Anant Raj Industries Ltd: On the way to becoming debt free

Anant Raj Industries Ltd (CMP: Rs.50.90), a Delhi based real estate company, launched its township project namely 'Anant Raj Estate' at sector 63A, Gurgaon in Haryana, a couple of months back. The township project comprises of luxury villas, plots, residential flats and independent floors. The project is located in the vicinity of planned high end development both in corporate and commercial sectors. This phase of project is spread over 100 acres. Anant Raj Industries is armed with one of the largest land banks in the region and is in the process of building an array of Special Economic Zones (SEZs), IT Parks, Hotels, Commercial Complexes, Malls, Residential / Service Apartment and other infrastructure projects. It was debt free till March 31, 2010. On 31st March 2011 or may be as of today the company has some debt in its books. 
Now, if you look at the news flows during the last few months, we would find that a number of marketmen, has given a buy call on the company, with a target price varying from Rs.83 to Rs.100. The CMP of the scrip is now Rs.50.90, while we have strong supports at Rs.49.50--50.30 ranges. Or in other words it should not go below Rs.49.50 on a closing basis, considering the positive news I am getting from the sources. Hence, if we speak about Chartical perspective, then we are in a situation, where the downside seems to be capped while on the upside it can give more than 50% return from the CMP. It is trading near its monthly low of Rs.45.05, which further caps the downside.

Speaking, fundamentally, we find that, the scrip has a book value of Rs.127.23, P/E of 13.76 (Industry P/E: 17.21), Market Cap of Rs.16502.04 Cr, which is almost half its enterprise value. 

Now let us see, which MFs invested in this company:

(i) Reliance Infrastructure Fund

(ii) Reliance Infrastructure Fund - Institutional Plan
(iii) Reliance Infrastructure Fund 

(iv) Reliance Infrastructure Fund - Institutional Plan

(v) Reliance Infrastructure Fund - Bonus

Now, if you look at the further data, you would find that Mr.Ashok Sarin, bought 34945 shares in NSE and 4111 in the BSE from the open market on 22nd May, 2012---the deal executed, through Pace Broking Services Ltd. Moreover, the promoters hold 61.96% of shares of the company, while the FIIs hold 20.33%. Besides this the private corporate bodies+Banks Fin. Inst. and Insurance hold 8.19% of the shares of the company--this leaves very less number of shares to be traded in the Bourses (or 90.48% of the shares are blocked). The general public holds only 5.91% of the shares of the company--this actually gives premium value to its share price. 

Now let us see what the brokerages and marketmen have said about this scrip during the last few months:

(i) One of them on 10th April, 2012, said that it can move to Rs.100. He says, "The company was debt free till March 31, 2010. On 31st March 2011 or may be as of today the company has debt of close to about Rs.1000 crore; but the company in FY11 has acquired about 218 acres of land for about Rs.830 crore, which will give them 13 million sq ft of developable or saleable area. So one can say that they are tangibly holding that debt with a good quality of land which has really in fact appreciated and if you see their net current assets which is to the extent of about Rs.2700 crore against the net worth of Rs 3400 crore. The company has been focusing more on the rental income. On the first 9 months of FY12 the rental income is close to about Rs.65-66 crore which was at Rs.76 crore for whole of FY11, which means they are retaining the properties in their books on which they are having the annuity income. He was expecting it to become debt free in the next 18 months. 

(ii) Prabhudas Lilladher is bullish on Anant Raj Industries and has recommended accumulate rating on the stock with a target of Rs 83 in its February 10, 2012 research report. According to them in the month of January 2012, the company launched a large township project in Sector 63A Gurgaon which comprises of Luxury Villas, Plots, Residential Flats and Independent Floors. This phase of the project is spread over 100 acres. The report says, that the company's project trajectory looks quite strong with the launch of this project as it expects it to drive sales over the next few quarters. Besides, a couple of other launches like Bhagwandas Road and Sonepat are also lined up. The brokerage firm expects the rentals to further strengthen to a run-rate of ~Rs.340 m by FY13 onwards on account of incremental revenues from the mall. The report says, "The company's NAV stands at Rs.150. On account of better visibility of project launches, we are reducing the discount to NAV from 50% to 45%, thereby, giving us a TP of Rs.83". 

