Is it right time to Buy Reliance Power?

June 9, 2011   ·   2 Comments

Reliance Power has declared its FY11 results. Its consolidated net profit was up at Rs 760 crore versus Rs 684 crore. Its consolidated net sales were up at Rs 1,055 crore versus Rs 21 crore. The other income was at Rs 838 crore versus Rs 823 crore. The company’s Q4 consolidated net www.stockssavvy.comprofit was up at Rs 186.6 crore versus Rs 92.4 crore. Its net sales were up at Rs 598.2 crore versus Rs 82.5 crore. In an interview with CNBC-TV18, JP Chalasani, CEO, Reliance Power says, he expects 5,000 mega-watts (MW) to be operational by December 2012.

Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18.

Q: Could you just break-up the top-line and also the profit contribution from your key projects like Rosa?

A: I think the most important thing what happened this financial year is that Reliance Power started becoming an operating company. The top-line, bottom-line from operating companies started growing.

If you look at the top-line, last year, we had about Rs 20 crore revenue from operations, but this year it has gone up 50 times to over Rs 1,000 crore. And that is only coming from Rosa Phase I.

Even the operating profit has gone up over Rs 400 crore from operations. Till now we use to have profits coming from other income, now we have become an operating company. Now onwards, the revenues and profits from generation would keep increase from year to year.

Q: This year and this quarter also see an integration of RNRL numbers, could you just walk us through what the contribution was on the bottom-line for Reliance Power from that arm?

A: RNRL as you know there are significant operating assets. Its contribution is about Rs 3 crore for this. But RNRL main contribution would come once we explore the CBM and gas blocks in Mizoram, the work is happening right now.

Q: Just to go back to the contribution of operating assets to Reliance Power that you eluded to, what is the next big leap in operations? We believe that Samalkot could actually start kicking in by the end of next quarter. Do you expect that to contribute to your operating revenues significantly in the second half of the year or at least towards the October-December quarter?

A: Last year, if you remember we gave a guidance that by December’12, we would become a 5000 megawatt operating company. Currently, we are 600 megawatt. We are on track and we would become a 5000 megawatt company by December’12. This including Samalkot and Rosa Phase II, Butibori, Sasan, everything would keep coming up this year as well as some parts in the next year. The revenues from each of these projects would keep increasing on this. Samalkot, we expect all gas turbines to get commissioned by December-January this year. So that would start generating revenues.

Q: By when will Rosa too be operational? What will that contribute in terms of total megawatt to your guidance?

A: Rosa II is currently running a quarter head of schedule, both units. The unit III, which is the first unit of Rosa Phase II, will come by December and unit IV by March. When we say they come by December-March, they would be fully stabilised. They are for commercial operations. That is an important factor. So that would make Rosa fully commissioned, complete 1,200 megawatt.

One unit at Butibori, which is at Nagpur, would also get commissioned by March ’12. It is quarter ahead of schedule. Samalkot is entire gas turbines would come in this year, all these would get commissioned. We would be in a position of rather full gas towards end of this calendar year in fact. These are the projects that will keep following. We would be on track to reach 5,000 megawatt by December’12.

Savvy’s View: Company is going to go big while expanding their net assets on Power generation & in the Next 1.5 years, the Top Line & Bottom Line will be boosted by the new addition of plants as Capacity generation is going to be 5000 MW from 600 MW. Finally the investments made inbuilding the power generation assets  is going to pay off.   If one has a 2 Year investing horizon, I am sure price of the share can easily see the IPO Price i.e. 270 or even more.

Disclaimer: I have personal holding in Reliance power.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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  • Irrespective of how rosy a picture Anil Ambani may show about Reliance Power, the bottom line still remains that Anil Ambani is under lens of everyone.

    I agree that Reliance Power has some good projects and is going to grow big and may give handsome returns as well but the Risk involved is also very high.

  • Rajesh

    Good point Karan. There is also one fact that no Corporate or an individual can have a clear image all the time. One is bound to make enemies/attract govt. attention when he becomes a limelight. This is bound to happen. Overall if one has belief in the management, there should be no harm in taking the Investment.

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