Jaiprakash Power Ventures – IPO

Business of Jaiprakash Power Ventures

Jaiprakash Power is in the business of planning, developing and implementing power projects in India. The company was formed in 1995 and is part of the Jaypee group. Jaiprakash power currently operates the largest hydro electric power plant in the country which is a 400 MW run-of-the-river hydroelectric power plant on the river Alaknanda in Chamoli district of Uttarakhand and was commissioned in 2006 October.


Apart from this Jaiprakash power is implementing a 1000 MW coal fired power plant in Madhya Pradesh which is expected to become operational in 2012.

Financials of Jaiprakash Power Ventures

Since there is only one plant that became operational last year there is not a lot of financial history that can be analysed. The revenue figures for the year ending March 2007 were Rs. 2165.91 million and the same for the six months ending 30th September 2007 were Rs.2427.95 million. The profit after tax for the two corresponding periods were Rs.717.77 million and Rs.1326.80 million respectively. The EPS for the year ending March 31 2007 was Rs.1.51.

Objects of the Issue

There are three main purposes that for which the funds raised from this proceeding have been earmarked. The first one is to finance the equity component of the upcoming project in Madhya Pradesh which would entail a sum of Rs.15,000 million. Apart from this Jaiprakash associates plans to use the fund proceeds for subscribing to the shares of two companies which will would be involved in executing power projects. The first of them is Jaypee Karcham Hydro Corporation Limited in which Jaiprakash will acquire a 55.36% equity stake and which is engaged in Karcham Wangtoo 1000 MW hydro – electric power project.
The second company is Jaypee Powergrid Limited which will engage in the transmission system of the Karcham Wangtoo project. The stake in this company would be for Rs.690 million for 23%. The project would be commissioned in 2011.


The company operates in a growth industry and one which has got a special focus from the government in its plans also. The hydro power generation model itself is also insulated from the vagaries of rising raw material costs as the chief raw material is water and most of the company’s projects are in the north eastern region which are blessed with good water flow. The association with Jaypee group is a big plus however the very short history of the company itself is a dampener. If the issue is priced reasonably and P/E multiples reflect that the company is not charging as much as old and established power companies this IPO may well be worth the money for the long term investor. 

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