F

Kalpataru Power Transmission Ltd

BUY
I
C.M.P: Target Price:
Rs.1025.00 Rs.1179.00
June 24, 2010 R
1 Year Comparative Graph SYNOPSIS S
• Kalpataru Power Transmission is a turnkey
player in design, fabrication, construction T
and erection of transmission lines and sub-
station structures.
• During the quarter, the company has
C
secured an order worth Rs 319 crores from

Kalpataru Power BSE SENSEX

Stock Data
Sector
Face Value Rs.
52 wk. High/Low (Rs.)
Volume (2 wk. Avg.)
BSE Code
Market Cap (Rs.In mn)
Share Holding Pattern
Chhattisgarh State Power Transmission A
Company.
• KPTL has successfully raised QIP issue.
• Kalpataru Power Transmission has secured
L
Power two orders worth Rs 254.25 crore from
10.00 Algeria and Tamil Nadu Electricity Board. L
• Company has recently secured the first
1250.00/639.00
state BOT project for transmission line
8010 along with substation.
522287 • During the year ended, the robust growth of
27162.5 Net profit is increased by 80.55% R
Rs.1704.60 million.
KPTL, consolidated order book is around
•
Rs. 8000 crores which gives us closer to two
E
year’s visibility in terms of turnover for both
the companies. S
• The company’s top line and bottom line are
expected to grow at a CAGR of 22% and E
35% over 2009 to 2012E respectively.

A
Financials
V.S.R. Sastry
(Rs.in.mn) FY10 FY11E FY12E R
Equity Research Desk Net Sales 25973.7 29869.7 34350.2
vsrsastry@firstcallindiaequity.com EBIDTA 3380.9 3944.2 4346.1 C
Dr. V.V.L.N. Sastry Ph.D. PAT 1704.6 2079.4 2336.9
Chief Research Officer 64.32 78.47 88.19
drsastry@firstcallindia.com
EPS
H
P/E 15.93 13.06 11.62

1
Peer Group Comparison
Market
Name of the company CMP(Rs.) Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Kalpataru Power 1025.00 27162.5 64.32 15.94 2.75 75.00

Alstom Projects 631.55 42329.1 24.95 25.31 7.46 100.00

KEC International 465.25 23923.2 33.25 13.99 3.12 60.00

Jyoti Structures 159.00 13042.9 11.21 14.18 2.56 45.00

Investment Highlights

Q4 FY10 Results Update

Kalpataru Power Transmission disclosed a phenomenal rise in standalone net

profit for the quarter ended March 2010. During the quarter, the profit of the
company rose 2.48 times to Rs.574.00 million from Rs.231.40 million in the same
quarter previous year. Net sales for the quarter for the quarter surged 50.12% to
Rs 8383.30 million, while total income for the quarter jumped 49.58% to Rs
8457.10 million, when compared with the prior year period. It reported earnings of
Rs.21.66 a share during the quarter, registering 2.48 times growth over prior year
period.

Quarterly Results - standalone (Rs in mn)

As At Mar-10 Mar-09 %change

Net sales 8383.30 5584.40 50.12

PAT 574.00 231.40 148.06

Basic EPS 21.66 8.73 148.06

2

Break up of Expenditure

Segment wise Revenue

Revenue Streams Q4 FY 2010
Transmission &
Distribution 7429.2
Real Estate 0.8
Biomass Energy 125.6
Infrastructure 827.7
Total 8383.3

3

FY10 Performance

The Company has posted a net profit of Rs.1704.60 million for the year ended
March 31, 2010 as compared to Rs.944.10 million for the year ended March 31,
2009. Net sales for the year are surged 37.80% to Rs 25973.70 million, while total
income for the quarter jumped 37.50% to Rs.26306.90 million, when compared
with the prior year.

Approved Dividend

Kalpataru Power Transmission Ltd has approved the recommended payment of

Dividend of Rs. 7.50 (75%) per equity share of Rs. 10/- each to the shareholders of
the Company and company has approved for New Tower Manufacturing Plant at
Raipur at a Capacity of 30000 MTs.

Raise of funds via QIP Issue

Kalpataru Power Transmission, a leading global EPC player in power transmission

and distribution sector has successfully raised approximately Rs 4.50 billion (USD
101 million) through qualified institutional placement (QIP) issue. The shares have
been placed at a price of Rs 1074.20 per equity share.

The proceeds from the QIP issue are expected to be utilized for capacity expansion
of tower manufacturing for the transmission sector along with the investments in
BOOT projects and other long term initiatives.

Bags order worth over Rs. 319 crores

Kalpataru Power Transmission (KPTL), one of the leading global EPC players in
power T&D sector has secured an order worth Rs 319 crores from Chhattisgarh

4
 State Power Transmission Company. KPTL has signed a contract for the turnkey
project of 400 KV D/C Quad Marwa-Raipur transmission lines.

