crore) 6,000

Operating assumption
PLF 85%
Unit Generated 26,112
Auxillary consumption 8% Construction work is likely to start in the
Net Unit Generation 24,023 beginning of 2008. The first 800 MW
super-critical technology-based unit is
Coal cost per tonne (Rs) 2250 expected to go on stream by the second
Specific coal consumption (kg/kwh) 0.36 half of 2011
Cost of coal per kwh (Rs) 0.77
Transportation & handling cost (Rs) 0.22
Fixed cost per unit (Rs) 0.91
Total cost per unit (Rs) 1.90
Selling price per unit (Rs) 2.26
Profit per unit (Rs) 0.36
ROE of Project 18.9%
Source: ICICIdirect Research
Exhibit 11: Valuation of Mundra UMPP
Net present value (Rs crore) 1645.42
Discounting factor 11.50%
Equity shares (crore) 19.7
Value per share (Rs) 83.52
Source: ICICIdirect Research

6|Page
Tata Power also operates in other power-related businesses. The details of
these businesses are given below.

Distribution business

North Delhi Power Ltd (NDPL)

The company’s distribution joint venture with the Delhi state government,
NDPL, posted a revenue of Rs 2,052.20 crore in FY07, a growth of 11.15% and NDPL business to report growth
a net profit of Rs 185.79 crore against Rs 112.52 crore in FY06. The of 17.5 % CAGR over FY07-10E
aggregated technical and commercial losses have been reduced from 53.40%
to 23.70 % in a period of 4 years and 9 months, as against the regulatory
target of 31.10% by the end of 5 years. This has resulted in additional
revenues of Rs 207.77 crore during FY07 against Rs 172.16 crore in FY06,
enabling NDPL to have an additional operating profit of Rs 72.39 crore (Rs
55.39 crore in FY06).

We expect these businesses to witness a 17.5 % CAGR over FY07-10 to Rs

3328.8 crore. We have value these business with P/E multiple basis with 1-
year forward earning of 17x FY10E.

Transmission business

Tata Transmission Project: The Tata Transmission Project is a project being

implemented by Powerlinks Transmission Ltd, a joint venture between Tata
Power and Power Grid Corporation. This project involves the construction of
1,200 km of 400-kV transmission lines from Siliguri in West Bengal to Delhi. It
was conceptualised to evacuate 1,020 MW of power from Bhutan and transmit
it power-deficit states in northern India, while also facilitating the transmission
of surplus power from the north-eastern region. The Bareilly-Mandola portion
has been completed three months ahead of the project completion date of
June 2006.

In its first year of operations in FY07, the JV earned revenues of Rs 135.01

crore and a profit after tax of Rs 20.57 crore. We expect total sale of Rs 330
crore in FY10 and net profit of Rs 49.50 crore in FY10.

Power trading: Tata Power Trading Company traded 675 MUs (million units)
of power in FY07 and earned revenue of Rs 207.76 crore and profit after tax of
Rs 3.18 crore. The company is now a recognized trading company in the
country

Strategic Electronics Division: During FY07, the Strategic Electronics Division

(SED) registered operating revenue of Rs 38.18 crore against Rs 62.05 crore in
FY06. This was due to a significantly lower ‘Book and Bill’ revenue as a result
of the Defense Ministry’s programs taking longer time than anticipated to
fructify into orders. The SED is on a positive note with order bookings in
excess of Rs 200 crore. It has been assigned the status of a prime contractor
with the Defense Ministry and bagged the Pinaka Multi-Barrel Rocket Launcher
contract in March 2006. It also concluded negotiations for the supply of
multiple advanced air defense systems to be installed and commissioned in a
three-year span.

7|Page
ƒ Funding requirements: No dilution in equity expected
A total equity corpus of Rs 8,460 crore would be required for Tata Power’s proposed
projects. We believe internal accruals, amounting to Rs 4,316 crore between FY07-10E,
would be sufficient for the equity requirements of its projects. Further, the low
promoter’s holding (~35%) reduces the possibility for a further dilution in equity.

As a step towards meeting its funding requirements, the company proposed to make a
preferential issue of equity shares and warrants to Tata Sons, the holding company of
the Tata Group. It expects to raise approximately Rs 1,200 crore through the
preferential issue in FY08 and FY09. The company is considering various options to
meet its funding requirements and is well positioned to raise the required borrowing
from the overseas and domestic market.

