Belonging to VBC Ferro Group, VBC Inds. has capacity to produce 10,000 tonnes p.a. of Ferro Chrome. However, scrip is being recommended mainly due to big investments in group entities. Its Equity is 45.18 crs. Book Value is Rs. 22.50. Company has following investments:
1) Orissa Power Corporation : OPC is implementing 100 MW Hydel Power Plant in Orissa. VBC is holding 1.46 cr. shares in OPC which is nearly 45% of OPC’s total Equity. VBC was allotted these shares at par and actual market value of this holding should be now many times more. 20 MW of OPC is scheduled to start in Jan. ‘09. Funding for balance 80 MW is not yet finalized and implementation of 80 MW may be possible only in 2010. These days, scrips of Power Sector (particularly Alternate Energy) have high fancy in the market. Most likely, OPC comes out with IPO in 2010 to finance expansion to 100 MW. That time, value unlocking will take place for VBC share holders.
2) Konaseema : VBC Ind. is holding 3.087cr. shares in Konaseema, allotted at par. KGPL is gas based power project which has, in Phase-1, already implemented 445 MW Power Plant. Plant for the same has been supplied by Siemens. EPC is by L&T and O&M is by NTPC.
Project cost of Phase-I was 1383 crs. Phase-I is ready to become opera-tional but gas supplies did not start yet. As a result, project cost stands increased to around 1700 crs. Now, KGPL has embarked on Phase-II which involves setting up of 820 MW Plant at a cost of Rs. 2782 crs. which works out to Rs. 3.39 cr. per M.W.. D.E. Ratio will be 4:1. Phase-II is likely to be implemented by April 2011. Phase-II is being erected at the existing site to avail of ready infrastructure.
L&T is providing 66 cr. deferred payment credit. It is reliably learnt that for Phase II Equity placement by Konaseema with a Global FII had been finalized but, deal did not go through due to collapse of that FII.
Total investments of VBC Industries are as under:
1) 3.087 cr. shares of Konaseema 2) 1.459 cr. shares of Orissa Power 3) 8.056 million shares of India International Construction Pvt. Ltd.. This company holds 24% stake in BASIL Infrastructure (listed at BSE) which is constructing 2 Five Star Hotels in Hyderabad for which Equity/Management Agreement already signed with Trident Group.
Valuations :- 1) Stake in Konaseema: Konaseema power may come out with IPO towards Q4CY09. This may turn out to be one of the best
IPOs of Power Sector as Konaseema is likely to report decent profits. Firstly, it has been allowed by A.P. Govt. some concessions to compensate for interest loss being suffered by the company for the delayed period. Earlier, it was supposed to supply entire power to APtransco @ Rs. 2.10 per unit. Now, govt. has permitted to sell 25% power of Phase I in open market. Company has already signed an agreement with Karnata Electricity Board to sell this 25% @ 3.65 per unit. For Phase II, PTC will buy 25% of Phase II capacity @ 2.25 per unit, another 25% will be bought by Karnataka Govt. @ 3.65 per unit. Balance 50% power will be sold in open market at much much higher rate. Secondly, Konaseema will be entitled for carbon credits.
At present, KSK Energy (much smaller company, thermal based) is quoting at Rs. 150/- and R. Power (project which will be implemented in 2011) is quoting at Rs. 120/-. On the other hand, Konaseema will come out with IPO when it will be already reporting profits. On a conservative estimate, market value of VBC Inds. stake in Konaseema @ Rs. 80/- per share will work out to
nearly Rs. 250 crs.
2) Hydel Power Plants, being alternate energy, also get higher valuation. Market value of this investment (@ Rs. 50/-) should be more than 70 crs.
3) Since implementation of Hotel Project will take 2-3 years, valuation of India International Stake can be taken at par i.e. Rs. 8 crs
This SCRIP IS ALL SET TO BE A MULTIBAGGER FOR 2009, ALREADY RECOMMENDED TO PAID MEMBERS AT Rs 10. Go for it guys its my NEW YEAR GIFT to all you great people.
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