The scope of work includes design, testing, supply of towers and line materials,
construction and commissioning of the project. The project to lay 150 km of
transmission line expected to be completed in 25 months.

Company Profile

Kalpataru Power Transmission (KPTL) incorporated in 1981 is engaged in the business

of designing, testing, fabrication, erection and construction of transmission lines and
sub-station structures on a turnkey basis across India and overseas. The company
was incorporated under the name HT Power Structures- a private limited company.
The company got its present name in the year 1994. Company is promoted by
Kalpataru Group which holds 67% of stake in the company.

The company is one of the leading companies in the field of Turnkey projects for EHV
Transmission Lines up to and including 800 KV in India and Overseas. Being known
as EPC contractor, company is engaged in designing, 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. Company also has business interest
in substation projects.

The company has designed and supplied approximately 400,000 MT of sub-station

and towers structures. The company is one of the world's largest fabricator of Lattice
Steel Towers with a capacity of 84,000 MTs per annum. Company’s fabrication plant
located at Gandhinagar has a capacity of 78,000 MTs. Company has also set up 100%
Export Oriented Unit (EOU) with a fabrication capacity of 30,000 MTs p.a. Company
exports the tower plants to countries like Algeria, Mexico, Thailand, Bangladesh,
Australia, Peru, and Turkey. It has served its services to international companies like
Cobra, ABB, Sumitomo, Alstom, and EnelPower.

5
Kalpataru Group (Parent Company)

Kalpataru Group was founded in 1969 by Mr. Mofatraj Munot. This conglomerate has
business interest in area Real Estate and Property Development, Property
Management, Power Transmission Towers, Infrastructure, Oil and Gas Pipeline,
Biomass Power Plant, Rural Electrification, Telecom Infrastructure, Logistics and
Warehousing, International Trading, and Office Supplies.

Subsidiary Companies

The company has the following subsidiaries:

1. JMC Projects (India) Ltd. (53.02% Subsidiary), Listed Company
2. JMC Mining & Quarries Ltd. (100% Subsidiary of JMC Projects (India) Ltd),
3. Energylink (India) Ltd. (100% Subsidiary),
4. Shree Shubham Logistics Ltd. (80% Subsidiary),
5. Amber Real Estate Ltd. (100% Subsidiary),
6. Kalpataru Power Transmission (Mauritius) Ltd. (100% Subsidiary),
7. Kalpataru SA (Proprietary) Ltd. (74.9% Subsidiary) and
8. Kalpataru Power Transmission Nigeria Ltd. (100% Subsidiary).

Business areas

Business

Areas

Civil Power and Biomass Oil & Gas

Contracting Distribution Power Pipelines
Projects

6
Financials Results
12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09 FY10 FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 18849.20 25973.70 29869.76 34350.22

Other Income 283.40 333.20 359.86 395.84

Total Income 19132.60 26306.90 30229.61 34746.06

Expenditure -16766.70 -22926.00 -26285.38 -30399.94

Operating Profit 2365.90 3380.90 3944.23 4346.12

Interest -886.90 -722.50 -758.63 -796.56

Gross profit 1479.00 2658.40 3185.60 3549.56

Deprecation -273.20 -382.40 -412.99 -433.64

Profit Before Tax 1205.80 2276.00 2772.61 3115.92

Tax -261.70 -571.40 -693.15 -778.98

Profit After Tax 944.10 1704.60 2079.46 2336.94

Equity capital 265.00 265.00 265.00 265.00

Reserves 8099.50 9611.10 11690.56 14027.50

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 35.63 64.32 78.47 88.19

7
Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-09 31-Dec-09 31-Mar-10 30-Jun-10E

