BGR has signed today two JV agreements with Hitachi for design and manufacturing of Boiler-Turbine-Generator (BTG) sets for Thermal power plants in India. These JV’s would involve a total investment of Rs4,400cr (BGR’s share at Rs3,200cr) and would have capacity of c.4,000MW starting from end-2012.
Higher capex and equity stake in the JVs increase possibility of capital raising ahead. BGR will need to infuse ~Rs11.2bn (D/E = 65/35) as equity in the JVs over next two years. Company had a cash balance of Rs9.3bn and 1.3xD/E at FY10 end.
However, the impact of any such orders on revenues would only be visible starting FY13E as most of these orders will be for commissioning of plants in the later half of XIIth five-year plan (2012-2017). So, our current 12m TP of Rs874 (based on 18.6X P/E on average of FY11E and
FY12E EPS) does not include these subsidiaries.
