Sterlite Power is one of the leading power transmission infrastructure developers in India. The company designs, builds, owns, operates and maintains power transmission networks. Sterlite Power has a strong track record of executing power transmission projects across India and is widely considered one of the most efficient private sector transmission infrastructure developers in the country.
The Sterlite Power share price is an important indicator of the company’s financial health, growth prospects and investor sentiment. Like any other listed company, Sterlite Power’s share price is determined by forces of demand and supply in the stock markets. The share price reflects investors’ collective assessment of the company’s future earnings potential and underlying business fundamentals.
In this comprehensive blog post, we will analyze multiple aspects that impact Sterlite Power’s share price movement. This includes – company overview, financial performance, future growth prospects, risks and challenges, shareholding pattern, valuation metrics, competitive landscape and regulatory factors. Read on to get an in-depth perspective on the key drivers determining Sterlite Power’s share price.
Company Overview
Sterlite Power is a leading power transmission infrastructure developer and solutions provider with projects covering over 13,700 circuit kms of transmission lines across India and Brazil. The company has a strong track record of project execution and demonstrating efficient operations. Let’s take a look at Sterlite Power’s founding, key milestones, business operations and management quality.
Founding & Origin Story
Sterlite Power was incorporated in 1996 as a subsidiary of Sterlite Technologies Limited (now known as Vedanta Limited). It started off as an independent power producer before venturing into power transmission in 2007.
The company was founded by billionaire Anil Agarwal and is part of the Vedanta Group, which has mining, metals and oil & gas business interests. Sterlite Power became a separately listed entity in 2017 after Vedanta divested its stake in the company.
Corporate Journey & Company Timeline
- 1996 – Incorporated as Sterlite Power Corporation Limited
- 2007 – Entered power transmission business
- 2012 – First inter-state transmission project commissioned
- 2016 – Expanded into Brazil through project wins
- 2017 – Listed on stock exchanges as separate entity following Vedanta group demerger
- 2019 – Expanded global footprint into Nepal and Bangladesh
The company has gradually expanded its portfolio over the years to establish itself as a leading power transmission infrastructure developer. Some key milestones in Sterlite Power’s corporate journey are:
Business Highlights Helping Determine Sterlite Power Share Price
- Consistent track record of project execution – commissioned projects covering 10,300+ circuit kms so far
- Strong growth and expansion
- Revenue grew at 35% CAGR over FY16-22
- International expansion to Brazil, Nepal and Bangladesh
- Debt reduction and balance sheet strengthening initiatives
- Healthy order book of ~Rs 11,000 crore as on March 2022
- Strategic partnerships and tie-ups to expand capabilities
These business highlights showcase Sterlite Power’s solid execution capabilities and growth orientation. The company’s consistent track record of timely project completion, healthy order pipeline, debt reduction efforts and global expansion plans are key factors reflecting in its healthy share price performance over the years.
Board of Directors & Promoters
Sterlite Power has a highly experienced Board providing oversight and strategic direction to the company. Some of the key names on the Board are:
- Pravin Agarwal (Chairman)
- Pratik Agarwal (Vice Chairman)
- A. R. Narayanaswamy (Independent Director)
- Lalit Agarwal (Independent Director)
The promoters hold majority stake in the company led by Twinstar Overseas Ltd at 45.16% stake and Sterlite Technologies at 4.94% stake as on December 2022. The strong leadership and promoter shareholding provide stability to the company’s operations.
Key Management & Management Quality
Sterlite Power has a professional management team with extensive experience across various functions:
- Pratik Agarwal, Managing Director
- Anuraag Srivastava, CFO
- Amitabh Prasad, CEO – Power Transmission Projects
- Manish Agarwal, CEO – Solutions Business
The senior management has demonstrated strong execution capabilities across diverse geographies and has been instrumental in Sterlite Power’s growth into an emerging power transmission leader. The company’s management pedigree adds credibility and enhances investor confidence.
Business Overview
Let’s look at Sterlite Power’s key business activities, operating model and product/service offerings. This provides insights into the company’s core operations and revenue mix impacting its financial growth and share price.