Another Brokerage Firm, Angel Broking Ltd, has come up with its June quarterly earning estimates for real estate sector. According to the research firm, Mumbai real estate prices have increased significantly over the past few quarters, that too at a much faster rate than other key cities, and have been accompanied by falling absorptions. In our opinion, the increase in prices can be attributed to declining launches seen over the past few quarters, for which uncertainty due to development control regulation (DCR) in Mumbai and slow approval process has played an important role, thus leading to fewer launches. However, with new DCR rules in place, it expects launch activities to significantly improve over the coming quarters. Prices in Mumbai have rallied by 80% since the end of 2009, followed by Pune (30%) and Chennai (20%).
The brokerage house says, "For 1QFY2013, we expect residential volumes to report flat to moderate growth on a sequential basis on account of weak demand due to high interest rates and elevated property prices, especially in Mumbai and NCR. We are of the opinion that a 10-15% price cut in Mumbai can lead to significant demand revival in Mumbai. Revenue of real estate companies is expected to be largely driven by execution of existing projects, though execution delays remain a cause of concern. Inventory levels are expected to remain high in Mumbai and NCR".
Cost increase has been moderated:
Around 70% of the construction cost comprises material (steel and cement) and labor costs. Although cost overruns have been a cause of concern for real estate developers in the past, they seem to be moderating now. For instance, in 1QFY2013, cement price increased slightly to ~Rs 290/bag from ~Rs 270/bag in 1QFY2012; steel prices, on the other hand, remained more or less stable at Rs.42,886/tonne in 1QFY2013 vs. Rs.42,250/tonne in 1QFY2012.
The brokerage firm has come up with buy recommendations in the following counters:

(i) Mahindra Lifespace Developers Ltd

(ii) HDIL

(iii) DLF Ltd
(iv) Anant Raj Industries Ltd
Outlook and valuation:
India's Realty Index is currently ruling near its lifetime low seen in 2008. However, things are better than 2008 with respect to project visibility, cash flow, net debt-equity and growing disposable income. Further, refinancing of loans from the banking sector will give some respite to developers in the  falling volume scenario. Having said that, the absorption and not price appreciation will drive residential growth over the next few quarters. Amidst this scenario, new launches have been more rewarding for developers who have launched projects at a 10-15% discount to prevailing market rates. Further, high inventory is still hampering commercial recovery, especially in the office space with vacancy rates still elevated in key cities, but the Angel Broking does not expect the commercial space to deteriorate further, given the falling number of launches in the space. Although the situation is now much better than that in 2008, high debt levels, falling absorptions and high inventory remain a challenge for the sector.

Vijay Shanthi Builders Ltd

BSE Code: 523724

CMP: Rs.18.87

Book Value: Rs.42.69

EPS: Rs.3.62

P/E: 4.94

Industry P/E: 17.63

Market Cap: Rs.46.80 Cr

Dividend Yield: 4.48%

Target: Rs.32-38

Time: 2-4 months.

Medium Term Target: Rs.47-54

Introduction: Vijay Shanthi Builders Limited was started in 1977 as a partnership firm in the name of Shri Shanthi Constructions by Late Mr. V. C. Jain. In its aspiration of creating a “home for all”, Vijay Shanthi went public in January 1992 with an IPO of Rs.65.5 million and is listed on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Madras Stock Exchange (MSE).
Vijay Shanthi Builders Limited is engaged in Property Development mainly of Promotion of residential spaces in and around Chennai. VSBL is known for its excellence in quality of Homes with a delivery of clear title, on time and without cost escalations, along with necessary completion certificates from the regulatory authorities. VSBL gives guarantee for its homes, is transparent in its area calculation and provides maximum plinth area. VSBL is included in the panel of approved builders of south Indian bank, Kotak. HDFC, LIC Home Finance, ICICI Bank, IDBI Bank, SBI and other such reputed institutions. Vijay Shanthi Builders Ltd is also known to offer luxury apartments at affordable prices to discerning citizens. The Company currently has several projects under implementation and continues to explore newer opportunities. To rewind, a couple of years back; it merged High End Homes Private Limited into itself. Pursuant to this, the Company issued one equity share of Rs.10 each fully paid up, for every three equity shares held by the Shareholders in High End Homes Private Limited.

