>BGR ENERGY (ANAND RATHI)

Key takeaways from the roadshow

■ BGR Energy roadshow. On 16-17 Sep ’09 we organized a BGR Energy roadshow. During the roadshow management addressed various issues regarding BGR’s competitive strength, growth
sustainability and the dynamics of the power equipment sector.

■ Competitive advantage in bidding. BGR has enjoyed a 4-5% margin over competitors in bidding due to its in-house design capabilities. It has also negotiated for higher advances and lower retention money (20% and 10% of contract value, respectively), easing working capital and cash-flow concerns.

■ Capacity addition. Except for L&T-Hazira, which would soon commence production, other ventures (JSW, Thermax, Bharat Forge) are still in initial stages. BGR is planning to invest Rs4bn (Rs1.2bn in equity) for a boiler and Rs30-40bn for a turbinegenerator manufacturing plant. The boiler license agreement is pending GoI approval and the boiler-manufacturing plant would take 18-24 months to roll out after approval.

■ Management guidance. Management maintained a 50% yoy growth guidance for FY10/FY11 and an 11.5-12% operating margin. The current Rs125bn order backlog comprises EPC and
BoP projects in a 60:40 ratio. The company might look at a 10% equity dilution in FY12/13 for expansion plans.

To see full report: BGR ENERGY