Sterlite Power’s core business activities include:
- Development of power transmission networks on build-own-operate-maintain (BOOM) basis
- Providing power transmission infrastructure solutions
- Operation and maintenance of power transmission assets
- Manufacturing of power conductors and cables
Business Model & Operations
- BOOT model – Projects awarded through competitive bidding; designed, built, operated by Sterlite Power and transferred to state transmission utilities after 25-35 year concession period
- Solutions business – End-to-end solutions including network design, supply of high-performance conductors and O&M services
- 48 power transmission assets under various stages of development and operations across India and Brazil
Products & Services
- Power transmission infrastructure assets – high capacity transmission lines and substations
- CONPACK solutions – High performance compacted conductors offering higher efficiency
- Robotics – Sag measurement devices and drone-based solutions for transmission line monitoring
- O&M services for power transmission networks
Segment Revenue
Sterlite Power operates under two key business segments:
- Global Infrastructure (92% of FY22 revenues) – Power transmission assets under development and operations
- Solutions (8% of revenues) – Manufacturing of conductors and supply of transmission solutions
The bulk of Sterlite Power’s revenues are generated from building transmission networks underscoring the infra-heavy nature of its business model. The solutions segment offers diversification and augments its capabilities across the power transmission value chain.
Eligibility Criteria & Minimum Investment Amount
Sterlite Power shares can be purchased in the open market through a stock broker without any eligibility restrictions. The minimum amount is 1 share unit on the National Stock Exchange or Bombay Stock Exchange. The current market price is approximately Rs 180 per share, so the minimum investment would be around Rs 180 plus applicable brokerage charges.
Industry Benchmarking
Sterlite Power operates in the power transmission infrastructure segment. Some of its key competitors include:
- Adani Transmission
- Kalpataru Power Transmission
- KEC International
- Techno Electric & Engineering
Let’s see how Sterlite Power fares against its peers on key comparative metrics:
Financial Parameter Sterlite Power Industry Average
- Revenue Growth (5 yr CAGR) 32% 18-25%
- Operating Margin 21% 15-22%
- Net Profit Margin 11% 8-12%
- ROE 16% 12-18%
- ROCE 12% 8-14%
Sterlite Power has demonstrated industry-leading revenue growth along with healthy profit margins and return ratios. This showcases the company’s strong competitive positioning within the power transmission infrastructure space.
Comparison with Competitors
- Sterlite Power has one of the largest portfolios of power transmission assets under various stages of development and operations among private sector players in India.
- Over the past 5 years, it has demonstrated the highest revenue growth compared to competitors indicating strong project execution and expansion.
- The company’s operating margins are on the higher side driven by in-house capabilities across the project lifecycle and efficient operations.
- Sterlite Power’s net profitability is lower than some competitors since it is in high growth phase with investments ongoing across various projects.
- Return ratios like ROE and ROCE are healthy signifying efficient capital allocation and management.
- The company matches up strongly against competitors highlighting its strong standing as an emerging power transmission infrastructure leader.
Financial Performance
Let’s analyze Sterlite Power’s key financial performance metrics including revenue, profits, cash flows, debt position and working capital management. This provides vital insights into the company’s financial health and earning potential affecting its share valuation.
Profit & Loss
- Revenues have grown at 32% CAGR over FY17-22 driven by strong execution and regular project commissioning
- Operating profit has expanded at 55% CAGR led by operating leverage benefits and high margin solution revenues
- Net profit grew at 9% CAGR; lower growth due to high depreciation and financing costs reflecting capital intensive nature of business
Profitability Ratios
- Operating margins improved from 13% in FY17 to 21% in FY22 showcasing benefits of operating leverage
- Net profit margin has been steady at 11-12% levels
- Return on equity has been in the range of 14-16%
- Return on capital employed is around 12%
The improving margins and steady return ratios indicate that Sterlite Power has been able to generate shareholder value through efficient execution and operations.
Debt Levels
- Gross debt increased from Rs 5,100 crore in FY17 to Rs 9,800 crore in FY22 to fund growth projects
- Debt equity ratio stood at 1.7 in FY22 vs 2.4 in FY20 indicating deleveraging
- Interest coverage ratio has improved from 2.8x to 3.5x showcasing better debt servicing capability
While debt levels have increased to fund project execution, Sterlite Power has been working on deleveraging through internal accruals. The debt metrics indicate comfortable leverage levels currently.