The Company used to run a mineral water plant in the name of Vijay Shanthi. However, considering miniscule contribution (0.83%) of this segment to its top line, the Board of Directors had proposed to exit the Company from mineral water business from the FY11-12. As the assets deployed by the Company to this segment are very less, this decision would not involve any substantial sale / dilution in the value of assets of the Company.  It was in 2003 when Vijay Shanthi Builders started engaging in premium segment. It is probably the first company in this space in Chennai, to make a foray into this segment  and to come up with the concept of lifestyle premium homes, complete with theme, concept planning and high end amenities. Its elite homes boasted personalized lifts, mammoth open spaces, the finest gyms, spas and more. It has also ventured into villa housing concepts. Vijay Shanthi has been an Award Winning Company. It has been awarded by CREDAI and CRISIL in the years 2008 and 2009 respectively. Vijay Shanthi Builders Ltd has touched the lives of over 10000 happy families and has created some of the most finely crafted and contemporary homes in South India, covering a built up area of over to 50 lakhs square feet. It has already completed about 275 projects and is still counting. 

Shareholding Pattern: The promoters hold 66.89% while the general public holds 33.11%. Thus the company has the controlling stake which helps in taking fast decisions.

Financials: For FY12, the company came out with flat net profit even in a high interest rate regime. The total income of the company for FY12, came out to be Rs.210.78 Cr as against Rs.136.40 Cr in the same period previous year. The PBDT of the company is Rs.14.50 Cr in FY12 as against Rs.12.60 Cr in FY11. The net profit of the company came out to be flat at Rs.9.47 Cr as against Rs.9.50 Cr in the same period previous year. The EPS of the company remained flat at Rs.3.62 in FY12 as against Rs.3.63 in the same period previous year. The fall in net profit in FY12 is basically due to higher depreciation, tax component, and interest outgo. Meanwhile, the reserves of the company increased to Rs.83.17 Cr in FY12 as against Rs.76.14 Cr in the same period previous year. The book value of the shares also improved to Rs.42.69 from earlier, Rs.39.07.

Triggers:

(i) The demand for Housing continues to increase as ever, though the increase in lending rates by the Banks affected the off-take of home loans to a large extent, during the last few months. However, now with the RBI going in for the CRR cut, followed by an interest cut, we can look forwards for a softer interest rate regime in the coming days. The company is confident that with completion of various residential projects in the coming months, both its top and bottomlines, are set to witness a substantial increase.

(ii) Following are the on-going projects of Vijay Shanthi Builders Limited, which are expected to be revenue accretive in the coming days:

Project Name                                        Location

Lotus Pond                                                               Thaiyur

Infiniti                                                                     Mevalurkuppam

Park Avenue (Phase I)                                              Kandigai

Boulevord                                                                 Kandigai

Silent Valley                                                            Tambaram

Mystiq                                                                     Purasawalkam

The Art                                                                   Nunganbakkam

(iii) Vijay Shanthi Builders Limited has a land holding of 5507795 sq. ft (approx.) which is valued at Rs.1878 crores (approx). This shows the real potential of the company, in terms of value creation for the shareholders.

(iv) The futures projects are the following:

Project	Name of the Location	Total Saleable Area
Serene	Perungudi	48000 sq. ft.
Aurum	Besant Nagar	85000 sq. ft.
Whistling Woods	NH4-Bangalore Highway	700000 sq. ft.
Calm Springs	Ratnamangalam Vandalur–             Kelambakkam	1500000 sq. ft.
Eternal Springs	Ambattur	500000 sq. ft.

