1

Stock Data

Sector Diversified

Face Value (Rs.) 10.00

52 wk. High/Low (Rs.) 284.00/161.50

Volume (2 wk. Avg.) 144700

BSE Code 532259

Market Cap (Rs.mn.) 7692.73

Financials (Rs. in mn.) FY10 FY11E FY12E

Net Sales 20144.49 25784.95 29652.69

EBIDTA 1362.50 1807.23 2018.78

PAT 861.37 1176.24 1315.44

EPS 9.46 36.38 40.68

P/E 25.15 6.54 5.85

Apar Industries Ltd

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SYNOPSIS

Apar Industries Limited is one among the best established companies in India operating in the diverse fields of electrical, metallurgical and chemical engineering.

Apar’s main products consist of Speciality Oils and Aluminium Conductors.

Apar is the Fourth largest one in the export of Aluminum conductors of the global exporters in the world.

The net profit for the Sept quarter stood at Rs 342.54 million from Rs 224.38 million with a change of Rs 52.66%.

During the quarter the company has declared an interim dividend of Rs 2.50 per share of Rs 10.00/- each for FY 2011.

The company’s order book for the FY 11 is Rs 10832.40 million in confirmed orders and Rs 2865 million in Pipeline.

Apar is one of the largest producers of Aluminium Conductors in the World. It is the first to develop Aluminium rods and conductors in India.

During the quarter the Company’s segmental revenue stood at Rs 6681.39 million.

1 Year Comparative Graph

Apar Industries Ltd BSE SENSEX

V.S.R. Sastry

Equity Research Desk

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

C.M.P: Target Price: Rs.237.90 Rs. 285.00

Share holding Pattern

Dec 16th, 2010

2

Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Apar Industries 237.90 7692.73 9.46 25.15 2.63 50.00

Havells India 378.35 45529.40 19.55 19.35 4.01 75.00

Finolex Cables 53.80 8228.10 3.19 16.87 1.28 30.00

Diamon Power 198.20 7374.30 25.59 7.75 3.31 10.00

Investment Highlights

Results Updates (Q2 FY11) (Standalone) Apar Industries Sept quarter results have shown a good performance with a change of

36.82% in Net sales to Rs 6678.76 million from Rs 4881.32 million. The operating

profit for the quarter stood at Rs 517.05 million from Rs 393.78 million with a change

of 31.30%. The net profit for the quarter stood at Rs 342.54 million from Rs 224.38

million with a change of Rs 52.66%.The EPS stood at Rs 10.59 from Rs 6.94 with face

value of Rs 10/- each. The OPM and NPM for the quarters are 7.74% and 5.13%.

Quarterly Results – Standalone (Rs in mn)

As At Q2 FY 10 Q2 FY 11 %change

Net sales 6678.76 4881.32 36.82

PAT 342.54 224.38 52.66

Basic EPS 10.59 6.94 52.66

3

4

Break up Expenses for Sept Quarter 2010

5

Company Profile

Apar Industries Limited, founded by Late Mr. Dharmsinh D. Desai in the year 1958 is

one among the best established companies in India operating in the diverse fields of

electrical, metallurgical and chemical engineering. Over the ensuing years it has

evolved to be a 500 million US Dollar diversified company offering value added

products and services in Power Transmission Conductors and Petroleum Specialities.

Products

1. Speciality Oils

i) Transformer Oils

ii) Industrial Oils & Lubricants

iii) Liquid Paraffins & White Oils

iv) Rubber Processing Oils

v) Ink Oils

2. Aluminium Conductors

The company has two business segments which continued to maintain significant

market positions. The company derives 75% of its revenue from power sector. During

the quarter the Company’s segment revenue consisted of Rs 6681.39 million of total

revenue in which Transformer oils and speciality oil segment consists of 52% of Rs

3442.69 million and 48% consisting of Rs 3226.81 million in conductors segment out

of the total revenue.

6

Apar’s Presence in Transformer Oil and Speciality Oil Segment

This division contributed 52% of the company’s revenue for the Sept Quarter.

The company is expecting at least 15% of growth in the transformer oil segment

for the next 3-4 years which are based on the ongoing expansions in the power

sector in India.

