Chirag Rajendra Shah

K. J. Somaiya Institute of Management

Studies & Research, Mumbai.

BASF India Ltd.

Equity Research Report

COMPANY INFORMATION:
BASF India Limited is a leading multinational chemical company guided by its corporate purpose – We
create chemistry for a sustainable future. The Company caters to several sectors including agriculture,
automotive, pharmaceuticals, construction, consumer durables, consumer care, paper, and paints. These
businesses have inherited a strong technological support from the parent company – BASF SE and
embody total quality commitment from every employee of the organization. Through its focus on
sustainability, the company embodies environment-friendly and customer-focused best practices to
deliver high value to customers, stakeholders and the community at large. BASF India Limited is listed on
BSE Ltd. and the National Stock Exchange of India Ltd. At BASF, they create chemistry for a sustainable
future. They combine economic success with environmental protection and social responsibility. BASF has
successfully partnered India’s progress for over 127 years. In 2019, BASF India Limited, the flagship
company of BASF in India, celebrated 75 years of incorporation in the country. BASF India generated sales
of around €1.4 billion.

Founded: 1943

Industry Name: SECTOR: CHEMICALS

House Name: Public Sector

Traded as-

BSE: 500042

NSE: BASF

ISIN: INE373A01013

Headquarters: Mumbai, Maharashtra, India.

168
REGISTERED CORPORATE OFFICE:
Address: The Capital, 'A' Wing, 1204- C, 12th Floor, Plot No. C-70, ‘G’ Block, Bandra Kurla Complex,
Bandra (East), Mumbai- 400051.

Tel. No.: 022-62785600

Email: [email protected]

Website: http://www.basf.com/in

Global view of Chemical Industry:

The chemical industry is of strategic importance to the sustainable development of national economies.
The ILO estimates that there are up to 20 million people employed in the global chemical, pharmaceutical
and rubber and tyre industries today. Global competition has rapidly changed the world map of chemical
production and consumption. Greater competitiveness and uncertainty have triggered restructuring
processes with significant implications for employment and earnings, composition of employment and
working conditions in general.

The improper use of chemicals can have adverse consequences for humans and the environment.
Although occupational safety and health prevention practices in the chemical sector have generally
improved, there is concern about the risk gaps between large and small companies, and especially
between regular workers and outsourced workers. Moreover, new occupational risks have emerged due
to technological innovation. On the basis of total returns to shareholders (TRS), the chemical sector has,
over the long term, outperformed not only the overall market but also most of its customer industries
and raw-material suppliers. Within chemicals, the commodity and specialty subsectors show similar
performance, while diversified companies have trailed. There have been variations on the theme over
time, with petrochemical players’ performance more affected by the naphtha-ethane spread and the
commodity cycle, while specialty players have been more affected by end-market growth and mergers-
and-acquisitions activity, but the variations have not changed the overall sunny picture.

Looked at globally, we estimate that the last decade’s 3.6 percent growth rate for petrochemicals may go
down by between 0.5 and 2.0 percentage points over the next ten years, depending on assumptions for
regional GDP growth. For an industry with an estimated capacity creep somewhere between 1 and 2
percent annually, this could be a dramatic shift. Other sectors are likely to see similar reductions in
growth rates—although the growth in overall chemical demand will continue to outpace GDP.

Chemical Industry in India:

169
Chemicals industry in India is highly diversified, covering more than 80,000 commercial products. It is
broadly classified into Bulk chemicals, Specialty chemicals, Agrochemicals, Petrochemicals, Polymers
and Fertilizers. India’s proximity to the Middle East, the world’s source of petrochemicals feedstock,
makes for economies of scale.

India is a strong global dye supplier, accounting for approximately 16% of the world production of
dyestuff and dye intermediates. Chemicals industry in India has been de-licensed except for few
hazardous chemicals. Upcoming Petroleum, Chemicals and Petrochemicals Investment Regions
(PCPIRs) and Plastic parks will provide state-of-the-art infrastructure for Chemicals and
Petrochemicals sector.

• The Indian chemicals industry is projected to reach $304 bn by 2025

• Indian ranks 14th in export and 8th in import of chemicals (Excluding Pharmaceuticals
products) globally

• Demand of chemical products is expected to grow at approximately 9% p.a. over the next 5
years

• Indian chemical industry employs more than 2 million people

Total production of major chemicals and petrochemicals stood at 27,858 MT during 2018-19, a
growth of 4.18% over 2017-18. Alkali chemicals had the largest share in the Chemical industry in
India with approximately 69% share in the total production. Production of polymers accounts for
around 61% of the total production of basic major petrochemicals.

