Monday, December 01, 2014

JSW acquires 100% stake in Baspa and Karcham Wangtoo hydro power plant
The Stocks with High P/E ratio
[Editor: This deal marks the synergies between the two leading infrastructure (power, steel, construction, mining, etc) companies in India. Some of the chartists have spoken about Rs.15, as a strong resistance, for the scrip. But in practical there is nothing called valuation of a scrip. In the same way Resistances or Supports are just mental set ups or mental boundaries--they really do not exist anywhere. The point is that if the traders want, they can take a scrip to any level, without bothering much about the fundamentals, like Eicher Motors Ltd (Rs.14505), CCL International Ltd (Rs.(Rs.615), Intellivate Cap (Rs.69.30), Creative Merch (Rs.383.15), Risa International Ltd (Rs.398), etc, etc. We have seen many such examples in earlier Bulls Runs. Therefore, as long as a group of people will come in fr0nt of Television cameras as say these have such and such points as resistance, the stock would find difficulty in crossing those levels, because stock market is more of SENTIMENTAL PLAY, rather than valuations. These people have already implanted in your minds that so and so stock cannot cross certain levels, hence you act not because of what your conscience says but because certain group of individuals are saying something. Isn't it? This is one of the greatest manipulations done using various media channels; while the share market regulator  looks at the other side. Have you ever thought why many of those marketmen, who reject J P Power Ltd (Rs.13.20) are recommending Eicher Motor Ltd (a company whose earnings are basically based only on one product) in front of cameras? The Book Value of Eicher Motors Ltd is only Rs.303.07, while P/E is 77.20. Have you ever analysed what this mean? While a high P/E ratio may make a stock look like a good buy, factoring in the company's future growth rate to get the stock's PEG ratio can tell a different story. The lower the PEG ratio, the more the stock may be undervalued given its earnings performance. Have they analysed the PEG of Eicher Motors Ltd Vis-a-vis, J P Power Ltd? I do not think so....Anyway, some of the stocks in the renewable energy sector are down because of low crude oil prices. However, J P Power Ltd also has thermal power plant (Bina Thermal Power plant – 500 MW), whose cost would go down if the price of coal comes down. Hence, it would be better if you continue to accumulate the shares of Jaiprakash Power Ltd, at the CMP of Rs.13.20, for a target of Rs.18-22. These people will again come on TV, and ask all to buy, when they themselves have recommend it first to their clients]
Mumbai | November 17, 2014: After the deal with Reliance CleanGen failed to take off, JSW Energy has now successfully acquired two of Jaiprakash Power Ventures' hydro power plants. The combined capacity of these two power plants is 1,391 MW and comes at a price tag of Rs 9,700 crore.

Jaiprakash Power Ventures, a fully owned subsidiary of the Jaypee group, earlier this year had put up its entire hydro power portfolio for sale. The plants included the 300-Mw Baspa-II hydroelectric plant, 1,091-Mw Karcham Wangtoo plant and 400 MW Vishnuprayag.

Although JSW is acquiring the Baspa and Karcham Wangtoo plant , acquisition of these two assets will make JSW Energy the largest hydroelectric power producer in the country with an operating portfolio of 1,300 MW. The new entity will be called Himachal Baspa power.

The proposed acquisition in the state of Himachal Pradesh is a strategic fit to the company and will enable it to establish its presence in the state where it is also setting up 240 MW hydro electric project at Kutehr. The Baspa and Karcham project have a estimated life of over 29 and 37 years respectively and are extendable to 20 more years.

Axis Capital Limited & SBI Capital Markets Ltd. Were the financial advisors to JSW for the transaction. Amarchand & Mangaldas & Suresh & Co. Were the legal advisors to the company. PWC carried out the financial and tax due diligence and Lahmeyer International Private Ltd. Carried out the technical due diligence.

Courtesy: Indiainfoline
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