Entegra Ltd
BSE Code: 532287
CMP: Rs.19.7
EPS: 0.21
P/E: 93.81
Industry P/E: 24.04
The company created a fully integrated business model by forming three separate business divisions: (i) EnnerGreen Resources, focuses on generation of renewable energy, (ii) EnnerGreen Solutions, provides customized renewable energy solutions to residential, commercial and industrial facilities, and (iii) EnnerTech Projects, provides EPC and advisory services. Entegra is executing several high-value projects in the three verticals:
EnnerGreen Resources:
• Floated a 100% subsidiary, Ennertech Bio-Fuels Ltd to develop bio-fuel technologies and undertake Jatropha plantation in 70,000 hectares of land.
EnnerGreen Solutions:
• Customized renewable energy facilities for a residential tower in Worli.
• Marketing solar heating systems for hot water requirements.
• Setting up 2 solar water heaters with capacity of 300 and 200 litres per day for a Military Hospital.
• Setting up 5 solar water heaters of different capacities for Sultania Infantry and EME Centre.
EnnerTech Projects:
• In the process of acquiring PSC Engineers Pvt Ltd for Rs.100mn, to be invested in a phased manner to foray into transmission and distribution businesses.
• Exclusive tie-up with VRB Power Systems, a Canadian company providing Energy Storage Systems It has access to the cutting-edge technology through strong tie-ups with global players including Borawind (Swiss wind power development company), EDIG (a reputed R&D company from the US engaged in the development of Solar Thermal Systems), SHAP (Italian manufacturer of fluidized bed combustors for biomass and waste combustion and solar concentrators), VRB Power Systems (Canadian company providing Energy Storage Systems), Battery Equaliser (International Manufacturer, Distributor and Service Provider of Battery Refurbishment Technology through which life of a lead acid battery can be extended upto 100%), Pirelli (Italian firm having state-of-the-art technology for converting municipal waste into fuel), and Ankur Scientific Energy Technologies Pvt Ltd (successfully developed and commercialised a wide range of biomass gassifiers ranging from 5 kWe to 500 kWe).
Shareholding Pattern: The promoters hold 73.08% while the general public holds 26.92%. Among the promoters MW Infra Developers Pvt Ltd holds 63.3% of the shares of the company. Among the non promoters, Padmini Mercantile Pvt Ltd holds 3.29%, Durvish Mercantile Pvt Ltd holds 1.85% and Panther Fincap & Management Services Ltd holds 1.92% of the shares of the company.
Financials: On a standalone basis, the total income of the company for FY09 came out to be Rs.106.06 Cr as against Rs.218.7 Cr. The net profit of the company for FY09 came out to be Rs.2.11 Cr as against Rs.13.08 Cr in the same period previous year. The equity capital of the company is huge, Rs.101.9 Cr which eats away most of the profits of the company. But this is compensated by low floating stock of the company as the public shareholding is very low.
Industry Outlook: Huge potential for renewable energy to be tapped in India:
• Hydro Power: India ranks fifth in terms of exploitable hydro potential in the world, with economic exploitable hydro power potential of 148,700MW of which only 30,873MW (20.8%) has been tapped so far and another 13,446MW (9.0%) is in various stages of development.
• Wind Energy: Out of the total potential of over 45,195MW, only 5,340.6MW was achieved till March 31, 2006.
• Solar Energy: Total potential of Solar Energy (Solar Photovoltaic and Solar Thermal) estimated at 160MW/sq.km. out of which only 3.7MW/sq. km was harnessed till Mar’06.
• Bio-diesel: Estimated demand in India at 2.62 million tonnes in 2006-07 assuming a 5% blend in fossil diesel and expected to grow to 3.35 million tonnes by 2011-12.
• Bio-mass Energy: The total potential of Bio-mass power is 52,000MW compared to the installed capacity of just 234MW as on 31 December 2005.
Triggers:
The company is on the verge of completing the Rs.25bn, 400MW run-of the-river Shree Maheshwar Hydel Power Project in Madhya Pradesh, which is the main trigger for the stock.
In addition to this the investment in the shares of Entegra Ltd is a play on strong growth opportunity in the renewable energy sector driven by the Government’s target to increase the installed capacity of renewable energy from 10,000MW at present to 15,000MW by 2011 and 80,000MW by 2032 with an estimated investment of USD2.6 bn in the next five years. Entegra Ltd is well positioned to capture this opportunity through its fully integrated business model with several high-value projects under execution in each of the focused verticals, access to latest technology through strong tie-ups with global technology leaders and a visionary promoter, who has created a strong professional management team of technocrats and execution experts to drive the business. Renewable energy is being increasingly targeted due to strained availability of hydrocarbon fuel basket and environmental concerns in thermal
power generation.
As a consequence, the Company has initialed the process of obtaining a release of these pledged shares, which is expected to be completed shortly. Also, during the year ended March 31, 2009 and subsequent to year end, the Company has been in negotiations with MPSIDC for consideration of its request either to reschedule the repayment of the liability and grant waiver of the interest for the period or permit the Company to take benefit of the revised OTS policy. As of date, MPSIDC has requested the Company to submit a revised proposal for the settlement, which is expected to be submitted shortly. Based on these negotiations, the Company is confident of obtaining a waiver of past interest and a rescheduling of repayment of the balance amount of interest and principal outstanding.
Entegra Ltd is leveraging its partnership with Bora Wind AG to foray into the high potential area of developing Wind Power Projects. The first project with 100 MW capacities will be developed in a Special Purpose Vehicle, Ennertech Wind Farms with investment outlay of Rs.6bn and is currently identifying suitable land in the state of Maharashtra, Karnataka and Madhya Pradesh.
EnnerGreen Solutions is marketing Solar Heating Systems for hot water requirement which has a short pay back period of just 2 years and has already received some orders.
Conclusion and Chart Check: At the CMP of Rs.19.70, the stock looks to be undervalued. The charts it has been found that the stock has a strong support in the price range of Rs.15.5 to Rs.18.7 which will be difficult to break in the short term.
At the current market price (CMP) the stock of Entegra Ltd is HIGHLY UNDERVALUED given the incremental fully diluted equity value of Rs.82 per share attributable to Entegra from the consolidation of Maheshwar Hydro Power Project. The company also has a huge business pipeline to be executed in FY10. However, the main trigger for the stock is the Rs.25 bn 400 MW Maheshwar Hydro Power Project to be commissioned in FY10. The scheduled month for commissioning is July, 2009.