Apar’s Presence in Conductor division

Revenue of about 48% of total revenue has come from the conductor division.

Q2 FY 10 there was a lower execution of orders as there was delays/

reschedulement of several orders took place. The postponement of these orders

will result in higher volumes in FY 11.

Enters into JV

The net sales turnover of the “Agip" brand automotive lubricants produced by

the Company with license and technical know-how of ENI-S.p.A of Italy and

marketed by Apar ChemateK Lubricants Ltd., (50:50 joint venture company

with ChemateK SpA) (ACL)increased substantially by 31.1%

Acquisitions and subsidiaries

Apar has acquired Uniflex cables in FY 08 with 66% stake which manufactures

power and telecom cables. During the Q2 FY 10 there was a considerable

demand for power cables which resulted in better sales and margins.

Petroleum Specialities Pte. Ltd (PSPL) Singapore based company for trading in

petroleum based products and general wholesale trade which includes general

importers and exporters.

Australian incorporated company Quantum Apar Speciality Oils Pty.

Ltd.(Subsidiary of PSPL) was the subsidiary of Apar industries for marketing of

Speciality Lubricants.

UAE based Power oil Speciality Products FZE was the subsidiary of Apar for the

purpose of general trading.

Order Book of the company

The company’s order book for the FY 11 is Rs 10832.40 million in confirmed

orders and Rs 2865 million in Pipeline. There is an expectation of growth by

30% of volume by FY 11. Approximately 75% of the orders will be completed by

7

FY 11. Power Grid is one of the largest domestic customer for the company with

Rs 5000 million while Adhani Power is another client with an order book of

approx Rs 3000 millions.

Export Markets

Exports made Apar as one of the fourth largest global manufacturer of Transformer Oils in around 50 countries across Asia, the Middle East, Africa, Europe, Australia and Far East. Apar contributes 28% of the total revenue to the export market and 72% in domestic market. Apar is the largest exporter of aluminium conductors from India who has earned superior brand recognition and approval from Indian Ministry of Commerce, and exporting directly to power utilities in Asia, Africa, Europe, the Middle East and the US, along with reputed international turnkey contractors.

SWOT ANALYSIS Strengths

Apar is one of the largest producers of Aluminium Conductors in the World. It

is the first to develop Aluminium rods and conductors in India.

It is the largest exporter of Aluminum conductors from India, it has recognized

as a registered export house by Indian Ministry of Commerce.

Weakness

Base Oils and Aluminium are the major raw materials of which any one of the

volatility of the crude oil will affect the business profitability

Some of the orders were delayed and rescheduled from the major clients which

affected the sales.

Opportunities

Initiating new strategies of Six Sigma using DMAIC approach in R&D.

New orders from the power segment from major clients like Power Grid and

Adhani Power.

Threats

Most of the business is from export market of which the currency valuation will

affect the profitability.

Continued volatility in commodity market.

8

Financials Results 12 Months Ended Profit & Loss Account (Standalone)

Value (Rs. in million) FY09A FY10A FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 24,697.36 20144.49 25784.95 29652.69

Other Income 0.00 2.44 2.28 2.39

Total Income 24697.36 20146.93 25787.23 29655.08

Expenditure -24190.73 -18,784.43 -23980.00 -27636.31

Operating Profit 506.63 1362.50 1807.23 2018.78

Interest -312.49 -195.60 14.47 15.92

Gross Profit 194.14 1166.90 1821.70 2034.69

Depreciation -109.93 -118.79 -141.36 -155.50

Profit before Tax 84.21 1048.11 1680.34 1879.20

Tax -31.14 -186.74 -504.10 -563.76

Profit after Tax 53.07 861.37 1176.24 1315.44

Extraordinary items 0.00 -555.54 0.00 0.00

Net Profit 53.07 305.83 1176.24 1315.44

Equity Capital 323.36 323.36 323.36 323.36

Reserves 2,489.19 2606.48 3782.72 5098.15

Face Value 10.00 10.00 10.00 10.00

EPS 1.64 9.46 36.38 40.68

9

Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs. in million) 31-Mar-10 30-Jun-10 30-Sep-10 31-Dec-10E