During the year, Tata Power raised a Rs 450-crore long-term loan from IDFC
(Infrastructure Development Finance Corporation) to meet its capex requirements. It
also placed Rs 500 crore commercial paper withdomestic mutual funds. It has finalised
a rupee-denominated Rs 350 crore loan from the ADB (Asian Development Bank) and
IREDA (Indian Renewal Energy Development Agency) to fund its new Wind project in
Maharashtra.

Exhibit 12: Funding requirements

Capex: Fund requirement Fund: Source (Rs crore)
Funds Equity
Plant MW (Rs cr) Cost/MW Equity % FY07 FY08 FY09 FY10
Wind 100 600 6 180 30% PAT 696 874 1037 1222
DG 100 500 5 150 30% Dep 291 290 314 344
Less:
Trombay 250 1250 5 375 30% Dividend 188 188 188 188
Internal
Jojobera 1050 5250 5 1575 30% accural 799 976 1163 1378
Haldia 120 600 5 180 30% A B C D
UMPP 4000 20000 5 6000 30%
CPP 144 720 5 216 30%
Total 28920 8460 A+B+C+D=Rs 4316 crore
Source: ICICIdirect Research

ƒ Fuel availability: Not a issue

Tata Power signed a $1.1-billion (Rs 4,950 crore) deal to buy a 30% stake in two
Indonesian coal companies, and in a related coal trading company, all promoted by PT
Bumi Resources Tbk (Bumi), Indonesia. L Kaltim Prima Coal and PT Arutmin Indonesia
are two of Indonesia's largest coalmines, which together produced 53.5 million tonnes
in 2006, of which 95% was exported. Tata Power has also signed an off-take
agreement with Kaltim Prima, which entitles it to purchase 10 million tonnes of coal
per annum.

Tata Power will make this acquisition through an offshore special purpose vehicle
(SPV). Funding would be through a combination of debt in SPV, internal accruals and
borrowings. The company will require 21 million tonnes of imported coal for its
planned projects. The Indonesian deal will take care of 50% of Tata Power's
requirements.

8|Page
Trombay Thermal Power Station has a requirement for low sulphur and low ash
coal to meet environmental stipulations. Tata Power has therefore, entered into
long-term contracts with Indonesian mines. These long-term contracts are for a
period of 5 years (up to FY09) and can be extended by another 5 years at the
company’s option. This will be enhanced by the off-take agreement signed by
Tata Power with companies owned by PT Bumi Resources Tbk.

The off-take agreement entitles Tata Power to purchase about 10.5 million
tonnes of coal per annum. The acquisition secures the company’s fuel
requirements for the Mundra UMPP and supports the assumptions made in the
bid for the Mundra UMPP.

Risks and Concerns

ƒ Any delay to its UMPP at Mundra, as tariffs are based on strict deadlines

ƒ Performance of its telecom business would have impact on the book value
of investment

ƒ The Mumbai bulk licensee runs until 2014 and is usually renewed
automatically

ƒ Delay in proposed project under construction could have impact on

company’s valuation

ƒ Tata Power’s aggressive capacity expansion that is about 5x what it has

done so far has poses significant execution challenges

9|Page
Financials

Net sales to register steady growth

We expect a 10.6% CAGR in revenues from sale of electricity to Rs 7,402.2
crore from Rs 4,962.2 crore over FY06-10E. The increase will be mainly
because of increased units sold as a result of the increase in the capacity by
250 MW and higher PLF of existing capacities.

Exhibit 13: Increased capacity, higher PLF to boost sales

8000 7402.7
6740.3
7000 6034.5
6000 5309.1
4946.2 10.6% CAGR in sales over FY06-
5000 10E in line with capacity
4000 expansion
3000
2000
1000
0
FY06 FY07 FY08E FY09E FY10E

Source: ICICIdirect Research

Net profit to jump

We expect a 19% CAGR in net profit to Rs 1,222.52 crore from Rs 610.54 crore
over FY06-10E on account of capacity expansion and improving operational
efficiency.