• The petrochemical demand is expected to grow at 7.5% CAGR from FY 2019-23, with
polymer demand growing at 8%

• The agrochemicals market in India is expected to grow at 8% CAGR reaching $3.7 bn by FY22
and $4.7 bn by FY25.

• The specialty chemicals constitute 22% of total chemicals and petrochemicals market in
India. As of FY18, the total market size is around $35 bn. The demand for speciality
chemicals is expected to grow at 12% CAGR from FY19-22.

Company Highlights:
BASF India Limited (the flagship company of BASF in India) is a public limited company1 with 73.33%
of its shares held by BASF SE. BASF Group companies operate key production sites in Dahej,
Mangalore, Thane, Hyderabad2 and Chennai. The Mangalore site is BASF’s largest manufacturing
site in South Asia in terms of area. BASF SE holds 90% of BASF Catalysts India Private Limited, and
100% of BASF Chemicals India Private Limited, Chemetall India Private Limited, Nunhems India
170
Private Limited, and BASF Colors & Effects India Private Limited through its group companies. BASF
also operates two Research and Development Centers in India, in Mumbai and Mangalore, which are
part of BASF’s global technology platform.

• Number of companies: 3 wholly-owned (BASF Chemicals India Pvt. Ltd., Chemetall

India Pvt. Ltd., and Nunhems India Pvt. Ltd.); 1 joint venture (BASF Catalysts India
Pvt. Ltd.); 1 publicly listed company (BASF India Ltd.) in which BASF SE holds a
73.33% stake.
• Number of production sites (group companies): 11
• Number of employees: 2,431
• Sales of BASF Group companies in India: approximately €1.3 billion

171
Revenue from Operations (net of GST / Excise duty) at Rs. 60,256.7 million represents an increase of
8% over the previous year. The Company reported a profit after tax of Rs. 817.2 million for the year
ended 31st March, 2019 as compared to profit after tax of Rs. 2,465.0 million in the previous year.
The profitability was mainly impacted due to higher input cost.

The business segments of the Company have been reorganized effective 1st January, 2019. The new
segment structure will enable an even more differentiated steering of the business, taking into
account market-specific requirements and the competitive environment. It will further increase the
transparency of the segment results. The new segments are as under:

a) Agricultural Solutions - The Agricultural Solutions segment consists of the Crop Protection
business.

b) Materials - The Materials segment comprises of Performance Materials and the Monomers
businesses.

172
c) Industrial Solutions - The Industrial Solutions segment consists of the Dispersions & Pigments and
Performance Chemicals businesses.

d) Surface Technologies - The Surface Technologies segment comprises of the Catalysts, Coatings
and Construction Chemicals businesses.

e) Nutrition & Care - The Nutrition & Care segment consists of the Care Chemicals and Nutrition &
Health businesses.

f) Chemicals - The Chemicals segment consists of the Petrochemicals and Intermediates businesses.

g) Others - Others include activities that are not allocated to any of the continued operating
divisions. These include remaining activities after divestiture of certain businesses including leather
and textile chemicals business, paper wet-end and water chemicals business.

COMPANY MANAGEMENT:
Board of Directors:

173
FINANCIALS OF THE COMPANY:
Balance Sheet

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Equity Share Capital 43.29 43.29 43.29 43.29 43.29

Reserves 1,118.77 1,072.72 1,058.97 1,300.59 1,369.60

Borrowings 1,600.20 1,349.22 1,274.55 867.69 912.21

Other Liabilities 1,405.61 1,311.33 1,497.74 1,634.79 1,526.37

Total 4,167.87 3,776.56 3,874.55 3,846.36 3,851.47

Net Block 1,351.09 1,288.87 1,222.39 1,117.35 956.98

Capital Work in Progress 74.18 55.14 32.86 27.48 42.24

174
Investments - - - - -

Other Assets 2,742.60 2,432.55 2,619.30 2,701.53 2,852.25

Total 4,167.87 3,776.56 3,874.55 3,846.36 3,851.47

Working Capital 1,336.99 1,121.22 1,121.56 1,066.74 1,325.88

Debtors 930.45 1,042.34 1,068.82 1,088.78 1,040.67

Inventory 990.77 807.58 920.13 1,019.17 1,212.63

Debtor Days 72.17 80.11 76.89 71.18 63.04

Inventory Turnover 4.75 5.88 5.51 5.48 4.97

Profit & Loss Account

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Sales 4,705.76 4,749.17 5,073.41 5,583.40 6,025.67

