Hyderabad: Nagarjuna Construction Co. Ltd (NCC), the Hyderabad-based infrastructure company, plans to set up power plants to generate 1500MW by 2012 in an effort to cater to growing demand for power in an economy that grew by 9.4% in 2006-07. The company, which has a presence in hydro and gas-based power plants, said it plans to invest around Rs6,000 crore in this.
“We are looking at developing some coal-based power projects in Tamil Nadu and Andhra Pradesh,” said Y.D. Murthy, senior vice-president, finance, Nagarjuna. He added the company had not “finalized anything” and the plan was to “set up 250-300MW capacity per year which translates into around Rs1,200 crore investment per year.”
NCC reported revenue of Rs2,900 crore for the year ended March, up from Rs1,842.47 crore the year before, a growth of 57%. The company posted a net profit of Rs151.91 crore in the year, up 46% from Rs103.90 crore the previous year.
Kuljit Singh, partner with accounting firm Ernst & Young, said it was a good idea for NCC to enter the power sector. “Focus on generation projects will allow it to take advantage of the significant demand-supply shortfall in the industry, which should result in high margins in the short to medium term particularly if the generation projects are structured for the merchant (or industrial) power market,” he added.
NCC is currently involved in the development of two hydroelectric power projects with a capacity of 380MW at a total cost of Rs2,050 crore. The projects are in Himachal Pradesh (100MW)?and?Sikkim (280MW). While the company is developing the Himachal Pradesh project along with Satyam group’s Maytas Infra Pvt Ltd and Bangalore’s SSJV Projects Private Ltd, it is developing the Sikkim project with SMEC of Australia. “Our equity participation in these projects is Rs258 crore. We are very bullish on the road sector and power sector and will set up projects through our subsidiary company NCC Infra Holdings Ltd,” said Murthy.
NCC is also a partner in the 460MW gas-based power project being developed by Gautami Power of GVK Power & Infrastructure Ltd; it holds a minority stake of 10%.
In a related development, NCC is also looking for orders for projects under the government’s rural electrification programme in Gujarat and Maharashtra. “We have an electrical division that can do turn-key electrification and transmission and distribution lines. There is a huge business opportunity in the transmission and distribution sphere and these projects have a short gestation period of up to a year,” said Murthy.
“The significant government focus on rural electrification investments will result in sizeable contracting opportunities for NCC which will add to its topline and bottomline in the short term,” said Ernst & Young’s Singh.
NCC’s stocks declined by 3.17% on 8 June, to end at Rs163.60 on the Bombay Stock Exchange on a day when the Sensex shed 122.37 points to close at 14,063.81 points. The stock recorded a year’s high price of Rs236 and low of Rs97.50 on BSE.