KSK Energy
KSK Energy Ventures is entering the capital market on 23rd June 08, with a public issue of 3.46 crores equity shares of Rs.10 each in the band of Rs.240 to Rs.255 per share.
Post Reliance Power, investors have become cautious about all the power stocks and hence it becomes more essential to understand this company well.
The company presently has three operational power plants, generating 144 MW of power and two power projects of 675 MW are under construction, which would be operational in December 08 (135 MW) and 540 MW in December 09. Three power projects of 1,973 MW are under development for which term sheet for debt financing has been secured and construction would start soon. The total cost of these three projects has been pegged at Rs.7,786 crores which is being financed at a debt equity ratio of 3 : 1. They will go for commercial production by June 10 (43 MW) March 11 (130 MW) and September 11, for 1,800 MW.
The company has also planned five more power projects of 6,345 MW with project cost of Rs.27,086 to be financed at a debt equity ratio of 3 : 1. All these projects are likely to be operational in phases with last commencing by September 12. The fund for debt and equity of these projects need to be arranged,
The company now proposes to source finance for its 1,800 MW Wardha Chattisgarh Power project estimated to cost Rs.6,874 crores which is financed by debt of Rs.5,156 crores and equity of Rs.1,718 crores. Of this, Pre-IPO placement of 1.73 crore equity share were made at Rs.240 per share for Rs.415 crores while remaining Rs.1,300 crores would get raised from equity issue, including proposed IPO, and subscription by actual users.
The good part about structuring of various power projects by the company is supplying power generated from the projects directly to the users, which results in better realization of power. Also, these users have subscribed to the equity of each SPV generating power, with non-participating economic interest, which enables the company to earn a higher return on lower equity investment. This model also gives the benefit of captive power plant, including coal dispensation through captive route.
For example, operational power project of 43 MW having set up by SPV Arasmeta Captive Power Co. P. Ltd. had project cost of Rs.160 crores, which is being financed by the equity of Rs.50 crores, of which 49% shares were subscribed by Lafarge India P. Ltd. with Class A equity shares, having non-participatory preferential right to dividend equal to 0.10% of the face value, while 51% is held by the company, entitled to normal dividend declared by the company on equity. This results a higher return on investments to the company.
L B India, an affiliate of Lehman Brothers will hold 28.41% of the post IPO equity of the company while 55.24% would be held by the promoters with 6.35% by pre-IPO allottees. The post issue equity of the company would be placed at Rs.346.10 crores.
With the present financial closure, the company shall have 2,792 MW power generation capacity without any equity dilution. Remaining capacity creation of 6,345 MW would be requiring about Rs.8,000 crores as equity, which may dilute equity and may raise it to between Rs.500 crores to Rs.600 crores, over a period of time. So, even that kind of equity base would be considered quite low for power generation capacity of 9,137 MW.
Considering the feedstock tie-up for almost all of its power projects, coupled with participation of actual users in the differential equity as also having actual user status of projects the structuring of all the projects, instill confidence.
Since pre-IPO placement has been made at Rs.240 per share, which happens to be its lower band, one could safely contemplate investment in the issue.