Exhibit 14: Higher operational efficiency to propel net profit

1400.00
1222.52
1200.00
1037.90
1000.00 874.89
800.00 696.80
610.54
600.00

400.00

200.00

0.00
FY06 FY07 FY08E FY09E FY10E

Source: ICICIdirect Research

ROE to improve
We expect RoE to improve from 8.37% in FY06 to 14.21% in FY10E on the
back of improved PLF of above 80%. Tata Power has strong financial position,
which would enable company to finance its capacity expansion without diluting
equity. We expect the debt-equity ratio to rise to 0.98 in FY10 from 0.5 in FY06.

10 | P a g e
Valuation

We value Tata Power’s core business valued at Rs 962 per share. We have
valued the core business at Rs 5.5 crore per MW based on its FY10E proposed
capacity. We are giving a premium to the replacement cost on account of long
gestatation period for new capacity addition and robust cash flows.

Exhibit 15: Valuation of core business

Particulars FY10E
Installed capacity (MW) 4,132
Capital cost per MW (Rs crore) 5.5
Replacement cost (Rs crore) 22726
Capex 2836
Less Debt 8000
Cash 1400
Share value 18,962
Equity shares (crore) 19.7
Value per share (Rs) 962.5
Source: ICICIdirect Research

Exhibit 16: Valuation of quoted investments

Number of Cost of Current
equity investment (Rs Current value of
Company shares crore) price (Rs) investment
Tata Teleservices 192,263,168 167.62 53.95 1037.26
VSNL 2,575,837 121.84 625.55 161.13
PTC India 15,705,300 17.63 153.15 240.53
Nelco 11,099,630 11.07 127.45 141.46
Total 326 1,580
Source: ICICIdirect Research

The value of investments in quoted companies works out to Rs 80 per share.

We have valued Tata Power’s stake in Tata Teleservices factoring in the Rs

1,500 crore Temasek paid in early 2006 to acquire a 10% stake in the
company. This gives the company a value of Rs 15,000 crore. Tata Power
transmission & distribution business have been valued at 17x P/E of its FY10
earnings.

Exhibit 17: Valuation of Tata Power in telecom, T&D business

Tata Power value in telecom, T& D business Rs 6,040 crore
Number of equity shares (in crore) 19.7
Value per share Rs 306
Source: ICICIdirect Research

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The balance cost of unquoted investment (excluding investment in Tata Teleservices) is Rs 1,300
crore. Unquoted investments include investments in subsidiaries and joint ventures. We have
valued these investments on a relative basis.

Exhibit 18: Value of unquoted investments

Investment Value
Book value of unquoted investment Rs 1,300 crore
P/B (x) 1.5
Investment value Rs 1,950 crore
Number of equity shares (in crore) 19.7
Value per share Rs 99
Source: ICICIdirect Research

We believe Tata Power's aggressive capacity addition, coupled with higher PLF and income from
its investment would drive earnings at a CAGR of 19% over FY06-10E, and boost RoE to 14.21%.
At the current price Rs 1,370, the stock trades at a significant discount to peers. We valued the
stock at Rs 1,530 based on a SOTP valuation. At the target price, the stock would trade at P/E
multiple of 21.1x its FY10E EPS of Rs 62.06.

Exhibit 19: Peer comparison

NTPC Reliance Energy Tata Power
FY08E FY09E FY10E FY08E FY09E FY10E FY08E FY09E FY10E
Net profit 8905.90 10226.80 12566 1001.0 1191.1 1441.2 874.8 1037.9 1222.5
EPS (Rs) 10.80 12.40 15.25 43.90 52.24 63.03 44.41 52.69 62.06
RoE (%) 14.52 14.29 14.86 8.8 8.72 8.83 13.02 13.71 14.21
Source: ICICIdirect Research

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Financial Summary

Profit & Loss

(Rs crore)
Year ending March FY07 FY08E FY09E FY10E
10.6% CAGR in sales
Sales 5,309.13 6,034.49 6,740.31 7,402.70
over FY07-10E
% Growth 7.34 13.66 11.70 9.83
Operating Profit 1,068.92 1,744.31 1,978.32 2,360.61
% Growth -10.23 63.18 13.42 19.32
Depreciation 291.92 290.13 314.42 344.50
EBIT 777.00 1,454.18 1,663.89 2,016.10
% Growth -14.83 87.15 14.42 21.17
Interest 191.59 204.33 261.32 318.16
Profit before Tax 585.41 1,249.84 1,402.57 1,697.95
% Growth -21.64 113.50 12.22 21.06
Taxation -111.39 374.95 364.67 475.42
Net Profit 696.80 874.89 1,037.90 1,222.52 19% CAGR in net profit
% Change 14.13 25.56 18.63 17.79 over FY07-10E

