Monday, June 29, 2009

Stock Idea: Nava Bharat Ventures

Today, Nava Bharat Ventures is known more as a power company with focus on ferro alloys and sugar. Its total installed power capacity is at 237 MW in AP and Orissa. In Ferro alloys, its capacity is 125,000 MT of manganese and 75,000mT of chrome alloy. In sugar, it has a 3500 TCD integrated plant.

To mitigate itself from being dependent on just one sector, the company got into power and sugar and that has been a very wise decision. It is power and sugar which has helped the company face the rough weather in FY09, especially in ferro alloys, where lack of demand since the end of Sep'08, forced the company to curtail production and shut its ferro chrome furnace.

And though the pressure of this has been reflected in the performance of Q4FY09, the overall performance for FY09 was good. In the last quarter of FY09, the topline and the bottomline took a dip. The revenues for the quarter fell by 12.14% to Rs 303.36 crore and net profit declined by 16.13% to Rs.108.54 crore. Power segment sales rose by 92% while ferro alloys sales was down 74%.

For FY09, revenues of the company increased by 43.43% to Rs 1,350.05 crore and its net profit increased by a whopping 62.84% to Rs 520.57 crore. The company posted a forex loss of Rs.29.17 crore. It also bought back 1.93 million equity shares of Rs 2 each for Rs 23.26 crore and extinguished equal number of equity shares. After this, the paid up capital has come down to 7.59 million equity shares of Rs 2 each.

Power sales rose by 91.4% for FY09 thus taking a leading position in the segmental performance. Ferro alloys, thanks to the good realisations during the first half managed to end the year on more or less at same levels.

The company plans to go full throttle with its power projects and has plans to set up a 1,050MW merchant power plant (50: 50 JV with Malaxmi group) and another 64MW at its existing location in Orissa. Capex envisaged is Rs.4700 crore ad is expected to be commissioned by FY12. It has been allocated Rambia coal mine in Orissa with estimated reserves of 112 million mt. It also plans to put up another power plant in Andhra Pradesh.

This remains a good long term stock as it is power which will power the company in the coming months.

Source: (S P Tulsian)

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