Expenses 4,572.73 4,643.43 4,803.73 5,261.77 5,904.19

Operating Profit 133.03 105.74 269.68 321.63 121.48

Other Income 39.09 175.04 28.52 205.75 182.58

Depreciation 142.42 163.09 169.03 153.39 147.09

Interest 95.56 148.06 141.64 112.96 85.11

Profit before tax -65.86 -30.37 -12.47 261.03 71.86

Tax 1.04 - 1.66 14.53 -9.86

175
Net profit -66.90 -30.37 -14.13 246.50 81.72

EPS -15.45 -7.01 -3.26 56.93 18.87

Price to earning -72.54 -125.11 -420.08 33.79 78.45

Price 1,120.75 877.50 1,370.85 1,923.35 1,480.55

Cash Flow Statement:

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Cash from Operating Activity -96.33 198.86 221.07 290.00 -77.15

Cash from Investing Activity -163.05 199.31 -65.96 158.25 176.80

Cash from Financing Activity 372.01 -425.09 -132.99 -464.65 -94.97

Net Cash Flow 112.63 -26.92 22.12 -16.40 4.68

SHARE HOLDING PATTERN:

Share holding pattern:
Standalone Mar-20 Dec-19 Sep-19 Mar-19
Promoters 73.33 73.33 73.33 73.33
Pledged 0 0 0 0

FII/FPI 3.55 2.21 2.05 1.75

Total DII 10.57 11.82 11.81 11.72
Fin.Insts 0.05 0.04 0.04 0.02

176
Insurance Co 6 6 5.98 5.94

MF 1.63 3.02 2.93 2.79

Others DIIs 2.89 2.76 2.86 2.97

Others 12.55 12.63 12.81 13.18

Total 100 99.99 100 99.98

DIVIDEND & RIGHTS:

Dividend:
Announcement Date Effective Date Dividend Type Dividend (%)
26-05-20 22-07-20 Final 30
30-04-19 04-07-19 Final 30
01-05-19 04-07-19 Special 20
04-05-18 26-07-18 Final 30
05-05-17 20-09-17 Final 10
04-05-16 03-08-16 Final 10
07-05-15 12-08-15 Final 40

Bonus:

Announcement Date Bonus Ratio

17-08-98 1:2
30-09-92 1:2
05-10-91 1:2
12-06-90 1:2
05-10-88 1:2
12-06-79 1:1

177
12-06-76 1:3

Rights Issue:

Ex-
Announcement Rights
Face Value Premium Record Date Rights
Date Ratio
Date
01-07-
30-04-96 2:05 0 115 30-11-001
96
18-11-
08-11-94 1:05 0 90 07-12-94
94

RATIOS:

Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Basic EPS (Rs.) 4.3 18.9 56.9 -3.3 -7

Diluted EPS (Rs.) 4.3 18.9 56.9 -3.3 -7

Cash EPS (Rs.) 45.87 52.86 92.37 35.78 30.66

Book Value
[InclRevalReserve]/Share 320.17 326.38 310.44 254.62 257.8
(Rs.)
Dividend / Share(Rs.) 3 5 3 1 1
Revenue from
1,744.29 1,391.93 1,289.77 1,171.96 1,096.61
Operations/Share (Rs.)
PBDIT/Share (Rs.) 69.43 41.12 85.2 64.95 25.1

PBIT/Share (Rs.) 27.84 7.14 49.76 25.91 -12.57

PBT/Share (Rs.) 1.07 16.6 60.3 -2.88 -7.02

Net Profit/Share (Rs.) 4.28 18.88 56.94 -3.26 -7.02

178
Key Profitability Ratios:

20

15

PBDIT Margin (%)

10
Net Profit Margin (%)
Return on Networth / Equity (%)
5 Return on Assets (%)

0
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

-5

Liquidity Ratio:

Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Current Ratio
1.17 1.26 1.21 1.27 1.34
(X)
Quick Ratio
0.65 0.68 0.72 0.8 0.85
(X)
Inventory
Turnover 5.05 4.97 5.48 5.51 5.88
Ratio (X)
Dividend
Payout Ratio 0 19.16 2.11 -36.87 -56.99
(NP) (%)
Dividend
Payout Ratio 0 6.84 1.3 3.36 13.04
(CP) (%)
Earnings
Retention 0 80.84 97.89 136.87 156.99
Ratio (%)
Cash
Earnings
0 93.16 98.7 96.64 86.96
Retention
Ratio (%)

