7 July 2009

Jaiprakash Associates

The InSites
Takeaways from site visits

Vishnu Prayag hydro power project (400MW)

Vishnu Prayag hydro power project: Vishnu Prayag hydro power project
with generation capacity of 400MW (4x100MW) is one of India's largest private
sector hydro power projects developed, owned and operated by Jaiprakash Power
Venture Limited (JPVL, 80.6% owned by Jaiprakash Associates). The project is
run-of-river (RoR) project on river Alaknanda in Chamoli district in the state of
Uttarakhand and was commissioned in October 2006. The plant is designed to
generate 1,774 MU in a 90% dependable year, and actual generation stood at
1,871MUs in FY08 and 2,033MUs in FY09.

En-route to Vishnu Prayag: GVK's Alaknanda HEP, NTPC's Tapovan Vishnugad, etc. On our way to Vishnu Prayag
hydro power project, we came across four-five hydro power projects including GVK's Alaknanda HEP (at Srinagar),
NTPC's Tapovan Vishnugad, GMR's Alaknanda HEP and also proposed power projects by NHPC. The two projects where
construction work is going on at a full pace were GVK's Alaknanda and NTPC's Tapovan Vishnugad.

JPVL project portfolio of 13GW: JPVL has power project portfolio of ~13GW, comprising of 7.9GW of thermal power
projects and 5.1GW of hydro power projects. Of this, 400MW Vishnu Prayag hydro power project is already operational,
while 1GW Karcham Wangtoo project is under construction and is expected to be commissioned by May / June 2011.
Thermal power projects in advanced stages include 500MW of Bina power project (total size 1.3GW), and 1.3GW of
Nigrie thermal power project based on two coal blocks (Amelia and Dongri Tal) allotted to Jaiprakash Associates.

Equity funding of JPVL at Rs40-45b+ till FY12: Based on the projects under construction and the pipeline, we
expect equity requirement at Rs55b+, of which Rs10b+ has already been invested till March 2009. The balance funding
requirement stands at Rs40-45b+ till FY12, of which Rs18-20b is required in FY10.

Valuation and view: We expect Jaiprakash Associates to report net profit of Rs11.8b in FY10E (up 38% YoY) and
Rs11.5b in FY11E (down 2% YoY). Based on SOTP methodology, we arrive at price target of Rs227/sh. Stock trades at
PER of 24.6x FY10E and 25.1x FY11E. Maintain Buy.

VISHNUPRAYAG PROJECT FINANCIALS (RS M)

MAR-09 MAR-08 CHG (%)

Net Sales 4,300 3,796 13.3

Total Expenditure 687 267 157.4
EBITDA 3,613 3,529 2.4
EBITDA Margin (%) 84 93
Depreciation 458 453 1.1
Interest 1,227 1,175 4.4
Other Income 176 250 -29.6
PBT 2,104 2,151 -2.2
Tax 240 245 -2.3
Profit after Tax 1,865 1,906 -2.1
Source: Company/MOSL

Satyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 3982 5410

Nalin Bhatt (NalinBhatt@MotilalOswal.com); Tel: +91 22 3982 5429
 The InSites

Vishnu Prayag hydro power project

Vishnu Prayag hydro power project with generation capacity of 400MW (4x100MW) is
one of India’s largest private sector hydro power projects developed, owned and operated
by Jaiprakash Power Venture Limited (JPVL, 80.6% owned by Jaiprakash Associates).

The project is run-of-river (RoR) project on river Alaknanda in Chamoli district in the
state of Uttarakhand and was commissioned in October 2006. The plant is designed to
generate 1,774 MU in a 90% Dependable Year, and actual generation stood at 1,871MUs
in FY08 and 2,033MUs in 2009.

Run-of-the-river hydro power projects

Run-of-the-river is a type of hydroelectric generation whereby the natural flow and
elevation drop of a river are used to generate electricity. Power stations of this type are
built on rivers that generally have a consistent and steady flow of water, either naturally
or through the use of a large reservoir at the head of the river. Run-of-the-river projects
also do not require the impoundment of water, such as through a dam.

Run-of-the-river systems operate as follows:

Process flow 1: Diversion and intake collect water: Water is taken from the river
by diverting it through an intake at a weir, which is a structure that ensures that the intake
remains submerged during periods of fluctuating flow. Water is then carried horizontally
to the forebay tank by a small canal or “leat.”

Before descending to the turbine, the water passes through a settling tank or “forebay”
in which the water is slowed down sufficiently for suspended particles to settle out. The
forebay is usually protected by a rack of metal bars (a trash rack) which filters out
water-borne debris.

Penstock transports the water to the turbine: A pressure pipe, or “penstock,” conveys
the water from the forebay to the turbine, which is enclosed in the powerhouse together
with the generator and control equipment.

Process flow 2: Turbine and generator convert the kinetic and potential energy
in the water to electrical energy. After this, the water is discharged down a “tailrace”
canal back into the river.

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 The InSites

PROCESS FLOW 1: Diversion of water and intake channel

Vishnu Prayag project Heavy gates to block flow
– Barrage entry gate of water between barrage pillars

The blockage on
the river Alakananda is
created by building a
barrage to divert the water
into intake channel

Accumulated water at the barrage Other side of the barrage

Waterflow is blocked for

diverting into the intake
channel. The other side of
barrage is dry as the water
levels are optimum and there
is no excess water let out. In
case of excess water, part of
the water is allowed to flow
in the other side (typically
used only in floods)

Major filter to remove large Fine filter behind major filter to

sedimentation remove fine sedimentation

The first filter point (left) at

the barrage to remove
sedimentation from the
water. The second finer filter
(right) uses an electronic
automatic machine to
remove any debris entering
the Head Race Tunnel
(HRT). This is also the mouth
of the HRT

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 The InSites

PRCOESS FLOW 2: Functioning of Power house

Entry to the power house Main gate of power house inside
a tunnel

Entry to the power house of

400MW Vishnu Prayag
hydro power project. Main
gate for the power house is
through a tunnel created in
the mountain. View from
main gate to the power
house, to the turbine floor

Generator floor Generator named “Aditya” and CoD

The powerhouse starts with

the generator floor, which
has 4 generators of 100MW
each. Aditya is the name of
the turbine (100MW) and
was commissioned in June
2006

Water intake penstock Turbine building

Intake channel pumping

water to the turbine and
gate of one of the turbines

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 The InSites

Turbine shaft connected to generator Generator building

A shaft is connected
to the turbine (below),
which is in top connected to
the generator

Gas insulated switchyard Step-up transformer

Gas insulated switchgear
(Left) setup is used to
control, monitor and de-link
the power equipments from
any fluctuations in grid.
Thus, GIS is critical point of
the entire power house
system. GIS has central
control system, as well the
manual system for execution.
Power is generated in power
house at around 13kVA,
which is stepped up to
400kVa for transmission
(right)

Mouth of tail race tunnel

Mouth of the tail race

tunnel, from where the water
is flown back to the river
Alaknanda post power
generation

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 The InSites

Substations with evacuation linked Switchyard

to transmission line

Power generated from the

power project is transmitted
to the substation containing
links to the power
transmission evacuation
lines, switchyards, etc. This
is the bus bar point for the
power station

Hydro project development is more comprehensive than just power project

development
Jaiprakash has constructed an entire colony where the operations and management team
of the Vishnu Prayag power project and their families reside. Based on our interaction, we
understand that there are ~150 school going children and 100+ families.

Colony built by Jaiprakash almost on the mountain

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 The InSites

En-route to Vishnu Prayag is GVK’s Alaknanda hydro power project and

NTPC’s Tapoban Vishnugad
On our way to Vishnu Prayag hydro power project, we came across four-five hydro
power projects comprising of GVK’s Alaknanda HEP (at Srinagar), NTPC’ Tapovan
Vishnugad, GMR’s Alaknanda HEP and also proposed power projects by NHPC. The
two projects where the construction work is going on at a full pace were GVK’s Alaknanda
project and NTPC’s Tapovan Vishnugad project.

