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Motilal Oswal
Indiabulls Power (Buy)
CMP: ₹12.89
Target: ₹21
Indiabulls Power capacity will grow to 2.7GW by CY15, three times the current capacity of 810 MW. It is best placed on several fronts: a) 2.1 GW of net capacity (about 85 per cent of total capacity) tied up under LT power purchase agreement with reasonable tariff; b) 9.7 mtpa of domestic linkages/ FSA for projects; c) best-in-class contractors, domestic equipment provide comfort on operations and alleviate risk on equipment servicing/ forex debt; d) location in high load consuming western region; and e) 84 per cent of capex already incurred, with equity infusion of 88 per cent. Visibility of PPA/FSA is crucial, given that open capacities face issues of both fuel availability and transmission. In addition, Indiabulls Power has land and requisite clearances for about 4 GW of capacity, offering visibility on growth option. Recent restructuring amongst promoters is set to bring unified focus to the company and accelerate growth, in our view. It also stands out given that it is not affected by captive coal imbroglio.
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