CARE assigns IPO grade 4/5 to Jaiprakash Power Ventures

CARE has come out with a research report on Jaiprakash Power Ventures . It has assigned IPO Grade 4/5 to the company's IPO. The company proposes an IPO of 1040 lakh equity shares having a face value of Rs 10 per share.

CARE report on Jaiprakash Power Ventures' IPO:

CARE has assigned ‘CARE IPO Grade 4’ to the proposed Initial Public Offer of Jaiprakash Power Ventures (JPVL). CARE IPO Grade 4 indicates above average fundamentals. CARE assigns IPO grade on a scale of Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals. CARE’s IPO grading is an opinion on the fundamentals of the issuer. JPVL proposes an IPO of 1040 lakh equity shares having a face value of Rs 10 per share.

The grading reflects the long track record of the promoters in hydro power sector, group support in terms of execution capabilities as well as resourcefulness and encouraging prospects of the power sector in the medium term. The grading also takes into account performance of the existing hydro power project in operation, project implementation status along with associated risk and financial tie up in respect of all envisaged projects under IPO.
 
JPVL, is a Special Purpose vehicle (SPV), promoted by Jaiprakash Associates Ltd. (JAL) in December 1995 to build, own, operate and maintain the Vishnuprayag Hydel power project with an installed generation capacity of 4*100 MW. It is a run of the river hydro power project across the river Alaknanda, Uttrakhand.

JAL (formerly Jaiprakash Industries Ltd.) - the flagship company of the Jaypee group is the main promoter of JPVL. JAL was formed by the merger of Jaiprakash Industries Ltd. with Jaypee Cements Ltd w.e.f. April 1,2002. JAL has over four decades of experience in executing river valley/hydro power projects and undertaking EPC and turnkey contracts in the field of hydropower.

JPVL is managed by a board of directors comprising nineteen directors. Out of them, nine are independent directors, three are in executive capacity, two nominees of lenders and five belong to promoter category.

The Vishnuprayag project has been fully commissioned in phases from June to Oct 2006. The approved cost of project, on CoD, by UPSERC is Rs 1682.72 cr. which has been funded with D:E of 2.33. JPVL has executed a final Power Purchase Agreement with the UPPCL dated January16, 2007. The agreement is valid for a period of thirty years, which can be extended further for a period of twenty years upon mutually agreed terms. The payments of monthly bills to JPVL are to be made by UPPCL through a confirmed, irrevocable, revolving letter of credit (L/C). These payments are also backed by escrow mechanism and are further guaranteed by the GoUP.

In FY07, JPVL earned total income of Rs 214 cr including net revenue from sale of energy and incentives. The PAT was Rs 72 cr after providing for depreciation of Rs 36 cr and payment of interest of Rs 91 cr. During nine month period Apr-Dec 2007, JPVL recorded total income of Rs 307 cr, PBILDT of Rs 258 cr (84% margin) and PAT of Rs 149 cr (48% margin).

In December 2007, JPVL undertook implementation of 1000 MW (2 x 500 MW), sibce increased to 1320 MW(2x660 MW) coal based Thermal power project at Nigrie, Madhya Pradesh which was earlier awarded to JAL. The project has been transferred to JPVL through amended MoU among JAL, the Government of Madhya Pradesh and JPVL. Also, JPVL has proposed substantial investment in its group companies. It has proposed to invest in equity of the group company, Jaypee Karcham Hydro Corporation Ltd. (JKHCL) to the extent of 55%, which is currently implementing 1000 MW (4 X 250 MW) Hydro-Electric Project, in District - Kinnaur in the state of Himachal Pradesh. Further, JPVL proposes to invest in equity of Jaypee Powergrid Limited (JPL) to the extent of 23%, which is a joint venture company setup between Jaiprakash Hydro Power Ltd. (JHPL) and Powergrid Corporation of India Ltd. (PGCIL), to implement the transmission systems for evacuation of power from JKHCL’s hydro power project.