GVK’s Alaknanda HEP development

1. Project site board 2. Head race tunnel mouth

Mouth of Head
Race Tunnel

3. Dam structure creation work 4. Equipment, stores yard

NTPC’s Tapovan Vishnugad development

1. Project site board 2. Mobilisation at the site (EPC by
Patel Engg)

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 The InSites

JPVL project portfolio of 13GW

JPVL has power project portfolio of ~13GW, comprising of 7.9GW of thermal power
projects and 5.1GW of Hydro power projects. Of this, 400MW Vishnu Prayag hydro
power project is already operational, while 1,000MW Karcham Wangtoo project is under
construction and is expected to be commissioned by May / June 2011. Thermal power
projects in advanced stages include 500MW of Bina power project (total size 1.3GW),
and 1.3GW of Nigrie thermal power project based on two coal blocks (Amelia and Dongri
Tal) allotted to Jaiprakash Associates.
JPVL: POWER PORTFOLIO
PLANT / PROJECT JPVL’S FUEL TOTAL REMARKS

STAKE (%) (MW)

Vishnuprayag 100 Hydro 400 - Free power: 12% for the entire project life
Uttarakhand - 100% PPA based on CERC norms (16% ROE)
Karcham-Wangtoo 55.36 Hydro 1,000 - Free power: 12% for first 12 years, 18% for remaining 28 years
Himachal Pradesh - 704MW PPA (CERC norms, 16% ROE), 176MW merchant for first 12 yrs
- Post 12 years, 116MW merchant
Nigrie Thermal 100 Thermal 1,320 - Madhya Pradesh has first right of refusal for upto 30% of power
Madhya Pradesh on CERC tariffs
- 7.5% of generation to Madhya Pradesh govt at variable cost
- Fuel linkages in place from Amelia and Dongri Tal coal blocks
Lower Siang 89 Hydro 2,400 - Free power of 12% for first 10 years, 15% for remaining years
Arunachal Pradesh - All clearances received
- Government of Arunachal Pradesh has the first right of refusal for
additional power for the first 90 days.
Hirong 89 Hydro 500 - Free power of 12% for first 10 years, 15.5% for remaining years
Arunachal Pradesh - All clearances received
- Government of Arunachal Pradesh has the first right of refusal for
additional power for the first 90 days.
Kynshi II 74 Hydro 450 - Free Power of 12% to states, PPA signed for 171MW
Meghalaya - Balance 225 MW on merchant basis
Umngot 74 Hydro 270 - Free Power of 12% to states, PPA signed for 103MW
Meghalaya - Balance 135MW on merchant basis
Karchana 100 Thermal 3,300 - Levellised tariff of Rs2.97/unit,
- 4.68m tons of coal linkage received from NCL.
Bara 100 Thermal 1,980 - Environment clearance received, levelised tariff of Rs3.02/unit
- 7.02m tons of coal linkage received from NCL.
Bina power project 100 Thermal 1,250 - 500MW EPC order placed to BHEL, Linkages received for 500MW
- Based on CERC notes
Total 12,870
Source: Company/MOSL

Equity funding of JPVL at Rs40-45b+ till FY12: Based on the projects under
construction and the pipeline, we expect equity requirement at Rs55b+, of which Rs12.5b
has already been invested till March 2009. The balance funding requirement stands at
Rs40-45b+ till FY12, of which ~Rs18-20b is required in FY10.