Description 3m 3m 3m 3m

Net Sales 5004.36 6248.99 6678.76 7012.70

Other Income 1.47 0.34 0.23 0.24

Total Income 5005.83 6249.33 6678.99 7012.94

Expenditure -4767.73 -5880.58 -6161.94 -6479.73

Operating Profit 238.10 368.75 517.05 533.21

Interest -8.16 1.54 4.67 5.04

Gross Profit 229.94 370.29 521.72 538.25

Depreciation -29.43 -30.52 -36.12 -37.93

Profit before Tax 200.51 339.77 485.60 500.32

Tax -30.47 -99.62 -143.06 -150.10

Profit after Tax 170.04 240.15 342.54 350.23

Equity Capital 323.36 323.36 323.36 323.36

Face Value 10.00 10.00 10.00 10.00

Total No. of Shares 32.34 32.34 32.34 32.34

EPS 5.26 7.43 10.59 10.83

10

Balance Sheet FY 09 FY 10 FY 11 FY 12

Shareholder's Funds

a) Capital 323.36 323.36 323.36 323.36

b)Reserves & Surplus 2,489.19 2,606.48 3,782.72 5,098.15

Total(1) 2,812.55 2,929.84 4,106.08 5,421.51

Loan Funds

a) Secured Loans 376.32 574.54 838.07 921.26

b) Unsecured Loans 392.84 302.50 394.38 496.06

Loan funds (Debt)(2) 769.16 877.04 1232.45 1417.32

Deferred Tax Liabilities(3) 85.78 80.31 80.5 80.5

Total(1+2+3) 3,667.49 3,887.19 5,419.03 6,919.33

Application of Funds

Fixed Assets

a) Gross Block 1671.96 1797.82 1941.65 2077.56

b) Less: Depreciation 486.25 599.04 679.58 768.70

Net Block(1) 1185.71 1198.78 1262.07 1308.86

Capital work-in-progress(2) 46.03 9.24 9.24 9.24

Fixed Assets for sale(3) 0.73 0.73 0.73 0.73

Investments(4) 884.10 317.5 317.5 317.50

Current Assets :

Inventories 2974.9 3782.88 5156.99 6701.51

Sundry Debtors 4751.89 3784.27 3867.74 3854.85

Cash & Bank Balances 5996.98 4691.14 5150.30 4863.72

Loans Advances & Deposits 1667.55 2047.91 2201.50 2885.65 Total Current Assets 15391.32 14306.2 16383.22 18303.05

Less: Current Liabilities & Provisions

Current Liabilities 13835.01 11735.74 12222.77 12662.79

Provisions 16.95 209.52 324.27 359.94

Current Liabilities 13851.96 11945.26 12547.04 13022.73

Net Current Assets(5) 1539.36 2360.94 3836.18 5280.32

Miscellaneous Exp(6) 11.56 0.00 0.00 0.00

Total(1+2+3+4+5+6) 3667.486 3887.19 5419.03 6919.33

11

Key Ratios

Particulars FY09 A FY10 A FY11 E FY12 E

EBIDTA % 2.05% 6.76% 7.01% 6.81%

PAT % 0.21% 4.28% 4.56% 4.44%

P/E ratio (x) 144.95 25.15 6.54 5.85

ROE - % 2.07% 30.96% 29.74% 24.97%

ROCE - % 18.48% 40.48% 39.60% 34.35%

EV/EBIDITA (x) 15.18 5.65 4.26 3.81

Debt Equity Ratio 0.27 0.30 0.23 0.20

Price/Book Value 86.98 90.61 126.98 167.66

PBT Margin(%) 0.34% 5.20% 6.52% 6.34% A-Actual E-Expected Charts:

Net sales & PAT

12

P/E Ratio (x)

P/BV (X)

13

EV/EBITDA(X)

Debt Equity Ratio

14

Outlook and Conclusion

At the market price of Rs.237.90, the stock is trading at 6.54 x and 5.85 x for

FY11E and FY12E respectively.

On the basis of EV/EBDITA, the stock trades at 4.26 x for FY11E and 3.81 x for

FY12E.

Price to book value of the company is expected to be at 1.87 x for FY11E and 1.42

x for FY12E respectively.

EPS of the company is expected to be at Rs.36.38 and Rs.40.68 for the earnings of

FY11E and FY12E respectively.