(v) The Company’s projects are currently located in Chennai, Tamil Nadu only. Since Chennai has a lot of scope and potential, the Company plans to exploit all the opportunities provided by the city to the fullest. In the future the company might think of moving to other locations. (vi) The Company is in the process of completing and handing over around 800 apartments constituting more than 8 lacs Sq.ft. of constructed space during the first quarter of the Finance year 2012—13 (FY13) and further expect to complete and handover nearly 7 lacs Sq. Ft. constructed space during the subsequent quarter. This trigger alone can take the scrip to over Rs.50 price band. (vii) The Company is consistently paying dividend to its shareholders, since the last 7 years.  Vijay Shanthi Builders Ltd informed that the Board of Directors of the Company at its meeting held on May 30, 2012, inter alia, has recommended the dividend of Re. 0.80 per equity Share for the financial year 2011-2012, (Face Value of equity share is Rs. 10). Due to the Company’s superb performance it has been ranked among the TOP 400 SMALL CAP CORPORATES OF INDIA in Dalal Street Journal's widely circulated and read "SMALLCAP 400, 2011".  Vijay Shanthi builders are the leaders of the High end segment projects and have been conferred  with the prestigious “ACCOLADES OF EXCELLENCE” – India’s Best Residential Project  award for their Unique project  “PATIO” from CNBC & CRISIL. A rare Honour reserved for a select few in the real estate industry. It’s the first and only home in Chennai to have been bestowed with this special privilege.

Conclusion: The scrip is looking good on the charts and is about to give a breakout above Rs.18.20, which is expected to cross easily as the momentum is very strong.  Considering all the factors mentioned above, investors can go in for the scrip, at the CMP of Rs.18.87, for a price target of Rs.32-38, in the next 2-4 months time frame. Moreover, a decent P/E rating of 10 can also take the scrip to around Rs.37-38 in the coming days. The worst is over for the sector, as the rate cut by the RBI is imminent in the next policy meet as the inflation is expected to come down. 

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on the recommendation or after reading the report.

The call made herein is for informational purposes and is not a recommendation to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness is not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrip mentioned in this column. Investors should take their own decisions while buying and  selling the shares/securities

Reliance Power: Superb Future Ahead

Commissioning triggers ahead; Reiterate Buy

CMP: Rs.108.35
Target: Rs.135--160
Time: 2--6 months

4Q12 (4th Quarter of FY12) reported PAT of Rs.2.3bn, in line with the estimates at PAT level; Other income reported below expectations but impact was offset by negative tax provisioning. 

• (1) Rosa fully commissioned, (2) Sasan mine production in 2Q13, (3) Butibori unit#1 in Jun’12, (4) JORC study completed for Indo mines & (5) boiler hydro test done for Sasan unit#1. For more details on Power Projects, please CLICK HERE.
• Building strength - (1) huge cheap captive coal, (2) merchant capacity in captive coal plants only, (3) plants near load centers (PoC), (4) minimizing cost of capital & (5) low to reasonable tariffs - offtake and payment risk minimized.
• Solidity & positive triggers ignored with stock at around 30% discount to fair value. Foresee RPWR as most sustainable private power utility; Reiterate ‘Buy’ with TP of Rs.155/Share.

Recent Triggers:

(i) Sentimental effect of the 26% hike in power tariff by Delhi Electricity Regulatory Commission effective July. 

(ii) PMO directs environment ministry to grant clearances to 12 projects with 10 MT additional output.

As the country battles coal shortage, the Prime Minister's Office [PMO] on Friday sought to give a push to its production by directing the environment ministry to grant clearances to 12 projects which would lead to an additional output of 10 million tonnes per year. The PMO took stock of the coal production at a meeting attended by representatives of the ministries of coal, power and environment and forest besides the officials of the Coal India Limited [CIL].

The meeting specifically reviewed the status of 12 projects of the CIL which are proposed to increase production by 25 per cent.