Consolidation of power portfolio: Jaiprakash Hydro Power Limited (JHPL, 63.3%

held by Jaiprakash Associates) is a listed entity of JP group with 300MW Baspa hydro
power project. Recently, the Jaiprakash group approved the merger of JPVL with the
JHPL wef April 2009. The merger ratio has been decided at 1 shares of JPVL for every
3 shares held in JHPL. The proposed merger ratio values JPVL at Rs125b+ (at CMP of
Rs85/sh of JHPL). Further, the board of JHPL has approved fund raising of upto Rs15b.
Earlier, JPVL had placed ~3% stake to SBI and ICICI in JPVL at Rs4b, valuing the
company at Rs133b.
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 The InSites

Valuation and view

We expect JPA to report net profit of Rs11.8b in FY10E (up 38% YoY) and Rs11.5b in
FY11E (down 2% YoY). Based on SOTP methodology, we arrive at price target of
Rs227/share. Stock trades at PER of 24.6x FY10E and 25.1x FY11E. Maintain Buy.

JAIPRAKASH ASSOCIATES: SUM OF PARTS VALUATION

STANDALONE BUSINESS BUSINESS METHOD VALUATION VALUE VALUE RATIONALE

SEGMENT MULTIPLE (RS M) (RS/SH)

E&C Business Construction FY11 EV/EBIT 8 77,181 55 At par with Industry Average
Cement Business Cement FY10 EV/ton 85 99,994 71 At par with Industry Average
Coal Mining Mining Book Value 9,000 6
Cash Book Value 14,850 11 Book value FY09
Firm Value 201,024 143
Debt Book Value 123,650 88
Equity Value (A) 77,374 55
Subsidiary Companies
Jaiprakash Hydro Hydro Power Mkt Price (Rs/sh) 93 21,692 15 Based on 25% discount to current price
Jaiprakash Power Hydro Power NPV of project 18,018 13 At 25% discount to NPV of
Ventures Ltd. development project development
Jaypee Karcham Hydro Power Investment 3 28,500 20 Expected ROE = 30%+, as 20%
Hydro Corp Ltd. power on merchant basis
Total (B) 68,210 49
Real Estate / BOT
Jaypee Greens Real Estate NPV of project 15,475 11 At project NAV
development
Yamuna Expressway
BOT Expressway Road NPV of project (15,924) -11 NPV of project development
development development
Real Estate Real Estate NPV of project 128,740 92 At project NAV
development
Total (C) 128,292 91
Treasury Stock (D) 45,398 32 At Target price
Total ( A + B + C + D) 319,274 227
Source: MOSL

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 The InSites

Jaiprakash Associates

I N C O M E S T A T E M ENT ( R S M ILLION) RATIOS

Y/E MARCH 2008 2009 2 0 10 E 2 0 11E Y/E MARCH 2008 2009 2 0 10 E 2 0 11E
Net Sales 39,670 57,703 87,283 95,160 Basic (Rs)
Change (%) 14.5 45.5 51.3 9.0 A djusted EPS 5.2 7.2 8.4 8.2
Growth (%) 31.8 38.6 16.1 -2.0
Cons. & Manufact. Expen. 19,562 31,334 48,341 53,913
Consolidated EPS 7.3 9.5 10.2 10.0
2,553
Employees' Remuneration and Welfare 3,319 3,817 4,580
Growth (%) 45.5 29.9 6.6 -1.6
Selling & Distribution Expenses 3,689 4,058 4,464 4,910
Cash EPS 6.9 9.7 11.5 12.5
Other Expenses 3,080 2,869 3,250 3,397
Book Value 39.2 47.3 46.7 53.1
Total Expenses 28,884 41,580 59,871 66,800
DPS 1.0 1.4 1.7 1.6
EBITDA 10,786 16,123 27,412 28,360
Payout (incl. Div. Tax.) 22.0 22.2 22.8 22.8
% of Net Sales 27.2 27.9 31.4 29.8
Valuation (x)
Depreciation 2,030 2,958 4,395 6,011
P/E (standalone) 39.6 28.5 24.6 25.1
Interest 3,392 5,024 8,199 7,672
P/E (consolidated) 28.1 21.6 20.3 20.6
Other Income 3,069 4,147 2,586 2,644
Cash P/E 29.7 21.2 17.9 16.5
PBT 8,433 12,289 17,404 17,321
EV/EBITDA 28.4 21.2 14.8 14.4
Tax 2,336 3,477 5,634 5,783
EV/Sales 7.7 5.9 4.6 4.3
Rate (%) 27.7 28.3 32.4 33.4
Price/Book Value 5.2 4.4 4.4 3.9
Reported PAT 6,097 8,812 11,770 11,538
Dividend Yield (%) 0.5 0.7 0.8 0.8
Extra-o rd. Inc. (net o f expenses) 0 250 0 0
A djusted PAT 6,097 8,562 11,770 11,538 P rofitability Ratios (%)
Change (%) 40.8 40.4 37.5 -2.0 RoE 16.3 16.8 19.3 16.5
RoCE 10.6 11.2 13.6 12.3
BALANCE SHEET ( R S M ILLION)
Turnover Ratios
Y/E MARCH 2008 2009E 2 0 10 E 2 0 11E
Debtors (Days) 54 54 52 50
Share Capital 2,343 2,373 2,809 2,809
Asset Turnover (x) 0.4 0.4 0.5 0.5
Reserves 43,637 53,764 62,850 71,757
Net Worth 45,980 56,137 65,659 74,567 Leverage Ratio
Loans 83,056 112,383 130,686 122,128 Debt/Equity (x) 1.8 2.0 2.0 1.6
Deffered Tax Liability 5,597 5,597 6,097 6,597
Capital Employed 134,633 174,117 202,443 203,291 C A S H F L O W S T A T E M ENT ( R S M ILLION)

