The board of directors of Reliance Power Ltd (RPL) has approved a proposal to raise Rs2,000cr via a Qualified Institutional Placement (QIP). The purposes stated for the QIP are reduction of debt and general corporate purposes. The consolidated net debt of the company stood at ~Rs28,646cr at the end of Q2FY18. At the end of Q2FY18, the net debt to EBITDA and Debt to equity ratios stood at 6.3x and 1.3x respectively.
RPL had a power generation capacity of 5,945MW as on FY17. The company operates a 3,960MW Ultra Mega Power Project at Sasan, which has its own integrated coal mine. The other thermal power plants of RPL are at Rosa (1,200MW) and Butibori (600MW). The company also generates 194MW of renewable energy, out of which 45MW is wind energy and the remaining solar. RPL plans to step up a 3,000MW combined cycle power plant in Bangladesh. The project agreements for the first phase of 750MW have recently been executed and are expected to cost ~Rs6,500cr. The company has signed MoU to develop 6GW of solar power projects in Rajasthan over the next five years.
We expect the company to report revenue CAGR of 11.2% over FY17-20E aided by (a) improvement in pricing over FY17-20E and (b) utilization levels remaining steady over FY17-20E. EBITDA margins are likely to expand by 113bps over FY17-20E aided by better pricing. The stock is currently trading at 6.5x FY20E P/E.