At the meeting, it was decided that these projects should be given clearances by the environment ministry within 3-4 month. These are expected to yield additional 10 million tonnes of coal every year. The progress in the matter will be monitored on a monthly basis by the PMO, the sources said. The push comes at a time when the demand and supply gap of coal is expected to touch 200 million tonnes by 2016-17 after crossing the 161.5 million tonnes mark last fiscal. This has severely affected the power sector.

(iii) Against the backdrop of the PMO asking Coal India Ltd (CIL) to sign pacts with power firms, assuring a minimum supply of 65% of the total coal committed to them, the PSU's board will meet on 10th July, 2012 to finalize various issues, including changes in the penalty clause of new model FSAs. CIL has been directed by PMO to provide assured supply of 65% for the first three years of the FSAs, instead of 80% directed by it earlier in April. But in the fourth year, the assured supply has to increase to 72%, followed by 80% in the fifth year of the agreements. CIL, which missed the revised production target last fiscal and produced 435 million tonnes of coal, has set a production target of 464 MT for 2012-13.

(iv) The detailed exploration of 54 coal mines to be allocated, both through the auction and the government dispensation routes, is likely to begin in the next two months. Of these 54 mines, a maximum of 16 have been earmarked for the power sector, 12 for the steel sector, 12 for government firms, 7 for the cement sector, 5 for sponge iron and 2 for surface gasification.

(iv) Amid the People's Bank of China's July 5, 2012 decision to lower key interest rates, the market expects the consumer price index (CPI) for June to reflect a faster fall, to as low as 2%. This suggests that China may be moving beyond the era of negative interest rates (when the rate of inflation outstrips that of saving). Commodity prices are continuing to fall and the growth rate in prices in June is expected to fall to 2.5%, according to Guo Tianyong, director of a banking research center at Central University of Finance and Economics in Beijing. The People's Bank of China said it would cut the one-year renminbi lending rate by 31 basis points, to 6%, effective July 6, expecting borrowing to become more attractive. India could follow the suit, with a positive effect on the overall equity markets. 

