SJVN Company Analysis

Industry Profile : Power is one critical component for development of economy. Lack of availability of power is not sustainable for growth and development. India is one of the country having diverse source of natural resource like Water, Coal, Lignite, Natural Gas, Oil, Nuclear power, wind which also help development of power sector. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. India ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness Index, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner and moved up 73 spots to rank 26th in the World Bank’s list of electricity accessibility in 2017.

Power sector in India is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

Total installed capacity of power stations in India stood at 330,260.53 Megawatt (MW) as on May, 2017. The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity to be generated in the financial year 2017-18, which is 50 BU’s higher than the target for 2016-17. The annual growth rate in renewable energy generation has been estimated to be 27 per cent and 18 per cent for conventional energy.

The Government has added 10.2 Giga Watts (GW) of conventional energy generation capacity and 12.5 GW of renewable energy capacity in Financial Year 2017. Under the 12th Five Year Plan, the Government has added 93.5 GW of power generation capacity, thereby surpassing its target of 88.5 GW during the period.

Company profile  :  SJVN Limited, a Mini Ratna, Category-I and Schedule –’A’ CPSE under administrative control of Ministry of Power, Govt. of India, was incorporated on May 24, 1988 as a joint venture of the Government of India (GOI) and the Government of Himachal Pradesh (GOHP). The company was formerly known as Nathpa Jhakri Power Corporation. The present installed capacity of SJVN is 1,964.85 MW (comprising of 1912 MW Hydro + 47.6 MW Wind Power + 5.25 MW Solar Power).  The Company, at present, is implementing (under various stages of development) 10 Hydro Power Projects totaling 3,200 MW (7 Projects- 1,130 MW in India, 3 Projects of 2,070 MW in neighbouring countries of Nepal & Bhutan), one 1320 MW Thermal Power Project at Buxar in State of Bihar and 50 MW Sadla Wind Power Project in Gujarat. SJVN commissioned 86 ckm 400 kV double circuits Indo-Nepal Cross Border Power Transmission corridor between Dhalkebar (Nepal) and Muzzafarpur (India) on 17.02.2016 in JV with Power Grid, IL&FS, and Nepal Electricity Authority.  In addition to all this, Company is engaged in implementation of 400 kV double circuit associated transmission line of 310 km length for its 900 MW Arun-3 Project in Nepal.

Shareholding Pattern  :  Government of India and Himachal Pradesh holds 89.97% as promoter ( 64.46% with Govt. of India, 25.51% with Govt. of Himachal Pradesh ) . 0.94% held by mutual funds. 0.11% held by Financial Institutions. 1.53% held by insurance companies. 3.47% held by foreign investors. Remaining is held by public.

Financial and Ratios  : 

 2010 - 112011 - 122012 - 132013 - 142014 - 152015 - 162016 - 17
Revenue1,979.162,136.791,916.622,110.723,261.102,908.213,119.90
Net profit912.131,068.681,052.341,114.631,676.751,408.481,544.14
NPM46.08%50.01%54.90%52.80%51.41%48.43%49.49%
EPS2.212.582.542.694.053.403.79
Book value17.4218.9120.3321.8824.6726.7527.76
Dividend Per Share0.80.940.960.981.051.102.75
Dividend payout36.2836.3837.7336.3625.9032.3072.86
ROE12.6513.6612.5112.3116.4312.7313.44
ROCE9.5710.369.319.1312.329.7210.58
ROA8.198.818.428.2211.489.1510.04
Debt to Equity0.200.190.220.240.240.220.19

Future Prospectus  : Even after good fundamentals, the company having some issues as it is selling major part to State electricity boards and most of them are capital stressed. The Company is required to provide approximately 12% of its annual generation to the state of Himachal Pradesh free-of-cost, and an additional 1% of generation from operational projects located in the state of Himachal Pradesh to a state-established local development fund. Power sector is capital intensive and built up of power plant is taking long term. which is involving risk. If the state electricity boards stop payment then the company fundamentals will not look good.

But due to UDAY ( Ujwal Discoms Assurance Yojana) is very helpful for such companies and the sector is going through large  changes.

The company is keeping robust targets for FY 2018. Healthy EBITDA margin and Buyback is proving that company is having faith on its business. As the sector is going through Reforms, it is wisely that to keep such gem in your portfolio.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter