JSW Energy IPO - Good bet for long term investors!

Sajjan Jindal led JSW Energy will enter capital markets on Monday, December 7 with a public issue aggregating to Rs 27 billion. The price band of the issue has been set at Rs 100-115 a share.

The company intends to utilize the issue proceeds to partially finance construction and development of the identified projects aggregating to 2,790 MW in capacity; 400 KV transmission project and mining venture, and for repayment of corporate project.

JM Financial, Kotak Mahindra Capital Co, JPMorgan and Morgan Stanley r are helping the company in the fund raising process.

The issue has been graded by Care as CARE IPO Grade 4, indicating above average fundamentals.

Expansion plans:

The company has chalked out a capex plan of Rs 26.13 billion. It intends to utilize the issue proceeds to partially finance construction and development of the identified projects aggregating to 2,790 mega watt in capacity; 400 kilo watt transmission project and mining venture, and for repayment of corporate project.

Pros in investing:

Demand for Power seen rising: The per capita consumption of electricity is one of the lowest in India. According to the 17th electric power survey, May 2007 (`EPS`), India`s peak demand is expected to grow at a CAGR of 7.6% over a period of 10 years (FY2007 to FY2017) and would require a generating capacity of 300,000 MW by 2017 to cater to this demand compared to an installed capacity of 132,329 MW as on Mar. 31, 2007.

Facilities already operating: JSW Energy is an established energy company with operational capacity of 860 MW with additional 2,790 MW of capacity under construction and implementation stage. The company also has 7,740 MW of capacity under development, thus, making the total capacity of the company at 11,390 MW, with total project outlay of Rs 541.34 billion.

Strong corporate house backup: The company belong`s O.P. Jindal Group of company which has a strong presence in the industry.

Cons - You have to watch out for:

The project is constrained by project implementation risk involving multi-fold leap in capacity compared to present operations, exposure to volatile fuel prices and risk related to foreign exchange commitments.

However, good news for the retail investors is the company is offering discount of Rs 5 a share.


For six months ended September 2009, the total income of the company was at Rs 8.75 billion with net profit being placed at Rs 2.68 billion, against total income of Rs 18.52 billion of FY`09 with net profit at Rs 2.77 billion. In last 4.5 years, the total net profit of the company was at Rs 15.78 billion. Net worth of the company, as at Sep.30, 2009 is at Rs 17.48 billion. With a strong promoter background, rising demand for power and facilities already under operation, the issue is suggestible to subscribe from the long term perspective.

via IRIS