Stock Review: Premiere Energy and Infrastructure

 

 

There was a recent initial public offering (IPO), which got listed last week, which is Orient Green Power. This company has raised about Rs 900 crore and the marketcap at the IPO price is close to Rs 2,200 crore. If you look at the financials of the company, the revenues are just about Rs 60 crore and marketcap is about Rs 2,200 crore. The reason the market is giving such high valuation is because of the promoter, which is behind this company, which is Shriram EPC Group; the pedigree of the promoter, quality of the promoter and most importantly their execution capability in scaling up the business of the company. If that be the case, there is relatively unknown company belonging to the same promoter group which is trading on the Bombay Stock Exchange by the name of Premiere Energy and Infrastructure Ltd.

To give a background Premiere Energy was earlier called Premiere Housing. This company was acquired by Shriram EPC Group through Shri Housing, a subsidiary of Shriram Auto Finance. The company Shri Housing came out with an open offer in 2008 for the shareholders of Premiere Housing and subsequently the name was changed to Premiere Energy and Infrastructure Ltd.

This company as the name suggests is into two businesses; energy as well as infrastructure. The company over the past two years has been scaling up both the businesses through acquisitions and mergers. The company has merged one power company, which is Valagam Power Ltd, with itself. Valagam Power has got wind energy asset.

The company has also acquired a 51% stake in a company called Emas Engineers & Contractors Pvt Ltd. Emas Engineers & Contractors is a south based company which is into contracting and EPC projects. Emas Engineers has got projects under execution of close to Rs 700 crore.

So, here also since there are opportunities in both the businesses and you have a management which is capable of scaling up both the businesses significantly, here at the current price of Rs 43 the stock is trading at a marketcap of just about Rs 85 crore. The order book of Rs 700 crore which Emas Engineers & Contractors has that provides visibility to the earnings in the futures. The high promoter stake of about 69% in the company is definitely a comforting factor.

I would just like to say that this is not one of those deep value stocks where the company is available at deep discount to the intrinsic value of the asset. Here you are banking upon the management to scale up the business. Since they have done it in the past, given the opportunities which are available in both the businesses, significant scale up in the future can be expected from the management. So, this one maybe for investor with a slightly higher risk profile.