Ferro Alloys Corporation Ltd (CMP-Rs 30.1)
The company intends to turn into a commercial power producer with a capacity of 500 MW in five years. It has lined up Rs2, 750 crore of capital expenditure over the next few years, on a Greenfield stainless steel plant and a 250 MW power plant. Currently the company is scouting for 1,000 acres of land in Orissa for a 5, 00,000 tones stainless steel plant and a 250 MW power plant. The two projects will soak in an investment of Rs2500 crore in equal proportions and are expected to be operational in the next three years. The 250 MW of power will be the first phase target, to be completed by 2010-11 and an additional 250 MW will be added in due course of time. Out of the total 500 MW production envisaged in five years, the stainless steel plant will consume 100 MW and the rest would be supplied to the grid. Total investment of Rs2,500 crore going into the Orissa projects will be in a debt-equity ratio of 70:30. At current market price, stock is trading at 11.8x of its TTM earning of Rs 2.5. We recommend “ACCUMULATE” on the stock.
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