(v) The government is likely to exempt companies from paying customs duty on equipment imported for mega power plants and for which the orders have already been placed. A person in the know of the proposal said the exemption was beign planed to ensure projects that had mega status continued to get the inventive since they had already placed orders and signed power purchase agreements with the distribution companies. 
(vi) The recent power sector reforms aims at resolving near-term issues through rationalization of capacity additions and coal supplies. While the government is working on the modalities to resolve the structural issues such as expediting environmental clearances, improving evacuation infrastructure (mostly rail) and implementing power distribution reforms.
(vii) “Overall, although near-term volatility may continue, we think it is a good time to look at the sector. We believe power sector stocks are at an interesting level for longer-term investors. A reasonable mix of defensive companies and more volatile names provides the best positioning, in our view,” UBS Investment Research said in report.
(viii) RNRL-led consortium (RNRL, RELINFRA, Geopetrol and NaftoGaz) won one oil and gas block in the state of Mizoram and received the letter of award on February 12, 2007. The Company signed a contract with the Government of India on March 2, 2007 for exploration and production of Oil and Gas block having acreage of 3,619 Sq. Kms. Petroleum Exploration License (PEL) was notified by the Government of Mizoram on November 20, 2007. The Company has completed environmental impact assessment studies, geochemical studies and geological studies in line with the work commitment.
(ix) Carbon Credits: 
(a) Sasan Ultra Mega Power Project( UMPP): Sasan Power, implementing the 3,960 MW super-critical technology based power plant, in Singrauli district in Madhya Pradesh, India, is the world’s largest power generation plant ever registered with CDM-EB under United Nations Framework Convention on Climate Change since its inception. It is also the first Ultra Mega Power Project, in India, to be registered with the CDM-EB.  Sasan Power would reduce 2.24 million tonnes of CO2 per year (approximately).This emission reduction effort entitles the project to earn approximately 22.4 million carbon credits during its first ten years of operation. 
(b) Krishnapatnam Ultra Mega Power Project( UMPP): Coastal Andhra Power, implementing the 3,960 MW super-critical technology based power plant, in Potti Sri Ramulu Nellore district in Andhra Pradesh,has become the second UMPP to get  approval for carbon credits from United Nations Framework Convention on Climate change.  Coastal Andhra Power would reduce 1.23 million tonnes of CO2 per year (approximately),an effort that entitles Coastal Andhra Power to earn approximately 12.3 million carbon credits during its first ten years of operation. 
(c) Jharkhand Integrated Power Ltd: Jharkhand Integrated Power, implementing the 3,960 MW super-critical technology based power plant, in Hazaribagh District, Jharkhand, India, has become the third UMPP to get approval for carbon credits from United Nations Framework Convention on Climate change. Jharkhand Integrated Power would reduce 2.13 million tonnes of CO2 per year,an effort that would  earn 21.3million carbon credits for Jharkhand Integrated Power during its initial ten years of operation. 
(d) Samalkot Power Ltd: Samalkot Power, implementing the 2,460 MW natural gas based power plant, in East Godavari district, Andhra Pradesh. The project is currently under validation. Samalkot Power, being implemented in three CDM phases/blocks reduces approximately 5.55 Million tonnes of CO2 per year in comparison to baseline. This would entitle Samalkot Power to approximately 55.5 Million Carbon credits during its first ten years of operation, enabling it to become the world largest generator of carbon credits in the world. 
(e) Rajasthan Sun Technique Energy Private Ltd: Rajasthan Sun Technique is developing a large-scale solar power project in Jaisalmer district, Rajasthan. Validation of the project is currently underway.  Rajasthan Sun Technique would reduce 266,169 tonnes of CO2 per year (conservatively) in comparison to baseline. This would entitle Rajasthan Sun Technique to approximately 2.6 million carbon credits during its initial ten years of operation. 
(f) Reliance Cleantech Private Ltd: Reliance Clean Technique is developing a large scale  solar power project in Jaisalmer district,Rajasthan. Validation of the project is currently under progress. This would entitle Reliance Cleantech to approximately 3.7 million carbon credits during its initial ten years of operation.
(g) Dahanu Solar  Private Ltd: Rajasthan Sun Techinque  is developing a large scale solar photovoltaic (PV) power project in  Jaisalmer district, Rajasthan. Validation of  the project is currently underway. The Project would result in 153,717 tonnes of CO2 reduction per year (conservatively) in comparison to baseline.This would entitle Rajasthan Sun technique to approximately 1.53  million carbon credits during its intial ten years of operation.
(x) Renewable Energy: Reliance Power Ltd is developing a 40 MW solar photovoltaic project, India's largest such project , in Pokharan, Rajasthan which is expected to be commissioned by Q2FY13. This will be followed by a 100 MW solar thermal project at the same location which is expected to be commissioned by May 2013. It is also developing a 200 MW wind project in Vashpet, Maharashtra. The company has around 94 MW of operational wind farms within the Group. Reliance Power Ltd has finalized plans to develop 5,292 MW of hydroelectric power projects which are at various stages of development. It has also identified locations for setting up of wind and solar based capacities which would take its total renewable capacities to 1,000 MW. The company expects that, of its total energy portfolio as much as 10 (ten) percent will come from renewable energy capacities.