179
Valuation Ratios:

Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Enterprise
5,267.82 7,243.54 8,747.39 6,937.99 5,123.75
Value (Cr.)
EV/Net
Operating 0.7 1.2 1.57 1.37 1.08
Revenue (X)
EV/EBITDA (X) 17.53 40.69 23.72 24.67 47.15
MarketCap/Net
Operating 0.64 1.06 1.48 1.16 0.8
Revenue (X)
Retention
0 80.83 97.88 136.87 156.99
Ratios (%)
Price/BV (X) 3.51 4.52 6.15 5.36 3.39
Price/Net
Operating 0.64 1.06 1.48 1.16 0.8
Revenue
Earnings Yield 0 0.01 0.03 0 -0.01

180
Peer Comparison:

181
TECHNICALS:

182
183
EFFECT OF COVID-19:
Unlike many other sectors, the chemical industry is not in a position to stop production and send
workers home. Instead, it needs to strike the right balance between social distancing and keeping
plants running to provide the basic necessities for society, as well as the antiseptics, disinfectants,
protective packaging and more needed to fight the pandemic.

COVID-19 has quickly turned into an epidemic of massive, global proportions—one that is posing a
serious challenge to many industries. For a wide range of companies, COVID-19 is affecting demand,
supply, and customer and investor confidence. Indeed, value chains are being disrupted in
unprecedented ways.

184
For the chemical industry, such challenges are compounded by the fact that its customer industries,
such as automotive and electronics, are deeply affected by plant shutdowns and the disruption of
sales channels. Furthermore, the oil industry is experiencing oversupply in tandem with weak
demand resulting from reduced economic activity associated with the virus. This is disrupting the
oilfield chemical business as well as the economics of alternate feedstock routes and recycling.

In the weeks following the COVID-19 outbreak, the chemical industry share price index dropped
farther and more deeply than it did in previous crises, including the 2008 financial crisis. During that
time, there were also more shutdowns of plants in customer industries, such as automotive, than
there were during the financial crisis.

185
My Recommendation:
The chemical sector is India is flourishing especially after the ban on manufacturing certain
chemicals in China. Moreover now after the Covid-19 outbreak many companies are planning to
move out of China and India is quite a favourable option on their list. Also the movement which has
been started to make India “self-sufficient” that is “aatm nirbhar”. Looking at all these factors this
industry is bound to increase multifold times.

186
Coming to the discussion of BASF India, currently it’s P/E ratio it is very high compared to the
industry average P/E. As per my understanding the current market price of this stock is particularly
on the higher side.

Hence my view for this script is to wait for better entry levels to invest on a long term perspective.

187
Chirag Rajendra Shah

K. J. Somaiya Institute of Management

Studies & Research, Mumbai.

SJVN Ltd.
Equity Research Report

COMPANY INFORMATION:
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). SJVN is now a listed Company having
shareholders pattern of 59.92% with Govt. of India, 26.85% with Govt. of Himachal Pradesh and rest of
13.23% with Public. The present paid up capital and authorized capital of SJVN is Rs. 3,929.80 Crore and
Rs. 7,000 Crore respectively. The Net Worth as on 31.03.2019 is Rs.11238.78 Crore.
Beginning with a single Project and single State operation (i.e. India’s largest 1500 MW Nathpa Jhakri
Hydro Power Station in Himachal Pradesh) the Company has commissioned five projects totalling 2015
MW of installed capacity including wind and solar power. SJVN is presently implementing power projects
in Himachal Pradesh, Uttarakhand, Bihar, Maharashtra and Gujarat in India
besides neighbouring countries viz. Nepal and Bhutan.

The company is the largest operational hydroelectric power generation facility in India based on installed
capacity with an aggregate generation capacity of 1912 MW. SJVN has expanded its horizons and
envisions developing itself into a fully diversified transnational power sector company in all types of
conventional and non-conventional forms of energy along with Power Transmission. The company is also
engaged in the business of providing consultancy. All India installed power generation capacity as on 31
March. 2019 was 356100 MW. As regards hydro potential India has an estimated potential of about
150000 MW out of which as on 31 March. 2019 only about 45399 MW has been commissioned. The
Company has two wholly owned subsidiary companies as at 31 March 2019.

Founded: 1988

Industry Name: POWER - GENERATION &

DISTRIBUTION

188
House Name: Public Sector

Traded as-

BSE: 533206

NSE: SJVN

ISIN: INE002L01015

Headquarters: Shimla, Himachal Pradesh,

India.

