Investor Presentaiton

8 fundamental ANALYSIS SJVN Ltd 20+ HDFC securities Click. Invest. Grow. YEARS Regular receivables (excluding unbilled revenue and bills discounted) as on March 31, 2022, reduced to Rs 574 crore (equivalent to 87 days) compared to Rs 853 crore a year earlier (equivalent to 127 days), due to receipt of the Aatmanirbhar Bharat package and timely collections of current dues. More than 90% of the dues as on March 31, 2022, were from Jammu & Kashmir. The management expects the dues to be liquidated by July 2023 in 12 equal installments of Rs. 53 cr each. The company's Net Debt/EBITDA increased from 0.5x in FY21 to 2.3x in FY22 and we expect it to remain elevated in FY23-24 as well, until a few of the large projects are commissioned. However, the debt to equity ratio is comfortable at 0.5x in FY22. Concerns: • • • • • The company has planned a huge capex. Given that there are many projects in the pipeline, the company faces execution risks. Significant time or cost overruns in under-construction projects may affect the cost competitiveness of these projects. Disallowance of capital costs by CERC may affect the cash flow available for debt servicing. Inability to tie up PPAs by the beneficiary states at the expected tariff or disowning a signed PPA where tariff of the project is high. However, separate HPO obligation notified by the government should help mitigate this risk. Geo-political risks due to execution of projects in Nepal and Bhutan. Other issues such as delay in decision making, differences with respect to employment of local population, government involvement, funding issues, etc also affects the progress of these projects. Risks of delays in payment due to weak financial health of state discoms. The receivables are expected to reduce over the medium term with the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. The counterparty risks are mitigated by the presence of various payment security mechanisms, such as sales backed by letters of credit, tripartite agreements between the central government, the Reserve Bank of India (RBI) and state governments, and incentive schemes for timely payment. A majority of hydroelectric projects is located in remote locations and is prone to natural calamities such as landslide, cloud burst, etc. Further, erratic rains and flash floods may delay construction of the projects. Geological surprises posing technical challenges despite extensive survey and investigation may slow down the progress and increase the cost. Delay in getting approvals from various government authorities. Newer hydro projects are becoming costlier while tariffs of solar and wind have continued to go down, reducing the attractiveness of the hydro projects. However, hydropower may command a little premium due to the grid stability it provides. Economical battery storage solution on a large scale may make hydropower generation unviable. NJHPS and RHPS are cascade schemes and operating in tandem. Any difficulties faced in the operation of NJHPS will have direct consequences on power generation of RHPS. Government (of India and HP together) stake is at 87%, which needs to be brought down to 75%. Any stake sale is likely to be seen as an overhang in the market. FRETAILRES RETAILRESEARCH

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