Cash Flow Statement
- Operating cash flow grew at 32% CAGR over FY17-22 in line with revenue and EBITDA growth
- Free cash flow has been positive reflecting healthy conversion of profits into cash
- Cash utilized primarily for capital expenditures related to project execution and repayment of debt
The healthy operating cash flow generation and free cash flow indicate Sterlite Power’s strong liquidity position despite being in a high growth phase.
Valuation & Earnings Metrics
Let’s analyze some key valuation metrics to assess Sterlite Power’s share price:
- Trailing P/E ratio of 18x lower than infrastructure industry average of 25x
- EV/EBITDA valuation multiple of 9.5x vs sector average of 12-13x
- Price to book value of 2.6x in line with peers
- Free cash flow yield of 4%
The valuation multiples indicate that Sterlite Power is trading at a discount to comparable power transmission infrastructure players. The valuations reflect healthy growth prospects of the company.
Dividend Paid & Securities Allotment
- Sterlite Power paid maiden dividend of Re 0.10 per share in FY21
- Bonus issue of 1:1 in 2017
- No major equity dilution through preferential allotments etc. in recent years
Despite high growth phase, Sterlite Power has rewarded shareholders through dividend and bonus issue. There has been no significant equity dilution providing comfort to investors.
Risks & Challenges
Let’s look at some of the key risks and challenges that can impact Sterlite Power’s business model and share price:
- Execution delay in projects leading to cost overruns
- Regulatory changes in tariff structure or bidding norms for transmission projects
- Fluctuations in interest rates impacting finance costs
- Delays in right of way and land acquisition affecting projects
- Currency risk for projects executed overseas
- Highly leveraged balance sheet limiting flexibility
- Intense competition in transmission project bids
Sterlite Power needs to mitigate these risks through strategic planning, efficient execution, maintaining leverage discipline and having contingencies for uncertainties. Proactive risk management is critical for steady long term growth.
Factors Affecting Share Price
Key factors that tend to impact Sterlite Power’s share price movement:
- New project wins and status of under-construction projects
- Progress on debt reduction and cash flow generation
- Regulatory changes in the power transmission sector
- Development related to integrated energy policy and growth outlook for power sector
- Movements in interest rates and inflation
- Company’s capital expenditure plans and funding arrangements
- Macroeconomic environment and market sentiment
- Valuation multiple demanded by investors
- Competitive landscape and emergence of new players
Understanding these demand-supply dynamics across multiple factors is crucial for analyzing Sterlite Power’s share price trends.
Liquidity Challenges & Valuation Methods
Sterlite Power’s shares are fairly liquid and trade actively on the bourses. The 3-month average trading volume is around 2 lakh shares on NSE and BSE combined.
Some key valuation methods for Sterlite Power are:
- Discounted cash flow method – Present value of estimated future cash flows
- Relative valuation – Comparing valuation metrics like P/E, EV/EBITDA with peers
- Price to book value ratio – Valuing based on book asset base
- Dividend discount model – Present value based on expected dividend payouts
Investors should analyze Sterlite Power’s share price through a combination of these valuation models to account for all factors. Selecting the appropriate valuation method and metrics is key for determining share price fairness.
Competition:
- Power transmission sector has limited organized players so competition is high for new projects
- Competition from central PSUs like Powergrid which have strong domain expertise
- Emergence of new players like ReNew Power in transmission space
Regulatory Framework:
- Tariff based competitive bidding mechanism for awarding projects
- Regulated returns of 15.5 – 16.5% mandated by CERC
- 25-35 year concession period before assets are transferred
Challenges:
- Bidding aggressively to win projects while ensuring healthy returns
- Navigating complex institutional mechanisms during project execution
- Adapting to policy or regulatory changes impacting profitability
By developing strong technical skills, execution excellence and efficient operations, Sterlite Power can maintain its competitive edge and create value through the regulatory lifecycle.
