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Sharekhan on Genus Power Infrastructures

April 2, 2008

Genus Power Infrastructure Ltd (GPIL) has bought a 6 mega watt (MW) power generation plant from Genus Power Products Ltd (GPPL). Subsequently, the shareholders of GPPL would receive one fully paid-up share of GPIL for every 60 fully paid-up shares of GPPL currently held by them.

The 6MW plant of GPPL is based on biomass technology and the power generated can be sold as well as used for captive purposes. This will be a win-win situation since by selling the power generated the company would boost its revenues whereas by using the same captively would save its power cost. GPIL would also enjoy tax benefits under section 80-IA as per which the income from power generation is nontaxable for ten years of operations.

The additional capacity of 6MW could add to the profits of the company. However,
the equity would also be diluted by 1.5-1.8%. The the company is well poised to benefit from the government’s plan to spend on the country’s power transmission and distribution sector. At the current market price the stock discounts our FY2009E fully diluted earnings per share by 7.2x. Sharekhan expects the company to report an EPS of Rs 53.5 for FY09 and has set a target price of Rs 643.

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