ADAG’s 25,000MW target by 2015 seems wishful

There have been quite a few ambitious announcements by the Reliance-Anil Dhirubhai Ambani Group (ADAG). However, the most difficult to achieve seems to be its plan to ramp up capacity to 25,000MW by 2015

Given that R-Power's current capacity is just 600MW and even assuming that it grows eight times to 2,000MW in two years, Reliance ADAG's plan to touch 25,000MW by 2015 and 35,000MW by 2017 seems unrealistic. The rule of thumb is that you need roughly Rs40.5 million per MW - therefore, it would seem that ADAG will need more than Rs1 trillion to achieve its target. Even if we assume 70% debt, it will have to raise a mind-boggling Rs300 billion in equity. Seems like an uphill task. The second problem is execution. Most of its projects have already fallen behind schedule.

A Kotak report today says, "Targeted capacity of 25GW by FY2015E is ambitious given the high degree of execution risks involved. Our scepticism stems from the present status of projects, which are significantly lagging their original execution schedule." It points out that the current capex run rate is sluggish at Rs35 billion in FY10 which is marginally lesser than Rs37 billion in FY09, indicating sluggish execution. Out of its IPO proceeds of Rs116 billion, it has only used Rs55 billion.

Kotak also points out that its plans to expand its gas-based capacities face high fuel risk. R-Power plans to set up 10,000MW of gas-based capacities with 7,480MW in Dadri and 2,400MW in Samalkot. Kotak believes that Reliance Power's current valuation of 2.3x FY12 net worth is expensive given execution and fuel uncertainties and the fact that a large portion of capacity would be UMPPs (12,000MW) which are usually not value accretive given competitive bids.

In the last two months Reliance Power's stock is pretty much stagnant at around Rs160 levels, after falling from a high of Rs190 in July.

Anil Ambani also assured Reliance Communications shareholders that the company would be debt free in the next three years. Market reaction to this announcement has been scepticism. RCom has a huge debt of Rs300 billion and the plan was that the stake sale in Reliance Infratel, RCom's tower arm would help retire some of this debt. However, even after being in the news for the last many months this deal has not come through. The investor approach seems to be - we will believe it when we see it. In the AGM, ADAG said that RCom's capital expenditure would be only fourth of what it had been over the last three years implying that free cash flows would help it retire debt.

RCom's stock fell from a high of Rs205 in late June to around Rs155 late August. Since then it has recovered to Rs170 levels.

Shareholders' hopes from Reliance Capital may be on a bit more firmer ground with ADAG talking of its ambition to create a bank and listing the life insurance business. However, even both these are not new announcements and are already known to the market and long awaited. Reliance Capital's share price has been among the best performing in the ADAG pack, moving up from a low of Rs611 in May to around Rs850 recently.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).




6 years ago

Look ar solar passive energy also: R Power intends to invest 125000 crore in power capacity addition is quite amazing. I will request Anil to look in to business of passive solar energy also. If 1.2 billion Indians directly use solar heat and light falling on 6 billion square meter area energy capacity 12 lac MW can be created with cost of energy as low as Rs 0.25 per kWh or almost free as compared to Rs 5 for coal based power. I will request Anil and other industrialists who are sitting on mountains of money, most of which belongs to investors believing on their promises, to kindly invest their money in manufacture of solar cooker, solar water heaters, solar windows, solar walls, skylights, solar water purifiers, solar distillers, solar stem makers, solar food processors in form of dehydrators, solar passive building materials etc.



In Reply to alok 6 years ago

dear friend, capitalist are not interested in such things. their only is business is how to make money whatever way possible. they dont care about you, me, poor people, country - they only understand the language of money.

India invites foreign investment in aviation sector

Montreal: India has invited Canadian and other global companies to participate in its booming aviation sector, which has investment opportunities worth $150 billion, reports PTI.

"Though India has achieved a lot of progress in this area in a short span of time, still we have a long way to go.

Scope for working together is immense as $150 billion worth of investment opportunities are available," civil aviation minister Praful Patel said at a meeting of top aviation players here yesterday.

He said both the Indian aviation industry and its foreign partners could grow hand in hand to become "partners in progress" in the spectacular growth story of the country's civil aviation sector.

Highlighting several growth indicators of the sector, Mr Patel stressed that global best practices must be adopted so that the country may be equipped to handle this kind of high growth and massive expansion.

The meeting, jointly organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the civil aviation ministry on the sidelines of the ongoing 37th assembly of UN-affiliate International Civil Aviation Organisation, was attended by a large number of leading figures of the global aviation fraternity.

