Funds go scarce for RPower, but RInfra evolves

The June 2011 quarterly results seem to have rubbed off on the stock movement of Reliance Power and Reliance Infra, entities controlled by the Anil Dhirubhai Ambani Group (ADAG), which edged higher on Thursday. Over the past two weeks, RPower and RInfra have lost 21 percent and 15 percent market value, respectively.

Reliance Power

Reliance Power touched its 52-week low in early morning trade before bouncing back after the results were out. The ADAG power company posted a consolidated net profit of Rs 196 crore versus Rs 195 crore in the first quarter of the previous financial year. Its consolidated net sales were at Rs 541.8 crore versus Rs 139 crore in June quarter of 2011. The other income of Rs 147 crore on a consolidated basis was as high as the operating profits - profit before interest, tax, depreciation and amortisation - of Rs 156 crore.

 Funds go scarce for RPower, but RInfra evolves

Shareholders watch Mukesh Ambani, Chairman of Indian energy major Reliance Industries, on a screen. Reuters

The company says it wants to commission 5,000 mega watt projects by 2012, up from the 600 mw it used to operate at the end of March 2011. To finance this, it requires Rs 25,000 crore. It had raised Rs 11,500 crore from its IPO. According to the notes attached to the results, it has spent Rs 7,500 crore already and is left with around Rs 4,000 crore, including bank balance and investments in liquid funds.

It has tied up for a debt of Rs 22,000 crore with the US Export Import Bank to finance its gas-based and renewable power projects. In return, it is purchasing equipment from the US for its various projects. The State Bank of India is also leading a group lending Rs 4,000 crore for its Samalkot power project and US Exim Bank will put in Rs 3,000 crore.

The company also plans to invest Rs 1,500 crore to set up a wind power project of 200 mw, which can be scaled up to 400 mw in future. Taking into account all the projects it mentions in its investor's presentation, it plans to take up its power capacity to 34,880 mw for which it would require around Rs 1,75,000 crore.

But funding worries may remain for the company, with banks now lowering their exposure to the power sector. Moreover, the doubling of royalty for power companies holding captive mines will also be a worry, which will eat into the margins of the company. Reliance holds captive mining capacity to produce 70 million tonnes of coal per year.

Reliance Infra

Reliance Power is also bringing Rs 7,200 crore of orders to the other Anil Ambani-promoted company, Reliance Infrastructure. This is out of a total orderbook of Rs 28,000 crore of RInfra in the EPC segment (Engineering procurement construction). The stock was up 3 percent after dropping more than 15 percent in the last two weeks with better-than-expected quarterly results. Its consolidated revenue jumped 38 percent to Rs 5,191 crore compared to the first quarter in the previous year. The consolidated net profit was up 8 percent to Rs 405 crore compared to the corresponding quarter last year.

Its EPC revenue at Rs 1,754 crore was almost three times this quarter compared to the June quarter of 2010-11. Looking closely at the balance sheet, other income has gone down from Rs 201 crore to Rs 128 crore while income from the infrastructure business has jumped from Rs 12 crore to Rs 111 crore. The EPC margins remain at 8 percent while cost of electricity purchased has fallen by one fifth since June quarter last year.

So, the quality of earnings has improved with the company becoming a significant infrastructure player from being a power distribution player. It is tasked with building 11 road projects of 970 kms worth Rs 12,000 crore. Of this, four are operational projects and the other 6 road projects would start generating revenue this fiscal year. It is also working on three metro projects in Delhi and Mumbai worth Rs 16,000 crore. The cement business, however, should take more time to yield results as the sector is already reeling under pressure of over supply issues.

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Updated Date: Dec 20, 2014 04:10:37 IST

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