Description 3m 3m 3m 3m

Net sales 5525.30 7192.30 8383.30 7964.14

Other income 98.00 97.10 73.80 76.01

Total Income 5623.30 7289.40 8457.10 8040.15

Expenditure -4809.80 -6370.60 -7456.80 -7048.26

Operating profit 813.50 918.80 1000.30 991.89

Interest -239.10 -198.50 -144.90 -150.70

Gross profit 574.40 720.30 855.40 841.19

Deprecation -85.30 -106.50 -108.90 -117.61

Profit Before Tax 489.10 613.80 746.50 723.58

Tax -119.90 -173.10 -172.50 -180.90

Profit After Tax 369.20 440.70 574.00 542.69

Equity capital 265.00 265.00 265.00 265.00

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 13.93 16.63 21.66 20.48

8
Key Ratios

Particulars FY09 FY10 FY11E FY12E

No. of Shares(In Million) 26.5 26.5 26.5 26.5

EBITDA Margin (%) 12.55% 13.02% 13.20% 12.65%

PBT Margin (%) 6.40% 8.76% 9.28% 9.07%

PAT Margin (%) 5.01% 6.56% 6.96% 6.80%

P/E Ratio (x) 28.77 15.93 13.06 11.62

ROE (%) 11.29% 17.26% 17.39% 16.35%

ROCE (%) 17.70% 22.47% 22.72% 21.85%

Debt Equity Ratio 0.78 0.7 0.6 0.53

EV/EBITDA (x) 11.48 8.03 6.89 6.25

Book Value (Rs.) 315.64 372.68 451.15 539.34

P/BV 3.25 2.75 2.27 1.9

9
Charts:

10
11
Outlook and Conclusion

At the current market price of Rs.1025.00, the stock is trading at 13.06 x

FY11E and 11.62 x FY12E respectively.
Price to Book Value of the stock is expected to be at 2.27 x and 1.90 x
respectively for FY11E and FY12E.
Net Sales and PAT of the company are expected to grow at a CAGR of 22% and
35% over 2009 to 2012E respectively.
Company has recently secured the first state BOT project for transmission line
along with substation.
We estimates EPS earnings for FY11E is Rs.78.47 and FY12E is Rs.88.19 for
each share. During the quarter the company has secured contracts worth of
around Rs.573 cr. and maintain the consolidated order book was Rs.8000 cr.
which gives us closer to two year’s visibility in terms of turnover , so we
recommend ‘BUY’ in this particular scrip with a target price of Rs.1179.00 for
Medium to Long term investment.

Industry Overview

Sector structure

As the Indian economy continues to surge ahead, its power sector has been expanding
concurrently to support the growth rate. The demand for power is growing
exponentially and the scope for the growth of this sector is immense. India's total
installed capacity of electricity generation has expanded from 105,045.96 MW at the
end of 2001–02 to 155,859.23 MW at the end of November 2009. In fact, India ranks
sixth globally in terms of total electricity generation.

Source-wise, at the end of November 2009, thermal power plants accounted for an
overwhelming 63.92 per cent of the total installed capacity, producing 99628.48 MW.
Hydel power plants come next with an installed capacity of 36,885.40 MW, accounting
for 23.67 per cent of the total installed electricity generation capacity. Besides thermal
and hydel power, renewable energy sources contribute 9.77 per cent to the total power
generation in the country producing 15,225.35 MW. Nuclear energy makes up the
balance 2.64 per cent, contributing 41,200 MW.

12
According to the latest data obtained from the Central Electricity Authority (CEA),
while power demand increased marginally from 108,911 Mw in the first seven months
of the financial year 2007-08 to 109,304 Mw in the same period of 2008-09, it jumped
to 116,281 Mw in the first seven months of 2009-10, as industrial activity improved
due to the recovery. Factories accounted for around 30-40 per cent of the total power
consumed in the country.

Powering Up
Power demand versus deficit in Apr-Oct of last five years

Year Demand % increase in demand Availability Deficit (%)

2005-06 88,667 NA 80,631 9.10

2006-07 98,520 11.11 84,468 12.20

2007-08 108,911 10.54 92,976 14.60

2008-09 109,304 0.36 94,566 13.50

2009-10 116,281 6.38 101,609 12.60

Source: CEA
(Figures in Mw)

Growth Potential

According to a report by KPMG and CII, released in December 2007, India's energy
sector will require an investment of around US$ 120 billion- US$ 150 billion over the
next five years. The government has revised its target of power capacity addition to
92,700 MW in the 11th Five Year Plan (2007-12), from the earlier estimate of 78,577
MW (as of June 2007) to sustain the growth momentum of the economy.

Further, according to Planning Commission estimates, renewable energy (RE) projects

worth US$ 16.50 billion, for the generation of 15,000 MW power, would come up in
the 11th Plan. Moreover, the government has earmarked a total capital subsidy of US$
6.88 billion for providing electricity connections and for the distribution of
infrastructure to rural households.

13
Nuclear Power Generation

Subsequent to the Indo-US nuclear deal and India getting clearance from the Nuclear
Suppliers Group (NSG), nuclear power generation is likely to provide an opportunity of
US$ 10 billion in the next five years, according to a JP Morgan estimate.

Since the Indo-US nuclear deal, India has signed a crucial civil nuclear agreement
with Mongolia for supply of uranium to New Delhi. In November 2009, the Indo-
French civil nuclear agreement was unanimously adopted by the French Parliament,
paving way for companies to build nuclear power plants in India. India has also signed
a civil nuclear pact with Argentina and has reached an agreement on civil nuclear
cooperation with Canada. In December 2009, Russia and India signed an agreement to
expand nuclear cooperation.