The company’s net sales and net profit are expected to grow at a CAGR of 6% and

192% over FY09 to FY12E.

Apar contributes 28% of the total revenue to the export market and 72% in

domestic market.

Apar is one of the largest producers of Aluminium Conductors in the World. It is

the first to develop Aluminium rods and conductors in India.

In Exports Apar is one of the fourth largest global manufacturer of Transformer

Oils.

The fundamentals of the company are very good. So we recommend to ‘BUY’ this

stock with a target price of Rs.285.00 for medium to long term investment.

15

Industry Overview

Power

Sector structure

As the Indian economy continues to surge ahead, its power sector has been expanding

concurrently to support the growth rate. The demand for power is growing

exponentially and the scope for the growth of this sector is immense. The overall power

generation in the country has increased from 723.793 billion unit (BU) during 2008-

09 to 771.551 BU during the year 2009-10.

The Indian power sector has the fifth largest electricity generation capacity in the

world and the world's third largest transmission and distribution network.

According to the Ministry of Power, India's total installed capacity as on October 31,

2010 is 1,67,278.36 mega watt (MW). Thermal power plants account for 108,602.98

MW, followed by hydro power plants with a capacity of 37,328.40 MW. Renewable

energy sources provide 16,786.98 MW of power and the remaining 4,560 MW comes

from nuclear energy.

Within the thermal power plants, coal-based power plants have an installed capacity

of 89,778.38 MW, gas-based have a capacity of 17,624.85 MW and oil-based have a

capacity of 1,199.75 MW.

According to the Central Electricity Authority (CEA), a total of 34 projects were

commissioned during 2009-10 with a total capacity of 9,585 MW. These include 31

thermal power plants with a total capacity of 9,106 MW, one hydro power plant with a

capacity 39 MW, and two nuclear power plants with a combined capacity of 440 MW.

As on October 31, 2010, a total of 30 projects were commissioned during 2010-11,

with a total capacity of 7,020 MW. These include 22 thermal power plants with the

total capacity of 6,569 MW and eight hydro power plants with a capacity of 451 MW.

Growth Potential

As per the Economic Survey 2009-10, the 11th Five Year Plan envisaged an additional

capacity of 78,700 MW of which 19.9 per cent was hydro, 75.8 per cent thermal and

the rest was nuclear.

16

The Centre has targeted capacity addition of 100,000 MW each in the 12th Five Year

Plan (2012-17) and 13th Five Year Plan (2017-22), said Mr Sushil Kumar Shinde,

Union Minister of Power.

India has launched its ambitious solar energy mission which aims to generate 20,000

MW of solar power by 2022.

Investments

Mr Sushilkumar Shinde, Union Minister of Power, has stated that the scope for

investment in the power sector over the next few years is well over US$ 300 billion and

given the large expansion programme in this sector, the country would definitely need

and welcome a large amount of foreign direct investment (FDI).

Mr Farooq Abdullah, Union Minister of New and Renewable Energy said the

government is targeting to electrify 10000 remote villages across the country with an

investment of US$ 112.14 million by March 2012.

India expects investments of up to US$ 55 billion by 2015 in the renewable energy

sector, which would generate 35,000 MW of power, stated Debashish Majumdar,

Chairman and Managing Director, Indian Renewable Energy Development Agency

(IREDA).

According to the Department of Industrial Policy and Promotion (DIPP), the power

sector has attracted foreign direct investment (FDI) worth US$ 677 million during April

to August 2010. The cumulative FDI received by the power sector between April 2000

and August 2010 was US$ 5.30 billion.

According to data released by Venture Intelligence, a Chennai-based research

company, private equity (PE) investments in the country's power sector were worth

US$ 1.1 billion in 2009-10 with the total number of deals being 27. PE investments in

the conventional energy sector stood at US$ 694 million in 2009-10 as compared to

US$ 129 million in 2008-09.

As of October 19, 2010, PE investment in energy in 2010-11 has reached US$ 834

million in 12 deals, stated Venture Intelligence.

As per an industry report, India requires an additional 90,000 MW of generation

capacity in the next seven years with a corresponding investment in the transmission

and distribution network. Key growth drivers for this segment include large demand

supply gap, renovation and modernisation of old thermal and hydro power plants,

large untapped hydel power and increasing privatization of distribution networks.

