IPM Student Activity Council

IIM Indore
Pre Process (Finance Club)

1 Analyse any one of the following companies:

BHEL
Dabur India
Sun Pharmaceuticals
Reliance Power
State Bank of India
Mahindra and Mahindra

The analysis should give a good idea of the field of working

of the company, competitor analysis, sector analysis and
should contain your opinion on whether one should invest
in the company at current prices or not (with reasons).

Analysis of Reliance Powers

About The Company
Reliance Power Limited is a part of the Reliance Group, one of Indias
largest business houses. The energy sector companies include Reliance
Infrastructure and Reliance Power .
Reliance Power has been established to develop, construct and operate
power projects both in India as well as internationally. The Company on its
own and through its subsidiaries has a large portfolio of power generation
capacity, both in operation as well as capacity under development.

Working of the Company

The power projects are diverse in terms of geographic location,

fuel type, fuel source and off-take, and each project is planned to
be strategically located near an available fuel supply or load
centre. The company has 5,185 MW of operational power generation
assets. The projects under development include three coal-fired projects
to be fuelled by reserves from captive mines and supplies from India and
elsewhere; one gas-fired project and twelve hydroelectric projects, six of
them in Arunachal Pradesh, five in Himachal Pradesh and one in
Uttarakhand.
Reliance Power has won three of the four Ultra Mega Power
Projects(UMPPs) awarded by the Indian Government so far. These
include UMPPs in Sasan( Madhya Pradesh),Krishnapatnam( Andhra
Pradesh) & Tilaiya(Jharkhand).UMPPs are a significant part of the
Indian government's initiative to collaborate with power generation
companies to set up 4,000 MW projects to ease the countrys power
deficit situation.
Besides these, Reliance Power is also developing coal bed methane (CBM)
blocks. The company is registering projects with the Clean Development
Mechanism executive board for issuance of Certified Emission Reduction
(CER) certificates to augment its revenues.
The companies strategy and working can be summarized under
the following heads:

Diversified Fuel Sources

Proximity to Fuel Sources

Clean Technologies

Fuel Security

Low Cost Fuel

Major Projects
The major projects can be divided under the heading:

Coal based Projects( 3 operational, 2 under construction, 2 under

implementation)
Gas based Projects(Under Construction)
Hydroelectricity Projects(7 Under Development)
Initiatives in renewable energy

Major achievement has been commencement of coal production

Sasan Coal Mines. Along with its strategic partner North American
Coal Corporation Limited a detailed plan of the Sasan Coal Mines
has been prepared. On reaching peak capacity, the mines will be
amongst the largest coal mines in India. In order to produce coal from
these mines in the most productive and cost-efficient manner, the
company evaluated coal mining equipment from reputed vendors from
different countries. Along with its strategic partner, the company has put
in place a coal mining team capable of implementing these plans.

Competitor Analysis
The major competitors include Jindal Powers, Jaypee Powers, Adani
Powers and Lanco Powers in the Private Sector. Based on the analysis
of the Competitors and performance Reliance Powers the Competitor
Analysis is presented in the form of a Swot Analysis.

Strength

Well Diversified Portfolio.

One of the largest coal resource portfolio in private sector.
Track Record of execution capabilities.
Strong well capitalised balance sheet supported by cash flows from
operating assets.
Operations in Indonesia.
Strong financial track record. Total Income has grown at CAGR of
46% and Profit has grown at CAGR of 8%.
Share holder pattern suggestive of positive trend.
Clear Strategy for 10 years (till 2020).

Weakness

Acquisition of land for generating power setups is slow due to policy

paralysis. It hinders the growth of projects which are Under
Development due to a lack of clear policy framework.
Gap in resource acquisition.

Opportunities
Indias growing demand for energy provides a market which has
been largely untapped by private players.
Lack of efficiency in Government Enterprises creates opportunity for
private players to venture into Power Sector.
Increased government focus.

In markets like Indonesia where opportunities are immense and

untapped.

Threat

Internal stakeholders. 74.98% of shareholdings is by promoters and

in absence of implementation of the plans laid down and execution
of projects on time the company risks internal disparities.
Competition from other private players is significant. With
government focus on promoting private participation, existing
players venturing to gain same resources and consumers and
stricter bidding/auctioning processes constant pressure is
maintained.

Sector Analysis
Power sector holds immense possibilities given Indias growing need for
energy. Opening of the sector for private players holds avenues for
companies to invest in power whose potential has been largely untapped
till now. Availability of technology, resources and government focus makes
it a sector which will grow and not reach stagnation in the coming future.

