Jindal Photo-Power Play

BSE 532624; CMP Rs 165

The Central Governments new Power Policy inviting merchant producers to install and generate power is bringing in a horde of new investors. The Rs 400 crore photographic equipment and imaging films manufacturer Jindal Photo has moved off the block in a rapid pace.

-It has announced the setting up of a 250 MW Thermal Power Plant in the State of Orissa, costing close to Rs 1100 crore.

-The corporation has been allotted a dedicated Coal Block by the State/Central Governments to enable unhindered power generation. The development of these mines spread over 3 years will cost an additional Rs 200-300 crore, bringing the size of Jindal's expansion plan to Rs 1500 crore.

-Conservative profits on a thermal power plant work to Rs 1 crore per Megawatt produced per annum, thus in 3 years from now Jindal Photo could be adding as much as Rs 200 crore to its tax free bottomline, making the current price an attractive point to enter the stock.

-The new merchant power policy allows tax free benefits for 10 years under the Income Tax Act and numerous other concessions in the State taxes.

-Current operations of Jindal Photo, based as they are in the tax haven of Goa are lucrative.

-For Financial 07, Revenues were placed at Rs 412 crore with after tax profits at Rs 27 crore. The FY07 EPS worked out to Rs 27 per share on a small Equity of Rs 10 crore.

-For Q1 08, while Revenues have been flat at Rs 114 crore, the after tax profits moved up a sizzling 49 per cent to Rs 13 crore ( 8.7 crore) turning in a non annualised EPS of Rs 12.

-The promoter holding is a massive 72 per cent, and very conservative valuations should carry the scrip closer to a price target of Rs 270 to Rs 300.