• Hindustan Construction Company (HCC) has signed a memorandum of

understanding (MoU) with the international engineering and project management
company AMEC plc, to jointly explore the application of consulting and EPC
services for the establishment of nuclear power plants in India.
• The Central government has finalised six 1,000 MW nuclear power units at
Mithivirdi in Gujarat, involving an investment of US$ 12.8 billion.
• Indian Oil Corporation (IOC) has signed a memorandum of understanding (MoU)
with the Nuclear Power Corp of India (NPCIL) for setting up of a US$ 2.2 billion
nuclear power plant.
• Larsen & Toubro (L&T) is entering a joint venture with the Nuclear Power
Corporation of India (NPCIL) to explore co-operation in the setting up of nuclear
power plants.

Investments

According to research by Venture Intelligence, India’s power sector is set to emerge as

a key destination for private equity (PE) players to make investments, with close to
US$ 1.64 billion worth of infrastructure funds, mainly in power, awaiting their launch.

• National Hydroelectric Power Corporation (NHPC), the country’s largest hydel

power producer, will develop the 1,500-MW Tipaimukh hydropower project in the
north-eastern state of Manipur at an investment of US$ 1.7 billion.
• Bhushan Power and Steel (BPSL) plans to invest US$ 629.1 million to add 250
MW capacity to its existing power plant and to increase production of value-added
steel at its Orissa facility over the next one year.
• More than US$ 15.4 billion worth of investments have been lined up for various
power projects in Maharashtra; it was announced by Mr Subrat Ratho,
Maharashtra Power Secretary.

14
• A loan agreement of US$ 330 million for the Haryana Power System Improvement
Project has been signed by representatives from the Government of India, the
Government of Haryana and the World Bank.
• The Orissa government has approved two bio-mass based power projects with a
combined generating capacity of 39 MW of power, in an effort to exploit the
available potential in the bio-mass sector.
• Torrent Power Limited, has dedicated the country's biggest gas-based power
project of 1,147 MW capacity near Surat and is further scaling up generation
capacity of its plant by adding another 3,400 MW in the next five years.
• The joint venture between Toshiba of Japan and the JSW Group, which is setting
up a US$ 215 million power plant equipment manufacturing unit in Chennai,
plans to start work on the project by December 2009.
• Larsen & Toubro has reached a milestone in the Indian power sector by
establishing the country’s largest transmission line research and testing centre at
Kanchipuram, near Chennai.

Government Initiatives

The government has taken several proactive steps to open the sector for the private
players and realize the full potential of the country in the power sector.

• Introduction of the Electricity Act 2003 and the notification of the National
Electricity and Tariff policies.
• Constitution of Independent State Electricity Regulatory Commissions in the
states.
• Allowing the private sector to set up coal, gas or liquid-based thermal projects,
hydel projects and wind or solar projects of any size.
• Allowing foreign equity participation up to 100 per cent in the power sector under
the automatic route.
• Allowing 100 per cent foreign direct investment (FDI) in the Indian power sector
(except nuclear).
• Allowing 100 per cent foreign direct investment (FDI) in the renewable energy
sector.
• Providing income tax holiday for a block of 10 years in the first 15 years of
operation and waiver of capital goods' import duties on mega power projects
(above 1,000 MW generation capacity).
• The government has also taken up some ambitious programmes like the Ultra
Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana
(RGGVY), Accelerated Rural Electrification Programme and the goal of Power for
All by 2012 among others, to rapidly increase the installed capacity.

15
Looking ahead

A study by consultancy major McKinsey estimates, India's power demand to increase

to 315 GW–335 GW by 2017, if India continues to grow at an average of 8 per cent in
that time. This would require a five- to ten-fold rise in power production, entailing
investments worth US$ 600 billion. To fuel its rapidly growing economy, India is
planning to get an additional 60,000 MW of electricity from various hydro-power
projects by the end of 2025.

The government targets providing electricity for all by 2012. Under the Rajiv Gandhi
Grameen Vidyutikaran Yojna, the Ministry of Power plans to electrify 120,000 villages
in the current Five Year Plan (2007–12).

________________ ____ _________________________

Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.

16
Firstcall India Equity Research: Email – info@firstcallindia.com
B. Harikrishna Banking
B. Prathap IT
A. Rajesh Babu FMCG
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
E. Swethalatha Oil & Gas
D. Ashakirankumar Auto
Kavita Singh Diversified
Nimesh Gada Diversified
Priya Shetty Diversified
Neelam Dubey Diversified
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover
Offers, Offer for Sale and Buy Back Offerings.

Corporate Finance Offerings include Foreign Currency Loan Syndications,

Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.

Corporate Advisory Offerings include Mergers & Acquisitions(domestic and

cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.

For Further Details Contact:

3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: info@firstcallindiaequity.com
www.firstcallindiaequity.com

17