Expect 40-50% return in Nava Bharat: SP Tulsian

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Expect 40-50% return in Nava Bharat: SP Tulsian

Expect 40-50% return in Nava Bharat Ventures in 12 months, says SP Tulsian, sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about Nava Bharat Ven See messages about Nava Bharat Ven Nava Bharat Ven BSE | NSE 30/05/12 Are Mutual Funds betting on Nava Bharat Ven?

Expect 40-50% return in Nava Bharat Ventures in 12 months, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Nava Bharat Venture is an interesting company. In fact this is a Ferrous Alloys company. They have their 2 plants - one is in Andhra Pradesh and other in Orrisa. One plant has capacity 25,000; another has 75,000. But in the gradual course of time the company has migrated as a power generation company because they first initiated setting up of power project for their captive requirement and when they found that surplus is there they kept on increasing the capacity and today they have the power generation capacity of close to about 237 megawatt, largely at these 2 locations maybe some small capacity of 15-20 megawatt on the wind generation. But the main capacity of power generation is about 220 megawatt, a total capacity of 237 megawatt and now this has become predominantly a power generation company."

He further added, "Actually FY11 was not a very good year for the company. In spite of that they posted an EPS of Rs 30 plus but in FY10 the EPS was at Rs 45 plus and all. But now since the company has tasted that the huge profitability comes from the power business now they are setting 4-5 power generation projects but very small projects. All are thermal based power projects with a capacity of 100 to 150 megawatts."

"So in all about 800 megawatt power generation capacity is in the pipeline in which the company is holding 50% plus stake in all these SPVs. And the best part that the promoter seems to be very conservative even these capacities which are created with a debt free status of the company. If you take a consolidated basis call on 30 March 2011 the company had a debt of close to about Rs 650 crore and the equivalent cash and bank balance was also lying with the company as on that date. So it was a debt free company."

"They have a cash accrual of at least Rs 300 crore every year and I don't think that they would be requiring more than that amount every year to infuse the promoters contribution in that 800 megawatt power generation capacity."

"The share is virtually ruling at a PE multiple of about Rs 4-4.5. Maybe going forward they should be able to post an EPS of 40 plus. So since the stock has corrected a lot, I don't see firstly that there is more downside and if someone can keep a view of 12 months, I expect that share can give a return of about 40-50% from here on."