(xi) Fuel Business: The company has developed a portfolio of power projects utilizing a variety of fuel sources. Presently it is developing more than 18,000 MW of coal-fired capacity using domestic and imported coal, 8,000 MW of gas-fired capacity and 4,620 MW of hydroelectric capacity. 
##Sasan Coal Mines: The Government of India had allocated Moher, Moher–Amroli extension and Chhatrasal coal mines in the Singrauli coalfields to Sasan Power Limited, the company developing Sasan Ultra Mega Power Project. The allocation was made in the year 2006. Sasan Power Limited was transferred to the company in the year 2007. Subsequent to the transfer, the company along with the strategic partner North American Coal Corporation Limited developed a detailed mine plan for the Sasan coal mines. North American Coal Corporation Limited, the strategic partner for developing and operating coal mines, is an American coal mining and mining services company and ranks as America’s largest lignite coal producer.
According to the mine plans prepared by the company for these mines, the aggregate coal reserves of these mines are around 700 MT with a production level of 25 mtpa. The average stripping ratio of the mines would be 4 with an average calorific value of the coal would be around 4600 kcal. The Moher and Moher–Amroli and Chhatrasal coal mines are approximately 20 km from the Sasan project and 40 Km from the Chitrangi project. On commencement of production, the company will be the largest coal mining company in the private sector in the country. In order to produce coal from these mines in the most productive and cost-efficient manner, the company evaluated coal mining equipments from reputed vendors from different countries. The company would be procuring the best-in-class and large capacity coal mining equipments such as Draglines, Shovels, Dumpers from the most reputed companies in the world. The productivity being targeted with these equipments would be the best in the country and the company would seek to benchmark its productivity with the best coal producers in the world. Along with its strategic partner, the company has put in place a coal mining team capable of implementing these plans. The team is lead by very experienced coal mining professional who had developed and operated coal mines in the same area. The other members of the team too are people having rich experience of developing and operating coal mines. The experienced management team is supported by other young coal mining professionals who are also being trained in the deployment of the high quality equipments being procured for the project.
## Tilaiya Coal Mines: The Government of India has allocated Kerandari ‘B’ and ‘C’ coal blocks in North Karanpura coal fields the state of Jharkhand to Jharkhand Integrated Power Company Limited which is developing Tilaiya Ultra Mega Power Project. The allocation was made in the year 2007. Jharkhand Integrated Power Limited was transferred to the company in the year 2009. Subsequent to the transfer, the company along with the strategic partner North American Coal Corporation Limited developed a detailed mine plan for the Tilaiya coal mines. According to the mine plans prepared by the company for these mines which have been submitted for approval to the Ministry of Coal, Government of India, the aggregate coal reserves of these mines are around 1.3 billion tonees and the mine plans envisage a production level of 40 mtpa. The Tilaiya coal mines are approximately 100 kms from the Tilaiya project. The production of coal from these mines are being planned such that tit meets the coal requirements of the Tilaiya power project, On commencement of production, the company will be the largest coal mining company in the private sector in the country.
## Coal Mines in Indonesia: The company is developing the 3,960 MW Krishnapatnam Ultra Mega Power Project which would be using imported coal. To supply coal for this project the company, through its subsidiary – Reliance Coal Resources Private Limited – has acquired 100% economic interest in two coal companies in Indonesia which own three coal mines in Indonesia. These coal mines are located in South Sumatra in Indonesia. The company has evaluated these mines and they have significant resource potential which can support coal production which will not only meet the requirements of Krishnapatnam, but additional capacities also. The coal mines in Indonesia are located at an average distance of around 200 km from the nearest port in Bengkulu. We are planning to develop coal mines such that they commence production in time to meet the requirements of the Krishnapatnam project. The company is planning to develop the railway infrastructure facilities for transporting the coal from the mines to the port in Indonesia. The coal from the Indonesian port would be transported through ships to the Krishnapatnam port. The tie-up for shipping logistics is under finalization.
## Coal Bed Methane: Coal Bed Methane is a natural gas absorbed in coal and lignite seams and is an eco-friendly source of energy. Coal is both the source and reservoir rock for CBM. CBM production is done by simple depressurization and dewatering process. To harness this new source of energy in the country, the Government approved a comprehensive CBM policy in July, 1997 for exploration and production of CBM gas
In the year 2006 an RNRL-led Consortium won four CBM blocks in CBM III round, having an acreage of 3,251 sq. kms. The CBM blocks are located in Madhya Pradesh (one Block), Andhra Pradesh (one Block) and Rajasthan (two Blocks). After signing the contracts for all four blocks with the Government of India on November 7, 2006, the Company has obtained Petroleum Exploration Licence (PEL) for three of the blocks in MP and Rajasthan. The consortium has completed the Environment Impact Assessment study, geological and remote sensing studies in all the four blocks. Preliminary geological assessment has also been completed. The core hole drilling and testing is expected to commence soon. For more details please CLICK HERE.

