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Jan 18, 2019, 16:55
K.P.I Global Infrastructure Limited IPO Note (Part 2)
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Overview of the Sector:

 

India owns the position of having the 5th largest power generation capacity. It has also successfully become the 3rd largest producer and consumer of electricity. Electricity consumption is inevitable, thus the government has enforced measures such as Rent of Roof Policy. Under rent a roof policy the developers will rent the roof and offer lease to each household and then feed solar power to the entire grid.

 The Government’s target for FY2022 is to reach a capacity of producing 175 Gigawatt (GW) renewable energy. Out of which the contribution of solar energy stands at 100 GW. Wind is expected with the output of 60GW. Biomass and small hydro power will own 10GW and 5GW respectively. As per data released by the Central Electricity Authority (CEA) 9363MW of solar power capacity has been added in FY’18, this was an increase in the output capacity by over 69%. The industry CAGR for the period of FY10-18 stands at 5.69%.

Solar energy can be either be generated using the technology of Photovoltaic (PV) cells or by the means of the solar-thermal power. Under the process of PV cells the sunlight directly hits the solar panels and converts the light energy into power. When generating power through thermal process sun’s energy is used to fire up the steam turbine which in turn produces power; PV cells prove to be simpler in nature but includes complex procedures for wiring them at the plant site and has a higher Capex. In contrast to it, thermal power demands a lower investment but has high maintenance which increases the operating expenses.

India accommodates geographical area of 3.287million sq km. The intensity of radiation that india receives on an average is 200MW per km. This amounts to a radiation of 657.4million KW. The land utilised for agricultural, forests, residence, industries, snow-clad regions, inhabitable areas sum up to 87.5% of the region. The 12.5% land that is unutilized amounts up-to 0.413 million km which if optimally utilised has a potential to generate 8 million KW power. However solar energy also has a flip side. It requires substantial investment and has longer gestation periods. The energy that 1 sqm of lands generates in a day is equivalent to the energy produced by burning 1 kg of coal. This means that to reach the equivalent production level larger area of land will have to be acquired.

 

Financial Summary:

 

 

 

  • The net revenue for FY16 was realised at Rs.2,746.92 lakhs. For FY17 and FY18 it stood at Rs.2,576.03 and Rs.3,155.54 respectively. The RONW has declined from 57% in FY16 to 20% in FY18 due to heavy equity dilution from Rs. 3.5 crore in FY16 to Rs.12.94 crore in FY18.

  • In the same period the net profit posted was Rs. 767.97 for FY16, Rs.812.49 for FY17 and Rs. 1,140.92 for FY18.

  • For Q2FY19 the Net profit posted was Rs. 3.87 crore against the total turnover of Rs. 18.15 crore. Second half of the year witnesses higher profitability due to optimum radiation of sunlight the plant receives during the period.

  • Earning Per Share for Q2FY19 stood at Rs 2.99. For FY18 the EPS was estimated at Rs 9.39. For FY17 and FY16 it was Rs7.95 and Rs 8.09 respectively.

  • Due to companies unique and niche business operations the company has no listed player. Even for a new player it will take 3-5 years to reach at infrastructural level of KPI Global.

  • The IPO is currently valued at a P/E of 8.51x with a NAV of 43.80. EPS after dilution is coming at Rs 9.39.

  • Crisil has downgraded the ratings on the borrowings of KPI. The long term ratings have been downgraded from CRISIL BB+/Stable to CRISIL D. The short term ratings have been downgraded from CRISIL A4+ to CRISIL D.

  • The downgrade in the ratings is an indication of default of loan repayment in case of cash flow mismatch due to slowdown in the cash inflow from the business operations.

*Year 2016 has been assumed as the base year and therefore is taken at 100

 

 

Restated Summary Statement of Assets and Liabilities

 

Restated Summary Statement of Profit and Loss

 

K.P.I Global Infrastructure Limited IPO Note (Part 1)

 

K.P.I Global Infrastructure Ltd. Management walking the talk. Interaction with the management (Equity Right Exclusive) Part 1

 

Click here to read the complete IPO note

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