Jai Hind Projects

Background

Jaihind has been the pioneer in Engineering, Procurement and Construction (EPC), with focus on hydrocarbon, water and other prime sectors in infrastructure industry.

Jaihind has executed some of the most complex projects, which includes its achievement of laying 14,000 km of pipeline, the highest in India. Jaihind is currently nurturing projects that span across various segments such as oil, gas & water pipeline and associated facilities, city gas distribution, horizontal directional drilling, water transmission & distribution projects, water supply and sewerage systems, petrochemical complex, process plants, cathodic protection, tankages and civil infrastructure.

Jaihind boasts of second largest fleet of equipment in India which includes pipe layers, hydraulic excavators, dozers, heavy-du cranes, earth-moving heavy machineries, horizontal drilling machines, horizontal boring machines, trenchers and pipe-bending machines amongst others.


Main Products/Segments

  • Engineering Procurement and Construction (EPC) Company focussed on hydrocarbons, water & infrastructure sectors
  • Expertise includes laying nation-wide oil & gas pipelines and setting up storage tanks

Main Markets/Customers

  • Oil & Gas, Water and Infrastructure sectors
  • GSPL, Gail, IOCL, Adani Energy, Cairn, Mahanager Gas Ltd., Essar Group, L&T are major customers

Bullish Viewpoints

  • Huge scope for EPC Pipeline business in India, as per this Analyst Meet/Industry Update. Total proposed investments of more than Rs 200 billion in developing and expanding the existing pipeline network in India over next 3 to 4 years, adding up to more than 10000 km of additional cross-country natural gas pipeline across the country. Further more than 60 cities are earmarked to get CGD (city gas distribution) networks by FY’12, along with proposed implementation of National Gas Grid by GAIL and capacity expansion of the LNG terminals, the demand for natural gas pipelines is slated to grow. Pipeline projects are also expected to come up for crude oil and refined products linked to the development of new refineries GGRSL, Bhatinda, Bina refinery, Paradip refinery and new oil discoveries such as Cairn’s in Rajasthan, all provide sizable scope for the EPC pipeline business in India
  • JPL is one of the few national EPC companies to have laid more than 30″ diameter oil and gas pipelines, and other onshore pipelines for large oil and gas majors. The Company’s expertise also lies in handling complicated horizontal directional drilling projects
  • JPL has the second largest fleet of equipment in the Oil & Gas pipeline construction sector in India
  • JPL has been growing @ CAGR of 60%+ for last 5 years i.e.. from a turnover of just 62 Cr in 2006 to turnover of 410 Cr in 2010
  • JPL has a robust order book to the tune of 1000 Cr+
  • The company has been trying to expand overseas. They have opened an office in Abu Dhabi. JPL had won a 1100 Cr contract in Saudi Arabia under a JV in which their share would be 300 Cr
  • The stock is trading at less than 8 times FY 2010 earnings

Bearish Viewpoints

  • The company is highly leveraged with FY10 debt equity ratio of 2.5:1. While such leverage levels are not unusual in the infrastructure industry for funding aggressive growth, execution risks and delays associated with such infrastructure projects can pose serious threats
  • Promoters have pledged more than 31.83 lakh shares representing 43.86% of the equity capital of the company. The total promoter shareholding in the company is 47.74% (as on 31 December 2009)
  • The promoters have been diluting equity on a regular basis (2007, 2008 & 2009) by way of preferential allotments to themselves. From 5.11 Cr in FY07 to 7.26 Cr in FY10 or a dilution of over 42%
  • The business is very capital intensive and cash flow record has been unimpressive
  • One should note Auditors N K Aswani & Co had resigned in April 2008 and Deloitte Haskins & Sells appointed in their place. By Aug 2008 Deloitte Haskins & Sells had resigned and N K Aswani & Co re-appointed. Intringuingly the story repeated in Dec 2009 with resignation by N K Aswani & Co and re-appointment of Deloitte Haskins & Sells

Barriers to entry

  • It takes years to develop relationship with clients and build a track record
  • Being a capital intensive industry, its not easy for a new player to start operations
  • JPL has the second highest fleet of machinery and equipment in this sector

Interesting Viewpoints

  • Only 9% energy needs are met by Gas in India against a world average of 24%
  • With the domestic discovery of Gas reserves by companies like Reliance, Cairns etc., lot of investment is lined up for expanding the pipeline network over the next 3-5 yrs
  • JPL also cater to the city gas distribution industry. There is massive expansion lined up in this sector

Disclosure(s)

Ayush Mittal: No Holdings in the Company;


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