REGISTERED CORPORATE OFFICE:

Address: SJVN Corporate Office Complex, Shanan, Shimla, HP – 171006

Tel. No.: 0177-2660075

Email: [email protected]

Website: http://www.sjvn.nic.in

History:
SJVN Ltd was incorporated on May 24 1988 as Nathpa Jhakri Power Corporation Pvt Ltd. The company
was established as a joint venture between the Government of India and the State Government of
Himachal Pradesh to plan investigate organize execute operate and maintain hydroelectric power
projects. In November 3 1988 the word private was deleted and the name was changed to Nathpa Jhakri
Power Corporation Ltd. In August 1991 the company took over the construction and operation of the
NJHPS from the HPSEB. In September 17 2002 they changed their name from Nathpa Jhakri Power
Corporation Ltd to Satluj Jal Vidyut Nigam Ltd as the operations of the company were based in and
around the river Sutlej. In October 2003 the first 250 MW hydroelectric power generations unit was
commissioned at the NJHPS. In the year 2005 the company signed an agreement with Government of
Uttarakhand for execution of Devsari Hydro Electric Project (300 MW) Naitwar Mori Hydro Electric Project
(33 MW) and Jakhol Sankri Hydro Electric Project (33 MW) on BOO basis.

In the 2008 the company was granted the Mini Ratna Category I status of the company. They signed a
MoU for Arun - III Hydro Electric Project with Government of Nepal. Also they signed a MoU with
Government of Himachal Pradesh for the implementation of Luhri Hydro Electric Project and the
execution of Dhaulasidh Hydro Electric Project.In September 10 2009 the company changed their name
189
Satluj Jal Vidyut Nigam Ltd to SJVN Ltd as the operations of the company expanded and were no longer
confined to the area in and around the River Sutlej. Also the company was converted into a public limited
company. The company entered into a Joint Venture for the implementation of 1500 MW Tipaimukh
Hydro Electric Project in Manipur with equity participation to the extent of 26%. Also the company was
assigned the task of updating/preparing DPRs of two Hydro Electric Projects 900 MW Wangchu Hydro
Electric Project and 486 MW Kholongchu Hydro Electric Project in Bhutan by Government of India.

Shares of SJVN were listed on the bourses on 20 May 2010 after an Initial Public Offer (IPO). The stock
debuted at Rs 28 on BSE compared with IPO price of Rs 26.On 5 July 2013 SJVN announced that it has
acquired Buxar Bijlee Company Private Limited by acquisition of 100% of equity of the company on 4 July
2013 in terms of MOU signed with Bihar Government on 17 January 2013 for setting up Green Field 1320
MW (2 x 660 MW) Supercritical Technology Thermal Power Project at Chausa village in Buxar district of
Bihar. The Ministry of Coal has informed SJVN that the company has been allocated 486 MT of coal
reserves in the 2102 MT Deocha-Pachami Coal Block located in West Bengal for the purpose of Buxar
Thermal Project. On 29 January 2014 SJVN Limited signed a MoU to form a Joint Venture Company to
plan develop and operate the world's largest 4000 MW Ultra Mega Solar Project in Sambhar area of
Rajasthan with five other PSUs namely Bharat Heavy Industries Limited (BHEL) Power Grid Corporation of
India (PGCIL); Sambhar Salt Limited (SSL); Rajasthan Electronics & Instrumentation Ltd. (REIL) Solar Energy
Corporation of India (SECI).

Global view of Power Industry:

Due to higher levels of economic growth and anticipated improvements in the quality of life over the next
few years, developing countries will likely see a rapid increase in power demand. India, for instance, is
used to see annual consumption increase of up to 3.2 % between 2012 and 2040 while China's annual
demand is for caste to grow by 2.1 % for the same time period. Conversely, consumption in OECD
countries will evolve slowly. Between 2012 and 2040 the increase in annual power demand rates will
remain low for regions like the United States (0.2%) and may drop in the European Union.

Over the last few years, utilities have increasingly reliant on renewable energies to generate power for
two main reasons. First, Governments in several areas around the world have established incentives to
promote the installation of these facilities to guarantee their power supply and reduce the emission of
pollutant gases. Second, at the same time come on the improvement of renewable energy technologies
and their associated monitoring and control processes are enabling more rapid adoption.

According to current forecasts, more than 2457 gigawatts of Power capacity will be installed worldwide
over the next 25 years while total renewable energy capacity will grow to 3930 GW by 2035 to produce
11573 TWh are representing 31.2% of total world power generation. The most prevalent technologies will
be hydro at 1731 GW, wind at 1130 GW and solar photovoltaic (PV) at 690 GW.