Conclusion
In my opinion one should invest in Reliance Powers at the current prices.
The reasons are:

It is a good long term investment (Anything above 1 year).

The prices are likely to increase as more projects become

operational and hence would profit the investors who invest at the
current prices.
The income and profit of the company has been rising. The profits
for March31, 2014 was 5,648 lakhs and 51,393 lakhs for March
2013. The fall was mainly due to lack of clear political situation in
the country.
With a new government and renewed belief amongst the investors
and the companies, the company is likely to speed up its operations,
A strategic plan till 2020 makes it safe avenue to invest.
Reliance Power also has one of the largest resources at disposal,
access to new technologies and a track record for completion of
projects on time.
Power sector is unlikely to face stagnation in the near future and the
prospects of returns seem to be positive.

References
www.Moneycontrol.com
www.reliancepower.co.in
www.jindalpower.com
www.adanipower.com
www.jppowerventures.com
www.lancogroup.com

2 Benchmark one Finance Club of any prominent institution

(except IIM Indore), highlighting its key events/activities which
can be conducted for the IPM Participants. References made need
to be listed.
In most of the colleges the activities conducted by Finance Clubs are very
similar. Owing to this similarity and competitions conducted by them
which are mostly alike it is very difficult to benchmark them based on
their innovation or creativity. The success lies in how well such events are
conducted and implementation of the same. Most activities and
competitions have already been thought of and conducted by FIC since its
inception. However, our club activities need to be more
comprehensive, inclusive and sustained.
In light of the above mentioned details I would like to benchmark the
Economics Department of Fergusson College, Pune. There is no club

by the name Finance Club but the activities conducted by the Economics
Department includes the activities usually undertaken by Finance Clubs.
The Economics Department organizes an annual fest Wall Street
under which events related to Finance and Economics are
conducted. The main events are Mock Stock(Flagship Event), Quiz,
Debate, Bizinnovation (Presenting an innovative Business Idea),
Monopoly and a few more. In addition to the annual fest the department
regularly conducts seminars/guest lectures on investing, career prospects
in finance and other competitions. The reasons for Benchmarking
Economic Department of Fergusson are as follows:

The annual fest Wall Street is a very comprehensively planned

event which allows students to be engaged with Finance and
Economics for a sufficient period of time.
The annual fest also ensures that the activities are not fragmented
and the interest is maintained due to conduction of a big event.
Year round small scale competitions ensure enough exposure to
students.
The activities are well rounded and pay adequate attention to all
aspects of an economy instead of being solely guided by stock
market and trading.
Though the events are related to Finance and Economics they test
numerous parameters like knowledge(Quiz), speaking/presentation
skills(Debate),
analysis
of
market(
Mock
Stock),
critical
evaluation/creativity
(Bizinnovation)
and
experience
sharing( Lectures/ Seminars).
Sessions on career prospects is very important and essential .It
helps the students to have a fair idea to choose from the multitude
options available after evaluating both its pros and cons.

Our club can gain insights from the above benchmark due to its inclusive
nature. It is important for us and more precisely given the nature of our
course that we have an all rounded approach and awareness about the
finance and economic scenarios. In my opinion, a built up (in form of a
major event) is necessary owing to the feedbacks received from my peers.
For Example: Most of us do not trade and follow share markets regularly.
When earlier this year a trading game which involved trading politicians
was conducted it created interest and understanding among the students.
However, these events are fragmented and lack continuity which results
in people finding it difficult to use the concepts they imbibe and end up
losing enthusiasm about the same. The shortcomings of our club can be
summarized as:

Lack of awareness about share market among students.

Students are not adept with more sophisticated markets like Forex,
commodity etc
Lack of continuity in events.
No major event to grab the attention of students.
Other aspects of Finance and Economy not given adequate
attention.
Students consider share markets too complex and hence do not
show enough zeal.
Lack of ample opportunities to apply knowledge of Economics,
Business and Policy formation for students.

In lieu of the above mentioned shortcomings, a similar model (as

Economics Dept. of Fergusson) will allow sustained and inclusive
opportunities for students to hone their skills.
In addition to the above mentioned points that our club can learn from
Economics Dept. of Fergusson, Financial Literacy Week which is conducted
by Fiscul ( Finance Club of LSR, DU) should also be incorporated in our list
of activities. It is an interactive way to create awareness about concepts
related to finance amongst the students.
The above mentioned activities/ events will help the club generate enough
interest among students, lead to greater financial awareness and
hopefully mitigate the shortcomings that we face today.