Pick of the Week: CESC

CESC (BSE Code: 500084) (CMP: 237.30)

CESC (CESC), formerly known as Calcutta Electric Supply Corporation, is an RPG group company established in 1897. CESC is a private power utility company engaged in generation and distribution of electricity in the city of Kolkata and its adjoining areas with a licensed area of 567 square kilometers. The company has exclusive power supply license from the West Bengal government till the year 2020.

The company provides electricity to nearly two million customers and has a generating capacity of about 1,000 megawatts (MW) from its four power stations. CESC has five power generating stations, out of which, Mulajore and New Cossipore are vintage units and the Budge Budge, Titagarh and southern power stations have capacities of 500 MW, 240 MW and 135 MW respectively. RPG group flagship CESC is planning to invest Rs 200 billion in power over a period of seven years to enhance its generating capacity. In the proposed amount of Rs 200 billion, around Rs 100 billion would be allocated for additional generating capacity in West Bengal. Company is planning to set up a 2,000-megawatt unit at Haldia for around Rs 80 billion. This project will be built in two phases as three units of 660 megawatt each and West Bengal will be one of the consumers. CESC also has a plan of a mega project in Jharkhand. Company is likely to start a subsidiary for power project in Jharkhand. The company has already signed MOU with Jharkhand govt. for a 1,000-megawatt power project. This project will follow ntpc model of power generation with stand-alone power generating stations selling power to distribution companies. Company is expecting 400-500 megawatt additional demand from Kolkata region by 2010-11.

Sales and NP for year ended 07-08 were 2828.9Cr & 344.2Cr. Sales and NP for latest Quarter 783Cr & 94.0Cr. On YOY basis NP has increased by 14 % & based on quarter latest its increased by 33 %. Dividend during year ended 07-08 was 40 %. One can buy this script for a return of 25 to 30% in short to medium term.