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Tuesday, November 17, 2009

Jaihind Projects Ltd:Future growth outlook and prospects,buy/hold/sell,news and views

Scripscan:Jaihind Projects Ltd

Story:Established in 1963, Jaihind Projects Ltd (JPL) is an engineering, procurement & construction (EPC) company focused on the oil & gas, water & infrastructure sectors. Its core area of specialization & operation includes laying oil & gas pipe lines across the country. Thus it even boasts of executing some of the longest pipeline projects in India. Having laid around 5000 km of pipes till date, JPL has capability to lay pipelines from 4” to 56” in diameter thru different terrains ranging from rocky to desert and snowy to marshy land. Apart from GAIL - its biggest client, JPL also undertakes projects for ONGC, Cairn Energy, BPCL, IOC, GSPC, GSPL, Mahanagar Gas, Reliance Infra, L&T, Delhi Jal Board etc. Notably, company has accomplished many river crossing projects, which involve Horizontal Directional Drilling (HDD) - an advanced technology useful for construction of all types of pipelines and cable lines under various landscape obstacles, such as rivers, lakes, ramparts, roads, canals, swamps, runways, parks, sanctuaries etc. In this technology the obstacle is crossed by drilling under it, from one side to the other, using special machine called drilling rig. Thus to carry out such projects JPL owns 6 HDD rigs up to 150 tons for providing non-destructive alternative for crossing of pipelines and cables. Its USP also lies in owning one of the largest fleet of Pipeline equipment in India consisting of more than 1500 equipments with 70 different machineries.Meanwhile, company has also built a strong reputation for executing turnkey projects for water supply schemes. Out of the total pipes laid till date, JPL has supplied and laid over 2500 km of various pipes such as MS/ CS/ CI/ AS/ SS/ AC/ PVC/ RCC/ PSC/ DI/ MDPE/ HDPE/ SW/ GI etc. for water supply & sewerage system projects. It even has in house & mobile site facilities for pipe fabrication from metal plates. Besides it also undertakes projects for construction of reservoirs, water & sewage treatment plants, intake wells, pump house landfill & soil treatment pad etc. Moreover for corrosion protection, company provides services like coal tar & poly ethyle coating, anti-corrosion painting of terminals & pipes, cement lining, cathodic protection and weight coating. On the other hand, JPL is looking to increase its presence in city gas distribution business. It has successfully implemented construction of city gas distribution projects in Ahemdabad, Valsad, Nadiad etc for transporting piped natural gas and compressed natural gas to retail customers, including domestic, commercial, industrial and automobiles. One of its pioneering projects in this segment was the construction of a city gas distribution network for Mahanagar Gas Limited in Mumbai.To scale up its operation, JPL is now looking to enter the construction and laying of pipeline business in the international markets particularly in Gulf regions. It is in talks with many multinational companies for joint venture / equity participation or any such arrangement. Meantime, the outlook in India as well looks very promising for new 4~5 years. The discovery of huge gas reserves on the eastern coast of India would necessitate the laying of cross country pipelines as the demand centers are mainly located in the northern, western and southern regions. Rising gas demand and thrust on LNG imports will also lead to growing demand for gas transportation. GAIL alone is planning additional 7,900 km of new trunk lines over the next five years against current pipeline network of 4,600 km. As per estimated investments exceeding Rs. 30,000 cr is likely to be committed in setting up the National Gas Grid. As per unconfirmed reports, JPL has bid for more than Rs 2000 cr contract apart from having healthy order book position.To funds its capex & increased working capital requirement, JPL raised approx Rs 4 cr (thru placement of 10 lac equity shares @ Rs 41) in 2007 & then raised Rs 15 cr (thru placement of 10 lac equity shares @ Rs 150) in 2008. Thus today its equity stands at Rs 7.10 cr. Recently company has took the approval for preferential allotment of 20 lac warrants to be converted @ Rs 120 per share. Financially JPL is doing exceedingly well and has recently come out with terrific set of nos. For FY10, it can earn a PAT between Rs 16 ~ 18 on total revenue of more than Rs 300 cr.However investors should note that in April 2008 M/s N K Aswani & Co resigned as an auditor and M/s Deloitte Haskins & Sells were appointed as Statutory Auditor in their place. But couple of months later in August 2008, M/s NK Aswani & co was appointed again due to resignation tendered by M/s Deloitte. Secondly, to boost up its net worth to become eligible to bid for larger projects, company may opt for huge equity dilution in future. Despite all these, investors can buy this scrip at current levels as share price has the potential to delivery 40% return in an year"s time.


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