Balance Sheet
(Rs crore)
Year ending March FY07 FY08E FY09E FY10E
Equity Share Capital 197.92 197.92 197.92 197.92
Reserves & Surplus 5,835.19 6,522.08 7,371.98 8,406.50
Loans 3,633.36 4,482.12 6,350.05 8,410.93
Current Liabilities & Provisions 1,757.30 2,463.13 3,251.72 4,072.60
Total Liabilities 11,423.77 13,665.25 17,171.67 21,087.96
Gross Block 6,229.71 6,519.61 7,804.51 8,267.51
Accumulated Depreciation 3,199.40 3,489.53 3,803.95 4,148.46
Net Block 3,030.31 3,030.08 4,000.56 4,119.05
High capex due to
Capital Work-in-progress 781.05 1,898.81 2,471.25 5,836.84 expansion projects
Investments 3,570.15 3,570.15 3,570.15 3,570.15
Cash 1,367.72 2,216.43 3,906.26 4,069.29
Trade Receivables 1,478.22 1,723.34 1,991.66 2,258.79
Loans & Advances 1,195.85 1,225.97 1,231.32 1,233.36
Total Asset 11,423.77 13,665.25 17,171.67 21,087.96

13 | P a g e
Cash Flow
(Rs crore)
Year ending March FY07 FY08E FY09E FY10E
Profit Before Tax 586.01 1,249.84 1,402.57 1,697.95
Depn 291.92 290.13 314.42 344.50
Cash Flow before WC Changes 752.34 1,539.97 1,716.99 2,042.45
Net Increase in Current Liabilities 362.90 705.80 788.62 820.88
Net Increase in Current Assets -716.72 -215.00 -262.97 -267.13
Cash Flow after WC Changes 398.52 2,030.77 2,242.65 2,596.20
Extraordinary items 38.18 374.95 364.67 344.50
Purchase of Fixed Assets -781.36 -1,407.66 -1,857.32 -3,828.61
Others 45.31 -445.10 92.40 46.44
Cash Flow from Investing Activities -946.56 -1,852.76 -1,764.92 -782.17
Increase / (Decrease) in Loan Funds 919.71 848.76 1,035.43 1,192.50
Others -381.54 -188.00 -188.00 -188.00
Cash Flow from Financing Activities 538.52 660.76 847.43 1,004.50
Op bal Cash & Cash equivalents 974.05 1,002.71 2,216.43 3,906.26
Closing Cash/ Cash Equivalent 1,002.71 2,216.43 3,906.26 4,069.29

Ratio Analysis

Year ending March FY07 FY08E FY09E FY10E

EPS (Rs) 35.37 44.41 52.69 62.06
Book Value 306.25 341.12 384.26 436.77
Net profit Margin (%) 13.40 14.50 15.40 16.51
RoNW 10.99 13.02 13.71 14.21
RoCE 11.06 15.57 14.21 13.12
Enterprise Value 25,684.49 25,684.54 25,862.58 31,829.78
EV/EBIDTA 24.03 14.72 13.07 9.99
Sales to Equity 0.88 0.90 0.89 0.85
Market Cap 26,989.00 26,989.00 26,989.00 26,989.00
Market Cap to sales 5.08 4.47 4.00 3.72
Price to Book Value 4.47 4.02 3.57 3.13
P/E 38.73 30.85 26.00 21.11

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RATING RATIONALE
ICICIDirect endeavours to provide objective opinions and recommendations. ICICIdirect assigns ratings to its
stocks according to their notional target price vs current market price and then categorises them as
Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and
the notional target price is defined as the analysts' valuation for a stock.

Outperformer: 20% or more;

Performer: Between 10% and 20%;
Hold: +10% return;
Underperformer: -10% or more.

Harendra Kumar Head - Research & Advisory [email protected]

ICICIdirect Research Desk,

ICICI Securities Limited,
Gr. Floor, Mafatlal House,
163, H.T.Parekh Marg,
Backbay Reclamation
Churchgate, Mumbai – 400 020

[email protected]

Disclaimer
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