190
Power Industry in India:
India’s power sector is one of the most diversified in the world. Sources of power generation range
from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable
non-conventional sources such as wind, solar, and agricultural and domestic waste. 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.
In May 2018, India ranked fourth in the Asia Pacific region out of 25 nations on an index that
measures their overall power. India is ranked fourth in wind power, fifth in solar power and fifth in
renewable power installed capacity as of 2018. India ranked sixth in list of countries to make most
investments in clean energy with US$ 90 billion.
Indian power sector 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).
Wind energy is estimated to contribute 60 GW, followed by solar power at 100 GW by 2022 and
15GW from biomass and hydropower. The target for renewable energy has been increased to 175
GW by 2022.
Total installed capacity of power stations in India stood at 368.68 Gigawatt (GW) as of January 2020.
Electricity production reached 1,050.78 BU in FY20 (up to January 2020).

All India installed power generation capacity as on 31.03.2019 was 3,56,100 MW. A capacity addition
of 8,106 MW was targeted during the year 2018-19 comprising 7,266 MW of thermal and 840 MW
of hydro power. Capacity addition of 5,922 MW comprising 5,782 MW of thermal and 140 MW of
hydro power stations was achieved up to 31.03.2019. Above industry scenario indicates that there is
ample opportunity for consistent growth of business in hydro, renewable and thermal energy sector
in the times to come with growth in demand. Company has taken a big leap forward towards the
development of 1320 MW super-critical thermal power project at Chausa near Buxar in Bihar and
brought 900 MW Arun-III HEP in Nepal and 60 MW Naitwar Mori HEP in Uttarakhand under
construction. Company also commissioned 50 MW Sadla Wind Power Project in Gujarat.

As regards hydro potential, India has an estimated potential of about 1,50,000 MW out of which as
on 31.03. 2019 only about 45,399 MW has been commissioned. The bulk of the unharnessed
potential is located in the hill states of Himachal, Uttarakhand, Arunachal Pradesh and Sikkim. The
above industry scenario signifies that there is ample opportunity for consistent growth of business in
hydro sector in near future.

191
Company Portfolio:
The present installed capacity of SJVN is 2015.2 MW comprising of five projects and one
transmission line of 86 km length as tabulated below:

Sr.No Project Installed capacity

1. Nathpa Jhakri Hydro Power 1500 MW
Station
2. Rampur Hydro Power Station 412 MW
3. Khirvire Wind Power Project 47.6 MW
4. Charanka Solar PV Power Plant 5.6 MW
5. Sadla wind Power Project 50 MW

SJVN has expanded its horizons and envisions developing itself into a fully diversified transnational
power sector company in all types of conventional and non-conventional forms of energy along with
power transmission. SJVN aims to be a 5000 MW company by 2023, 12000 MW company by 2030
and 25000 MW company by 2040. Total portfolio of SJVN is 7489 MW, out of which 2015 MW is
under operation, 2880 MW is under construction, 482 MW is under pre-construction & investment
approval and 2112 MW is under survey & investigation stage. Project wise detail is as per under:

Sr.No Project Capacity

Projects under construction
1. Arun- 3 HEP 900 MW
2. Naitwar Mori HEP 60 MW
3. Kholongchhu HEP 600 MW
4. Buxar Thermal Power Project 1320 MW
Projects under Pre- construction and Investment approval
1. Luhri Stage-I HEP 210 MW
2. Dhaulasidh HEP 66 MW
3. Devsari HEP 162 MW

192
 4. Jakhol Sankri HEP 44 MW
Projects under Survey and Investigation stage
1. Sunni Dam HEP 382 MW
2. Luhri Stage-II HEP 172 MW
3. Jangi Thopan Powari HEP 780 MW
4. Bardang HEP 138 MW
5. Purthi HEP 210 MW
5. Reoli Dugli HEP 430 MW

Transmission Projects Portfolio:

SJVN commissioned 86 km long 400 kV double circuits Indo-Nepal Cross Border Power Transmission
corridor between Sursand (Indo-Nepal border) and Muzaffarpur on 19.02.2016 in JV – Cross-border
Power Transmission Company (CPTC) - with Power Grid, IL&FS Energy Development Company and
Nepal Electricity Authority. The same was dedicated to the two Nations jointly by Hon’ble Prime
Ministers of India and Nepal on 20.02.2016. In addition to above, Company is engaged in
implementation of 400 kV double circuit associated transmission line of 217 km long from Arun-3
HEP pot head yard to Bathnaha on Indo - Nepal Border in Nepal.

Subsidiaries:

• SJVN Arun -3 Power Development Company Pvt. Ltd. (SAPDC)–Fully owned subsidiary incorporated
in Nepal for implementation of 900 MW Arun-3 Project and associated transmission system in Nepal.

• SJVN Thermal Private Limited –Fully owned subsidiary incorporated for execution of 1320 MW
Buxar Thermal Power Project in Bihar.