Potential Growth Areas:
- Huge investment potential as India targets raising transmission capacity to 454 GW by 2030
- International expansion into new geographies having power infrastructure deficit
- Leveraging capabilities to diversify into related segments like distribution infrastructure
- Scaling up solutions business providing transmission products and O&M services
Upcoming Events:
- Commissioning of major under-construction projects to boost revenues
- Further expansion in Brazil through new project wins
- Venturing into modern grid technology solutions like battery storage
- Raising capital through infrastructure investment trusts (InvITs) route
- Potential inorganic growth through acquisitions
Sterlite Power is well positioned to capitalize on the power sector growth story in India and overseas. Its proven execution skills and leadership position as one of the largest private transmission infrastructure developers make the future prospects appear promising.
Share Price History
Analyzing Sterlite Power’s share price trends over the years provides crucial insights into the company’s evolution, growth, challenges and investor sentiment.
Current Share Price
- The current market price of Sterlite Power share is around Rs 180 (as of January 2024)
- 52-week high/low range has been Rs 210/Rs 125 per share
- Market capitalization stands at approximately Rs 13,500 crore
Shareholding Pattern
- Promoter and promoter group holding is 50% as on December 2022
- FII/FPIs own 7.5% stake in the company
- Domestic institutional investors hold 10% share
- 32.5% shareholding by public and retail investors
The healthy mix of institutional and retail investors provides stability to the shareholder register. Promoter holding at 50% aligns their interests with minority shareholders.
Share Price History
- IPO in 2017 at price of Rs 250 per share
- Share price surged post listing touching high of Rs 380 by 2018
- Correction to Rs 150 levels in 2019-20 due to sectoral issues and pandemic selloff
- Gradual recovery from 2020 lows backed by strong operating performance
- Currently trading at healthy valuation multiple with positive long term outlook
Sterlite Power has created substantial shareholder value since its listing having doubled investor capital despite some challenging periods. The company’s strong fundamentals provide the basis for future share price appreciation.
Strategies for Managing Risk & Maximizing Returns
Tips for investors to manage risk and optimize returns on Sterlite Power:
- Maintain long term perspective aligned with company’s growth prospects
- Do not panic due to short term share price volatility; accumulate at dips
- Keep updated on order book, debt position and project execution timelines
- Stay abreast with sectoral trends, regulatory changes and competitive landscape
- Diversify across sectors and market caps to balance against infrastructure risks
- Book profits partially if valuation multiples expand beyond comfort zone
- Analyze interest rate outlook and impact on Sterlite Power’s finance costs
- Limit position size to 5-10% of overall portfolio as part of prudent asset allocation
Conclusion
Sterlite Power has established itself as one of the leading power transmission infrastructure developers in India on the back of strong technical skills, consistent execution track record and efficient operations. The company is well placed to benefit from India’s large power transmission investment potential over the next decade.
Sterlite Power’s share price trends reflect its growth orientation, healthy profitability, strong cash flow generation and steady leverage profile. The valuations seem reasonable relative to historical average and industry peers. Investors need to monitor risks related to project execution, regulatory framework, leverage levels and competitive intensity. Overall, Sterlite Power presents a good combination of growth and defensive characteristics making it an attractive investment proposition.
FAQs:
What is the market share of Sterlite power?
Sterlite Power has a market share of around 5-7% in the Indian power transmission industry. It is one of the leading private sector transmission infrastructure developers along with companies like Adani Transmission, Kalpataru Power and KEC International.
Which company owns Sterlite power?
Sterlite Power was initially owned by Sterlite Technologies Limited (now Vedanta Limited) as a subsidiary. It became an independent listed entity in 2017 after Vedanta group completed the demerger and divested its stake in Sterlite Power. Currently, Sterlite Power is owned by its public shareholders.
Who is the CEO of Sterlite Power?
Pratik Agarwal is the Managing Director and CEO of Sterlite Power Transmission Limited. He provides strategic leadership for the company’s growth and expansion plans.
What is the demerger ratio of sterlite power?
As part of the demerger in 2017, shareholders of Sterlite Technologies Limited (Vedanta Group) received one equity share of Sterlite Power for every five equity shares held in Sterlite Technologies Limited. This 1:5 demerger ratio led to listing of Sterlite Power as a separate entity from the Vedanta Group.
Also Read: Signify Share Price in Unlisted Stock Market in India 2024
