Going Cheap: Jaiprakash Hydro Power

The power sector has come to occupy the centerstage and is being observed closely by investors and market watchers. Several Greenfield and Brownfield projects are in the pipe line and owing to these the power sector has in the past elicited a bullish response. It is estimated that India would add around 1 lakh MW of power generating capacity in the next 8-9 years. The thrust is on coal and hydro-based power generation.

In the hydro segment, so far only 23 percent of the possible 84,000 MW of capacity has been harnessed, leaving a vast capacity untapped. The scenario has brightened the prospects for Jaiprakash Hydro Power, which has done well over the past few years.

After the recent correction in the market, this scrip has fallen and become an attractive low price buy option. The scrip's price has slipped to Rs. 68, which is more than 50% of its highest level of Rs. 143. The fall in the scrip price is owing to the sullen market sentiment following the failure of the reliance power issue to live upto the investor's expectations. Almost all power scrips have taken a beating on the bourses.

Given its secured visibility of future revenues though the agreement with the Himachal Pradesh government, strong outlook of hydropower business and huge premium power scrip are enjoying these days, we are confident the scrip would scale higher levels on the bourses.

We recommend to investors to take exposure at the counter with a long-term horizon.