• Reliance Power has given a US$ 8.3 billion contract to China-based Shanghai

Electric Group Co Ltd (SEC) for supply of 36 coal-fired thermal power

17

generation units, spare parts and related services over a 10-year period.

Reliance Power is also planning to commission its entire portfolio of projects by

2017, which would be around 35,000 MW and include three ultra mega power

projects (UMPPs).

• Overseas Private Investment Corporation (OPIC), an agency of the US

Government, has signed an agreement with Azure Power to fund its 15 MW

solar photovoltaic (PV) project in Gujarat.

• Power Grid Corporation of India Ltd (PGCIL) is establishing a 1200 KV National

Test Station at Bina in Madhya Pradesh.

• Jindal India Thermal Power Limited (JITPL) expects to commission the first 600

MW unit of its 1200 MW power plant at Derang near Talcher by March 2012.

• Suzlon Energy has won a 202.2 MW wind power order worth US$ 252.19

million from Kolkata-based Techno Electric Group.

• Bajaj Hindusthan plans to invest up to US$ 2.19 billion to set up 1,980 MW

thermal power capacity in Uttar Pradesh.

• Geosyndicate Power Private Ltd, a Mumbai-based energy company, will set up

the country's first geothermal power plant of 25 MW in the Khammam district

of Andhra Pradesh at an investment of US$ 64.83 million.

• Azure Power, an independent power producer in solar energy, is targeting an

investment of US$ 64.54 million to set up about 20 MW power capacity under

phase-I of the National Solar Mission (up to 2013).

• Udupi Power Corporation Limited (UPCL), a subsidiary of Lanco Infratech Ltd,

an infrastructure company, is planning to expand capacity of its thermal power

plant by setting up two more units of 660 MW each at an estimated investment

of US$ 1.49 billion at Nandikur in Udupi district in coastal Karnataka.

• Tata Power will invest US$ 15.05 billion to raise its generation capacity eight

times from about 3,000 MW to 25,000 MW by 2017.

• Essar Power, a unit of Essar Energy, plans to invest US$ 2 billion to develop a

2,250 MW coal-fired power project in Orissa.

• State-owned NTPC is expected to invest over US$ 1.71 billion in Gujarat to

commission a coal-based project with a power generation capacity of 1,320 MW.

Government Initiatives

The government has initiated several proactive steps to open the sector for the private

players and realise the full potential of the country in the power sector:

• Introduction of the Electricity Act 2003 and the notification of the National

Electricity Policy 2005

• Constitution of Independent State Electricity Regulatory Commissions in the

states

• Providing income tax holiday for a block of 10 years in the first 15 years of

operation and waiver of capital goods' import duties on mega power projects

(above 1,000 MW generation capacity)

18

• 100 per cent FDI is permitted under the automatic route for generation and

transmission of electric energy produced in hydro-electric, coal/ lignite-based

thermal plants, oil-based thermal plants and gas-based thermal plants; non-

conventional energy generation and distribution, distribution of electric energy

to households, industrial commercial and other users; and power trading

• The government has also taken up some ambitious programmes like the Ultra

Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana

(RGGVY), Accelerated Rural Electrification Programme and the goal of Power for

All by 2012 among others, to rapidly increase the installed capacity

In the Union Budget of 2010-11, the Finance Minister, Pranab Mukherjee has

announced the following initiatives:

• Plan allocation for the power sector excluding RGGVY has been doubled from

US$ 501.3 million in 2009-10 to US$ 1.2 billion in 2010-11.

• Government proposes to introduce a competitive bidding process for allocating

coal blocks for captive mining to ensure greater transparency and increased

participation in production from these blocks.

• A "Coal Regulatory Authority" is proposed to be set up to create a level playing

field in the coal sector.

• Plan outlay for Ministry of New and Renewable Energy (MNRE) increased by 61

per cent from US$ 139.4 million in 2009-10 to US$ 224.8 million in 2010-11.

• Solar, small hydro and micro power projects at a cost of US$ 112.4 million to be

set up in the Ladakh region of Jammu and Kashmir.