References: 

(i) Millenniumpost

(ii) www.dnaindia.com

(iii) www.moneycontrol.com
(iv) www.wantchinatimes.com
(vi) http://www.reliancepower.co.in
(vii) Emkay Global Financial Services Ltd
Disclaimer: I do not hold any position in any of the Power Companies listed in BSE/NSE, including Reliance Power Ltd. But my clients could be having positions in the Power Sector. This is just a follow on report on Reliance Power and the Power Sector in general. 

Buy Reliance Power Ltd

CMP: Rs.106.20, 

Target: Rs.135-160

Time: 2 to 6 months

Reliance Power, a part of Reliance Group has the largest portfolio of power projects in the private sector based on coal, gas, hydro and renewable energy, with an operating portfolio of 1540 megawatts. 

Reliance Power Ltd is a huge company and according to Wikipedia: "Along with its subsidiaries, it is presently developing 13 medium and large-sized power projects with a combined planned installed capacity of 33,480 MW". 

Moreover, another point which many might have over looked is that: Reliance Natural Resources was merged with Reliance Power in 2010, shortly after its initial public offering---so it is basically two companies merged into one company. So, doesn't it look attractive at the CMP of Rs.106.20. 

If you remember the upper cut off price for the bid in its IPO (Indian Public Offering) was Rs. 450. You are getting the same share after more than  4 years at almost 1/4th (One fourth), the IPO price. Isn't it an amazing offer..??!!

According to Wikipedia: "On January 15, 2008, the company attracted $27.5 billion of bids on the first day of its initial public offering (IPO), equivalent to 10.5 times the stock on offer, thereby, creating India's IPO record. The upper cut off price for the bid was Rs.450. The proposed IPO was to fund the development of its six power projects across the country whose completion dates are scheduled from December 2009 to March 2014". 

Besides this, after being hit by many negatives in the last few years, there seem to be emerging some positives for the power sector. 
Recently a tariff hike was implemented in states like West Bengal, Tamil Nadu, Delhi, etc and it is believed that a few other states will also follow suit. The PMO’s office, coal ministry and the power ministry also seem to be very serious about resolving the power crisis situation in the country. And although coal production has not shown any overnight increase, the government has asked the coal ministry to de-allocate the private sector coal blocks and give them to Coal India. Besides, it has asked Coal India to appoint mine developers and operators (MDOs) in order to expedite coal production from these mines. On the international front the coal prices have cooled off. The demand for coal has declined a bit, as reflected in the coal prices. The Indonesian coal reference price in the last one year has come down by 14%. And  and there is mixed opinion about whether the coal prices will down any further from here on. The cooling of the international coal prices looks good for the Indian power sector which has some of the companies importing coal from Indonesia.

Also, the coal prices in other countries such as Australia, South Africa, etc have also shown a significant decline. The fall in the coal prices can be attributed to the over-supply situation created due to the availability of cheap natural gas. The U.S. has been replacing coal with cheap natural gas. Besides, the fall in industrial activity in many countries has also helped the coal prices show correction of between 20-30% in one year’s time. The slowdown in the Chinese economy has resulted in lower coal consumption and thus the Indonesian coal prices have shown a decline.

The situation should look good for sectors dependent on coal, such as power, steel and cement, especially in the view of rupee appreciating sharply against the USD in the last few days. Therefore, there would be good impact on the profits of the companies in the power sector, due to cooling off of the international coal prices. Therefore, buy the scrip of Reliance Power Ltd, like a bank Fixed Deposit and keep holding. I am expecting the scrip to cross Rs.135, within the next couple of months time frame. Today, the scrip closed at Rs.106.20.