It was also addressed by Giovanni Bisignani, Director General and CEO of the International Air Transport Association, Boeing India chief and chairman of FICCI civil aviation committee Dinesh Keskar and Indian high commissioner to Canada S M Gavai.


Personal finance Thursday

DSP BlackRock MF extends NFO closure period for DSP BlackRock FMP-3M-Series 21; Max Bupa launches Family First Health Insurance Plan to provide cover to extended families; HDFC Mutual Fund unveils HDFC FMP 100D September 2010 (4); Toyota Kirloskar Motor raises prices of three models

DSP BlackRock MF extends NFO closure period for DSP BlackRock FMP-3M-Series 21

DSP BlackRock Mutual Fund has extended the closing date for the new fund offer (NFO) of DSP BlackRock FMP-3M-Series 21, a close-ended income scheme to 6th October.

DSP BlackRock FMP-3M-Series 21 is a close-ended income scheme. The Scheme has a maturity of three months from the date of allotment. The investment objective of the Scheme is to seek capital appreciation by investing in debt and money-market securities. The Scheme will invest only in securities which mature on or before the date of maturity of the Scheme. The Scheme may also use fixed-income derivatives for hedging and portfolio balancing.

The Scheme offers two options-growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The minimum investment amount is Rs10,000. Dhawal Dalal is the fund manager. CRISIL Liquid Fund Index is the benchmark index.

Dhawal Dalal, senior vice president & head-fixed income, DSP BlackRock Investment Managers, says, "We hope to collect around Rs250 crore from the NFO."

Max Bupa launches Family First Health Insurance Plan to provide cover to extended families

Max Bupa Health Insurance has launched ‘Family First Health Insurance Plan’ under which customers can choose a cover for their extended families, in addition to their spouse and children.

Family First is a health plan designed keeping in mind the health insurance needs of the Indian joint families, where the customers can choose a cover for not just their spouse and children, but also for their extended families, including parents, grand-parents, in-laws and grand children. The plan provides flexibility for families to decide their optimal cover based on their needs. They can choose a sum insured per person (one amount chosen for all family members), as well as a floating amount for the entire family that can be utilised once the sum assured per person is consumed.

Max Bupa Health Insurance is a joint venture between Max India and the UK-based Bupa. While Max India holds 74% stake in the company, Bupa has 26% in the joint venture.

According to Dr Damien Marmion, Chief Executive, Max Bupa, the Family First policy offers its policyholders benefits such as any age enrolment, lifetime renewal and cover for expenses including in-patient treatment, pre- and post- hospitalisation along with access to health advice and health checkups. Under Family First the plan also includes maternity benefits wherein the policyholders can make up to two claims over the policy lifetime.

He adds, “Consumers can decide upon a sum insured per person (one amount chosen for all family members) as well as a floating amount for the entire family that can be utilised once the sum assured per person is consumed.” The Policy offers individual sum insured options ranging from Rs1 lakh to Rs5 lalh and family floater sum insured options ranging from Rs3 lakh to Rs15 lakh. And all members of the family covered under the plan do not necessarily have to be in the same location, so in cases where parents /parents in law/ grandparents or children are in different cities (across India) they can still be covered by the same policy. 

HDFC Mutual Fund unveils HDFC FMP 100D September 2010 (4)

HDFC Mutual Fund has launched HDFC FMP 100D September 2010 (4) under HDFC Fixed Maturity Plans-Series XIV. The Scheme is a close-ended income scheme. The investment objective of the Plan under the Scheme is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the Plan.

The Scheme will offer growth and dividend (payout) option. The Plan will have the maturity period of 100 days. The Plan will invest 60%-100% of assets in debt and money-market instruments and the remaining in government securities.
The Plan opens on 30th September and closes on 6th September. The exit load for the Plan is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The minimum investment amount is Rs5,000. CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are fund managers.

Toyota Kirloskar Motor raises prices of three models

The Indian unit of Toyota Kirloskar Motor will raise prices of three key models from 1st October. The models are Innova, Corolla Altis and Fortuner by up to 1.5%.
The company has not provided any reasons for the increase. The price rise will range from Rs10,000 to Rs17,000 for the Innova and Rs10,000 to Rs14,000 for the Corolla. The price of the Fortuner has been increased by about Rs29,000. Toyota produces the Corolla, Innova and Fortuner at a factory outside Bangalore. It also markets the imported Land Cruiser, Camry, Prado and Prius models.


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