The Central Electricity Regulatory Commission (CERC), in a bid to make available

easier grid connectivity to the hydro-electric power stations and the other generating

stations based on renewable sources of energy, has taken an important regulatory

initiative. While the threshold capacity for connecting to inter-state grid would be 250

MW for thermal power stations, the threshold has been reduced to 50 MW for the

hydropower generating stations and other stations using renewable sources of energy.

Another important regulatory change has been made to permit connectivity to inter-

state grid to such hydropower-generating stations and renewable energy source-based

stations which have individually installed capacity of less than 50 MW but approach

the Power Grid Corp, the central transmission utility, collectively with an aggregate

installed capacity of 50 MW and above.

As per an industry report, India requires an additional 90,000 MW of generation

capacity in the next seven years with a corresponding investment in the transmission

and distribution network. Key growth drivers for this segment include large demand

supply gap, renovation and modernisation of old thermal and hydro power plants,

large untapped hydel power and increasing privatization of distribution networks.

19

• Reliance Power has given a US$ 8.3 billion contract to China-based Shanghai

Electric Group Co Ltd (SEC) for supply of 36 coal-fired thermal power

generation units, spare parts and related services over a 10-year period.

Reliance Power is also planning to commission its entire portfolio of projects by

2017, which would be around 35,000 MW and include three ultra mega power

projects (UMPPs).

• Overseas Private Investment Corporation (OPIC), an agency of the US

Government, has signed an agreement with Azure Power to fund its 15 MW

solar photovoltaic (PV) project in Gujarat.

• Power Grid Corporation of India Ltd (PGCIL) is establishing a 1200 KV National

Test Station at Bina in Madhya Pradesh.

• Jindal India Thermal Power Limited (JITPL) expects to commission the first 600

MW unit of its 1200 MW power plant at Derang near Talcher by March 2012.

• Suzlon Energy has won a 202.2 MW wind power order worth US$ 252.19

million from Kolkata-based Techno Electric Group.

• Bajaj Hindusthan plans to invest up to US$ 2.19 billion to set up 1,980 MW

thermal power capacity in Uttar Pradesh.

• Geosyndicate Power Private Ltd, a Mumbai-based energy company, will set up

the country's first geothermal power plant of 25 MW in the Khammam district

of Andhra Pradesh at an investment of US$ 64.83 million.

• Azure Power, an independent power producer in solar energy, is targeting an

investment of US$ 64.54 million to set up about 20 MW power capacity under

phase-I of the National Solar Mission (up to 2013).

• Udupi Power Corporation Limited (UPCL), a subsidiary of Lanco Infratech Ltd,

an infrastructure company, is planning to expand capacity of its thermal power

plant by setting up two more units of 660 MW each at an estimated investment

of US$ 1.49 billion at Nandikur in Udupi district in coastal Karnataka.

• Tata Power will invest US$ 15.05 billion to raise its generation capacity eight

times from about 3,000 MW to 25,000 MW by 2017.

• Essar Power, a unit of Essar Energy, plans to invest US$ 2 billion to develop a

2,250 MW coal-fired power project in Orissa.

• State-owned NTPC is expected to invest over US$ 1.71 billion in Gujarat to

commission a coal-based project with a power generation capacity of 1,320 MW.

Government Initiatives

The government has initiated several proactive steps to open the sector for the private

players and realise the full potential of the country in the power sector:

• Introduction of the Electricity Act 2003 and the notification of the National

Electricity Policy 2005

• Constitution of Independent State Electricity Regulatory Commissions in the

states

20

• Providing income tax holiday for a block of 10 years in the first 15 years of

operation and waiver of capital goods' import duties on mega power projects

(above 1,000 MW generation capacity)

• 100 per cent FDI is permitted under the automatic route for generation and

transmission of electric energy produced in hydro-electric, coal/ lignite-based

thermal plants, oil-based thermal plants and gas-based thermal plants; non-

conventional energy generation and distribution, distribution of electric energy

to households, industrial commercial and other users; and power trading

• The government has also taken up some ambitious programmes like the Ultra

Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana

(RGGVY), Accelerated Rural Electrification Programme and the goal of Power for

All by 2012 among others, to rapidly increase the installed capacity

In the Union Budget of 2010-11, the Finance Minister, Pranab Mukherjee has

announced the following initiatives:

• Plan allocation for the power sector excluding RGGVY has been doubled from

US$ 501.3 million in 2009-10 to US$ 1.2 billion in 2010-11.

