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Thursday, February 5, 2009

VBC Industries:-Huge hidden value to be unlocked

Scripscan-VBC Industries Ltd

Story-Belonging to VBC Ferro Group, VBC Inds. has at present investment activities. Its Equity is 17.48 crs. Book Value is Rs. 18.90. Company has following investments:

1) Orissa Power Corporation: OPC is implementing 100 MW Hydel Power Plant in Orissa. VBC is holding 1.40 cr. shares in OPC which is nearly 45% of OPC's total Equity. The company for funding may place Equity with some FII at Rs. 40-45 per share. Thus, value of VBC's investment in OPC will stand multiplied 4 times to nearly Rs. 60 crs. These days, scrips of Power Sector (particularly Alternate Energy) still get great fancy-.

In fact, when OPC comes out with IPO after 1 year, IPO may be at Rs. 80-100. It means, Equity Holding of VBC in OPC can be worth Rs. 140 crs. after 1 year or so.

2) Konaseema: VBC Ind. is holding 1.4 cr. shares in Konaseema.

Profile of Konaseema

KGPL is gas based power project which has, in Phase-I, already implemented 445 MW Power Plant. Plant for the same has been supplied by Siemens. EPC is by L&T and O&M is by NTPC. Other share holders of KGPL are:

Name Equity
---------- -----------

L&T 5.06
ILFS 6.75
LIC 4.82
GIC 4.82
IDBI 8.43
International Power Vision 2.01
TIFOI 8.89

Project cost of Phase-I was 1383 crs. Phase-I is ready to become operational but gas supplies did not start yet. As a result, project cost stands increased to around 1700 crs. Now, KGPL has embarked on Phase-II which involves setting up of 820 MW Plant at a cost of Rs. 2782 crs. which works out to Rs. 3.39 cr. per M.W.. D.E. Ratio will be 4:1.

Phase-II is likely to be implemented by April 2010. Phase-II is being erected at the existing site to avail of ready infrastructure.

It is reliably learnt that for Phase-II, KGPL may make pre-IPO placement of Equity at Rs. 40-45 per share. Once KGPL gets gas supply and power generation starts company may come out with IPO at Rs. 100/- per share. Considering that Reliance Power may price its IPO of Rs. 2/- at Rs. 80/- per share (Rs. 400/- for Rs. 10/- F.V.) although, its Power Plant will be commissioned in 2012, KGPL IPO at Rs. 100/- should be a big success.Thus, again value of VBC Ind. investment in KGPL can easily be Rs. 150 crs.COMBINED VALUE OF ABOVE 2 INVESTMENTS OF VBC IND. SHOULD BE NEARLY RS. 300 CRS.

New Trigger: Unlisted Group Company of VBC Group is likely to be merged with VBC Ind. This unlisted company holds 3 cr. shares of Konaseema. Market Value of these 3 cr. shares will be nearly Rs. 300 crs.

Post Merger, Equity of VBC Ind. will rise to Rs. 30 crs. which means, around 3 cr. shares. And, its investments post merger will be:

1) 4.40 cr. shares of Konaseema, market value of which can be Rs. 450 crs.

2) 1.4 cr. shares of Orissa Power, market value of which can be Rs. 140-150 crs.

Conclusion-Thus,combined value (post merger of VBC Ind. investments can be Rs. 600 crs. or even more. It gives market value of Rs. 200/- per share. Even if we give it a 85% discount to NAV, its share prices should be Rs. 30/-. Once the market gets the full story,Its share price can double in 6-9 months.As and when IPO of KGPL and OPC hit the market, share prices can go much higher.At 11rs it looks gem of a buy.Go for it guys.

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