Joint Ventures:
• Cross Border Power Transmission Company Limited (CPTC)-A joint venture of IEDCL, Power Grid,
SJVN and NEA with equity participation 38%, 26 %, 26 % and 10 % respectively to construct and
maintain 86 km long, 400 kV D/C transmission line from Sursund on Indo- Nepal border to
Muzaffarpur.
.
• Kholongchhu Hydro Energy Limited--A joint venture with Druk Green Power Corporation of Bhutan
with 50:50 equity contribution for execution of 600 MW Kholongchhu Hydro Electric Project in
Bhutan.

193
COMPANY MANAGEMENT:
Board of Directors:

194
195
FINANCIALS OF THE COMPANY:
Balance Sheet
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Equity Share Capital 4,136.63 4,136.63 4,136.63 3,929.80 3,929.80
Reserves 6,066.15 7,165.82 7,352.92 6,770.36 7,316.44
Borrowings 2,648.25 2,646.14 2,416.42 2,230.68 2,155.11
Other Liabilities 1,781.18 1,439.98 1,485.87 1,459.67 1,572.34
Total 14,632.21 15,388.57 15,391.84 14,390.51 14,973.69
Net Block 9,053.91 8,775.26 8,424.80 8,086.97 8,141.93
Capital Work in Progress 428.93 504.65 661.29 943.94 1,303.30
Investments 2.54 35.66 89.85 120.24 160.32
Other Assets 5,146.83 6,073.00 6,215.90 5,239.36 5,368.14
Total 14,632.21 15,388.57 15,391.84 14,390.51 14,973.69
Working Capital 3,365.65 4,633.02 4,730.03 3,779.69 3,795.80
Debtors 1,507.08 1,001.23 612.84 288.99 276.57
Inventory 36.82 39.25 39.60 50.56 44.94
Debtor Days 195.37 146.53 83.49 47.33 38.04
Inventory Turnover 76.47 63.54 67.66 44.08 59.06

196
Profit & Loss Account
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Sales 2,815.62 2,493.96 2,679.14 2,228.50 2,654.05
Expenses 372.38 432.03 480.03 523.89 605.89
Operating Profit 2,443.24 2,061.93 2,199.11 1,704.61 2,048.16
Other Income 309.48 542.29 411.12 408.86 387.46
Depreciation 641.00 677.16 679.98 364.51 390.26
Interest 64.56 218.44 55.18 100.86 250.55
Profit before tax 2,047.16 1,708.62 1,875.07 1,648.10 1,794.81
Tax 370.51 297.83 329.79 423.49 428.25
Net profit 1,676.65 1,410.79 1,541.18 1,224.61 1,366.56
EPS 4.05 3.41 3.73 3.12 3.48
Price to earning 6.03 8.40 9.03 10.62 6.96
Price 24.45 28.65 33.65 33.10 24.20

Cash Flow Statement:

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Cash from Operating Activity 1,491.60 2,208.89 2,376.41 1,641.36 1,017.89

Cash from Investing Activity -303.85 -768.28 -1,199.23 15.09 -34.05

Cash from Financing Activity -746.20 -704.62 -1,621.27 -2,272.29 -1,107.02

Net Cash Flow 441.55 735.99 -444.09 -615.84 -123.18

197
SHARE HOLDING PATTERN:
Share holding pattern:
Standalone Mar-20 Dec-19 Jun-19 Dec-18
Promoters 86.77 87.9 88.78 89.53
Pledged 0 0 0 0

FII/FPI 3.14 3.06 3.26 2.82

Total DII 7.01 6.28 5.35 5.27
Fin.Insts 0.04 0.06 0.09 0.08

Insurance Co 1.59 1.74 1.37 1.37

MF 4.36 3.59 2.2 2.06

Others DIIs 1.02 0.89 1.69 1.76

Others 3.09 2.77 2.62 2.38

Total 100.01 100.01 100.01 100

DIVIDEND & RIGHTS:

Dividend:
Announcement Date Effective Date Dividend Type Dividend (%)
13-02-20 25-02-20 Interim 17
29-05-19 19-09-19 Final 6.5
08-02-19 18-02-19 Interim 15

198
28-05-18 17-09-18 Final 2
09-02-18 21-02-18 Interim 19
02-06-17 14-09-17 Final 5
14-02-17 22-02-17 Interim 22.5
27-05-16 14-09-16 Final 4.7
04-02-16 16-02-16 Interim 6.3
27-05-15 14-09-15 Final 4.2
05-02-15 16-02-15 Interim 6.3

RATIOS:

Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

Basic EPS (Rs.) 3.48 2.97 3.79 3.41 4.05

Diluted EPS (Rs.) 3.48 2.97 3.74 3.41 4.05

Cash EPS (Rs.) 4.46 4.04 5.37 5.04 5.6

Book Value
[ExclRevalReserve]/Share 28.62 27.23 27.78 27.32 24.66
(Rs.)
Book Value
[InclRevalReserve]/Share 28.62 27.23 27.78 27.32 24.66
(Rs.)
Revenue from
6.75 5.67 6.48 6.03 6.81
Operations/Share (Rs.)
PBDIT/Share (Rs.) 5.82 5.2 6.35 5.95 6.97

PBIT/Share (Rs.) 4.82 4.27 4.71 4.32 5.42

PBT/Share (Rs.) 4.56 4.19 4.52 4.12 4.95

Net Profit/Share (Rs.) 3.47 3.11 3.73 3.4 4.05

199
Key Profitability Ratios:

120

100

80 PBDIT Margin (%)

Net Profit Margin (%)
60 Return on Networth/Equity (%)
Return on Assets (%)
40 Asset Turnover Ratio (%)

20

0
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Liquidity Ratio:

Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

Current Ratio
5.33 5.63 6.77 8.04 4.65
(X)

Quick Ratio (X) 5.28 5.57 6.72 7.98 4.62

Inventory
Turnover Ratio 59.11 44.13 67.72 63.61 76.6
(X)
Dividend
Payout Ratio 43.26 64.34 73 30.86 25.9
(NP) (%)
Dividend
Payout Ratio 33.62 49.55 50.65 20.83 18.74
(CP) (%)

200
Earnings
Retention Ratio 56.74 35.66 27 69.14 74.1
(%)

Cash Earnings
Retention Ratio 66.38 50.45 49.35 79.17 81.26
(%)

Valuation Ratios:
Mar-19 Mar-18 Mar-17 Mar-16 Mar-15
Enterprise Value
8,483.64 11,526.68 11,912.21 10,426.69 9,820.20
(Cr.)
EV/Net
Operating 3.2 5.17 4.45 4.18 3.49
Revenue (X)

EV/EBITDA (X) 3.71 5.64 4.53 4.23 3.4

MarketCap/Net
Operating 3.58 5.88 5.23 4.75 3.62
Revenue (X)
Retention Ratios
56.73 35.65 26.99 69.13 74.09
(%)
Price/BV (X) 0.85 1.22 1.22 1.05 1
Price/Net
Operating 3.58 5.88 5.23 4.75 3.62
Revenue

201
202
203
Peer Comparison:

TECHNICALS:

204
205
206
EFFECT OF COVID-19:
India's power distribution sector is passing through a turbulent phase on the back of large
accumulated dues to be paid to generators, liquidity issues due to restricted cash flow, uncertain
revenue due to closure of industrial and commercial operations and the prevailing low power
demand in the sector in the wake of the ongoing lockdown due to the coronavirus outbreak.

According to data sourced from the PRAAPTI portal, the discoms owe Rs 92,602 crore to the gencos
as of February, 2020. Rajasthan has the highest discom dues of around Rs 23,695 crore, followed by
Uttar Pradesh with dues worth Rs 13,768 crore and Tamil Nadu with dues of Rs 13,132 crore.

The commercial and industrial sector in India consumes around 52 per cent of electricity, followed
by 24 per cent by domestic households and 18 per cent by agriculture sector. The pricing by
distribution utilities is set below the actual cost for agricultural sector and domestic households in

207
order to make power affordable for them and the gap is met through a combination of direct
subsidy transfers and cross-subsidy from higher tariffs applied to the industrial and commercial
sector.

My Recommendation:
The Government of India has identified power sector as a key sector of focus so as to promote
sustained industrial growth. Some initiatives by the Government of India to boost the Indian power
sector:

• The Union Budget 2020-21 has allocated Rs 15,875 crore (US$ 2.27 billion) to Ministry of
Power and Rs 5,500 crore (US$ 786.95 million) towards the Deen Dayal Upadhyay Gram Jyoti
Yojana (DDUGJY).
• Government plans to establish renewable energy capacity of 500 GW by 2030.
• The Government of India has released its roadmap to achieve 175 GW capacities in
renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind
power. The Union Government of India is preparing a 'rent a roof' policy for supporting its
target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.
• Coal-based power generation capacity in India, which currently stands at 229.40 (As of
October 2019) GW is expected to reach 330-441 GW by 2040.
• India could become the world's first country to use LEDs for all lighting needs by 2019,
thereby saving Rs 40,000 crore (US$ 6.23 billion) on an annual basis.
Hence my view for this script is to BUY on a long term perspective.

208