Y/E MARCH 2008 2009E 2 0 10 E 2 0 11E

Gross Fixed Assets 51,662 77,662 97,662 133,577 PBT before EO Items 8,433 12,289 17,404 17,321
Less: Depreciation 14,548 17,505 21,900 27,911 Add : Depreciation 2,030 2,958 4,395 6,011
Net Fixed Assets 37,115 60,157 75,762 105,666 Interest 3,392 5,024 8,199 7,672
Capital WIP 42,190 39,915 34,415 5,500 Less : Direct Taxes Paid 2,336 3,477 5,634 5,783
Investments 32,248 44,545 57,408 67,885 (Inc)/Dec in WC 369 -9,726 -4,857 -1,583
Curr. Assets 59,631 76,107 99,244 92,179 CF from Operations 11,889 7,068 19,507 23,638
Inventory 13,076 19,519 28,239 29,464 (Inc)/Dec in FA -29,835 -23,725 -14,500 -7,000
Debtors 5,862 8,527 12,435 13,036 (Pur)/Sale of Investments -14,461 -12,297 -12,863 -10,478
Cash & Bank Balance 18,154 14,850 15,351 3,150 CF from Investments -44,295 -36,022 -27,363 -17,478
Loans & Advances 22,219 32,892 42,899 46,210
Other Current Assets 320 320 320 320 (Inc)/Dec in Networth 13,097 3,298 936 500
(Inc)/Dec in Debt 27,898 29,327 18,303 -8,559
Current Liab. & Prov. 36,552 46,607 64,386 67,939 Less : Interest Paid 3,392 5,024 8,199 7,672
Creditors 7,010 8,276 12,643 13,990 Dividend Paid 1,341 1,952 2,684 2,631
Other Liabilities 26,481 34,331 47,243 49,449 CF from Fin. Activity 36,262 25,650 8,356 -18,361
Provisions 3,061 4,000 4,500 4,500
Inc/Dec of Cash 3,856 -3,304 501 -12,201
Net Current Assets 23,079 29,500 34,858 24,240
Add: Beginning Balance 14,298 18,154 14,850 15,351
Misc. Expenses 1 0 0 0
Closing Balance 18,154 14,850 15,351 3,150
A pplication of Funds 134,633 174,117 202,443 203,291
E: M OSt Estimates

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N O T E S

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 The InSites

For more copies or other information, contact

Institutional: Navin Agarwal. Retail: Manish Shah
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