>BGR ENERGY (SPARK CAPITAL)

BGR is a dominant player in the EPC / BoP space, with >20 years in the industry and a strong orderbook of Rs. 120bn. The company is focused on the large, > USD 57bn EPC / BoP opportunity, over FY11-17E, within the power sector and is considered to be one among the top five industry players. The company also has a small presence in the Oil & gas space (4% of orderbook). Given the company’s robust orderbook, credible project execution track record and the strong near term opportunities within the power sector (BGR’s focus area), we believe the company is at the cusp of rapid growth (>37% revenue and PAT CAGR) over the next 3-4 years.

Dominant EPC / BoP player expected to soar on macro tailwinds

INVESTMENT RATIONALE
■ Key beneficiary of a > USD 57bn revenue opportunity within the power EPC and BoP space - over the 12th Plan, we expect the power EPC & BoP markets to present additional order inflow opportunities worth ~USD 45bn, representing a ~40% increase in target opportunities;

■ BGR, we think, will benefit from the perceptible shift towards EPC contracts, away from package based ordering– during the 12th plan, we expect 50% (33% in 11th Plan) of the orders from state utilities and 80% (65% in 11th Plan) of the private sector orders to be awarded on EPC basis;

■ Ranks high on capabilities; in-house design capabilities provide company with greater control over costs and time schedules - Considered to be one of the top 5 players in the power EPC / BoP market, reflected in a significant portion of orderbook representing repeat orders from clients;

■ Strong orderbook of Rs. 120bn, comprising 60% power EPC, 35% power BoP and 4% oil & gas - diversified clientele and back-to-back equipment supply arrangements mitigate risks;

■ Well organized and professionally managed – Core management team comprising of ~30 members with each having an industry experience of ~20-40years.

■ Managements’ initiatives with regard to working capital management, we believe, will reduce working capital days (excluding surplus cash) from ~165-180 to ~150 over the next three years;

■ Resilient EBITDA margins (~11%), soaring growth (>37% revenue and PAT CAGR over FY09- 12E) and highly attractive capital efficiencies (~30% RoEs).

To read the full report: BGR ENERGY