JSW Energy Limited – IPO

by Manshu on February 15, 2008

in IPO/NFO

Business of JSW Energy

JSW Energy is part of the O.P. Jindal Group and this particular company comes under the umbrella of of the JSW Group. JSW Energy was incorporated in 1994 and derives most of its revenues from power generation. JSW Energy currently owns and operates a 260 MW power plant in Karnataka. The company is further expanding its capacity by 3410 MW by constructing and implementing five more power plants in Karnataka, Maharashtra, Rajasthan and Himachal Pradesh.

Apart from power generation JSW energy has also been engaged in power trading since June 2006 and according to CERC is one of the top five energy trading company in India. As next steps JSW energy plans to enter transmission business and for this purpose has created subsidiary.

Financials of JSW Energy

The consolidated revenues of JSW Energy have grown from Rs.5,505.28 million for the year ended 2003 to Rs.8115.48 million in the year ended 2007 at a CAGR of 8.07%. The profits after tax have grown from Rs.214.63 million to Rs. 2904.5 million in the same period at a CAGR of 68.38%.

The EPS for the last three years was Rs.6.38 in 2007, Rs.3.11 in 2006 and Rs. 3.80 in 2005. The RONW for 2007 was 26.59% and for 2006 it was 13.71%.

Objects of the Issue

JSW Energy will use the IPO proceeds primarily to fund the five power projects totaling to 3410 MW mentioned above, it has earmarked a sum of Rs.29186.50 million for this purpose. Apart from this the company would also repay debt worth Rs.6000 million using the proceeds of the IPO.

Key Risks

The company’s financial performance is based on the only operational plant which is the 260 MW power plant. However JSW has a lot of projects underway which are at initial stages and have long gestation periods. Given this scenario the historical financial performance may not accurately forecast the future performance.

The power plants are dependent on various different kind of fuels and JSW relies on a few power suppliers in China, Indonesia and Mozambique. These companies have a limited track record and it becomes difficult to enforce fuel supply agreements if the suppliers fail to carry out their obligation.

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