Started in 2008, SembCorp Energy India Limited is Hyderabad Telangana based a leading independent power producer ('IPP') in India. As of December 31, 2017, company had a total power generation capacity of approximately 4.07 GW, comprising approximately 3.57 GW of operating generation capacity and 0.50 GW of generating capacity under construction. Solar Energy Corporation of India ('SECI') has awarded an additional 0.30 GW of wind power capacity in the third SECI wind power auctions conducted in February 2018, taking company's overall power generation capacity to approximately 4.37 GW. As of December 31, 2017, the portfolio comprises:A. Two fully-operational thermal power assets with four 0.66 GW supercritical coal-fired units, having a total power generation capacity of 2.64 GW located in the state of Andhra Pradesh, India;B. 34 wind energy assets with a total power generation capacity of approximately 1.39 GW located across seven states in India; this includes approximately 0.50 GW in two wind power assets that they are currently constructing in the states of Tamil Nadu and Gujarat, India; andC. Three solar power assets with a total power generation capacity of 0.04 GW located in the states of Rajasthan and Gujarat, India. SEIL sells power generated from the operational assets under a combination of long-term and short-term power purchase agreements ('PPAs') to central government agencies, state-owned distribution companies ('DISCOMs'), private customers, as well as on the spot market. Over 62% of the total capacity (over 96% of the renewables capacity and over 40% of the thermal capacity) is under long-term PPAs with DISCOMs, private customers and power trading companies, ensuring stability of cash flows and potential upside in a tightening power market. SEIL is promoted by Sembcorp Utilities Pte. Ltd. ('SCU'), which is part of the Sembcorp group and a wholly owned subsidiary of Sembcorp Industries Ltd. ('SCI'), which is listed on the main board of the SingaporeExchange. The Sembcorp group is a global conglomerate present across in 15 countries across five continents, with businesses in energy, water, on-site logistics, marine and urban development. Globally, the Sembcorp group has facilities with approximately 11 GW of gross power capacity and water and wastewater treatment plants with a combined capacity of approximately nine million cubic meters per day. Company's thermal power assets, the SEIL Power Plant and the SGPL Power Plant, located on the eastern coast of southern India, are designed for more sustainable power production and are based on supercritical power generation technology, which allows them to operate at lower emission levels compared to subcritical power plants. They use sea water for their power generation operations, which eliminates the need to use precious ground water. All of the coal is transported through coastal and trans-ocean shipping, with last-mile connectivity through two closed-pipe coal conveyor belt systems. Company's fuel supply agreements ('FSA') for the supply of domestic coal with Mahanadi Coal Limited ('MCL'), a subsidiary of Coal India Limited ('CIL'), and with reputable suppliers of imported coal in Indonesia, South Africa and other countries, ensure reliable access to low-cost coal from diverse sources and insulates them from coal shortages in India. Company achieved an average plant load factor ('PLF') of 85.43% and 75.63% at the SEIL Power Plant and the SGPL Power Plant respectively for the period between April and December 2017, which is well above the market average of 60% for the same period, according to the Central Electricity Authority ('CEA') Monthly Generation Reports. Company had 864 full-time employees as of December 31, 2017. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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