• Government proposes to introduce a competitive bidding process for allocating

coal blocks for captive mining to ensure greater transparency and increased

participation in production from these blocks.

• A "Coal Regulatory Authority" is proposed to be set up to create a level playing

field in the coal sector.

• Plan outlay for Ministry of New and Renewable Energy (MNRE) increased by 61

per cent from US$ 139.4 million in 2009-10 to US$ 224.8 million in 2010-11.

• Solar, small hydro and micro power projects at a cost of US$ 112.4 million to be

set up in the Ladakh region of Jammu and Kashmir.

The Central Electricity Regulatory Commission (CERC), in a bid to make available

easier grid connectivity to the hydro-electric power stations and the other generating

stations based on renewable sources of energy, has taken an important regulatory

initiative. While the threshold capacity for connecting to inter-state grid would be 250

MW for thermal power stations, the threshold has been reduced to 50 MW for the

hydropower generating stations and other stations using renewable sources of energy.

Another important regulatory change has been made to permit connectivity to inter-

state grid to such hydropower-generating stations and renewable energy source-based

stations which have individually installed capacity of less than 50 MW but approach

the Power Grid Corp, the central transmission utility, collectively with an aggregate

installed capacity of 50 MW and above.

21

Transformer Oils

Transformer oil is a highly-refined mineral oil that is stable at high temperatures and

has excellent electrical insulating properties. It is used in oil-filled transformers, some

types of high voltage capacitors, fluorescent lamp ballasts, and some types of high

voltage switches and circuit breakers. Its functions are to insulate, suppress corona

and arcing, and to serve as a coolant. Demand for the transformer oil comes from the

transformer market. The transformer oil market can be divided into OEM and

replacement demand.

However, as 60 per cent - 65 per cent of the revenue is accured from the OEM market.

Apar is the largest player with 50 per cent market share in the transformer oil market

with a turnover of approx 1,31,000 KL in FY10.

Generally, 1 MW of power addition requires 7 MVA of transformer across generation,

transmission and distribution. A 62,374 MW capacity achievement in XIth plan, will

generate an additional demand for 87,323 MVA p.a. of transformers. A transformer

has a shelf life of around 25 to 30 years. Thus transformers that were installed in

1980-1985 are likely to be replaced in the near future, which implies a replacement

demand of 25,000 MVA per annum. Thus the demand for transformers is pegged at

1,12,323 MVA per annum. As per Apar’s annual report 2008-09, the requirement of

transformer oil stands at 1,10,000 KL p.a. The requirement of transformer oil stands

at 1,10,000 KL p.a.

________________ ____ _________________________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

22

Firstcall India Equity Research: Email – info@firstcallindia.com

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

B. Prathap IT

D. Ashakirankumar Automobile

A. Rajesh Babu FMCG

H.Lavanya Oil & Gas

A.Prathibha Diversified

G.Bharani Bhukta Banking

Dheeraj Bhatia Diversified

Manoj kotian Diversified

Nimesh Gada Diversified

First call India also provides

Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s, Takeover

Offers, Offer for Sale and Buy Back Offerings.

Corporate Finance Offerings include Foreign Currency Loan Syndications,

Placement of Equity / Debt with multilateral organizations, Short Term Funds

Management Debt & Equity, Working Capital Limits, Equity & Debt

Syndications and Structured Deals.

Corporate Advisory Offerings include Mergers & Acquisitions (domestic and

cross-border), divestitures, spin-offs, valuation of business, corporate

Restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &

Execution, Project Financing, Venture capital, Private Equity and Financial

Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising

of capital through FCCBs, GDRs, ADRs and listing of the same on International

Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and

Other international stock exchanges.

For Further Details Contact:

3rd Floor, Sankalp, The Bureau, Dr.R.C.Marg, Chembur, Mumbai 400 071

Tel.: 022-2527 2510/2527 6077/25276089 Telefax: 022-25276089

E-mail: info@firstcallindiaequity.com

www.firstcallindiaequity.com