NEPC India Ltd

CMP: Rs.17.30 BSE Code: 500310 Performance: Market Performer Targets: Rs.32 and Rs.51 in 12 months18 months SL: Rs.15.8 and Rs.13.5 (Exit)

Introduction: NEPC INDIA Limited is a Public Limited Company promoted by the Khemka Group with the primary
objective of promoting wind energy. This successful Group has a multi crore turnover from diversified activities in the field of Power Generation from Wind Energy and manufacture and marketing of Wind Turbine Generator (a renewable energy device). NEPC INDIA LIMITED places a high value on environmental responsibility, under this unified corporate philosophy, and its core business of Renewable Energy. The company strives towards providing the highest quality products, superior performance, extended life, reliable service and ever increasing reliability of its Products to provide unlimited green power. Shareholding Pattern: The Promoters holding is 11.99% while the general public holds 88.01%. Among the public Southern Wind Farms Pvt Ltd holds 5.79% while Deutshe Bank Trust Company Americas hold 3% of the shares of the company. Also, it is worth noting that Paul Arvind Pandian has increased his stake in the company from 1.65% to 1.71% speaking sequentially. Similarly Repatriates Co Operative Finance & Dev and Dhanada Portfolio Management Ltd have increased their holdings from 1.36% and 1.09% to 1.65% & 1.36%, respectively, as of 31st December, 2008 speaking sequentially---this is encouraging. To break further FIIs hold 0.13%, NRIs holds 0.91% and Corporate bodies hold 18.89% shares of the company. This has considerably decreased the floating shares of the company available for trade and hence its shares generally trade at a good premium to its face value. Financials: The Companys financials for Q3FY08 are absolutely marvelous. The total income of the company came out to be Rs.5.4 Cr as against Rs.2.9 Cr in the same period previous year---a jump of nearly 90%, Q-o-Q. The net profit of the company for Q3FY08 is equally spectacular at Rs.14.7 lakhs against a massive loss of Rs.5.9 Cr in the same period previous year. Thus from a loss making company it has now turned out to be a profit making company. The financial are expected to improve further due to the success of some of its products, whose demand is outstripping the production.

Triggers: NEPC Solar Dual Power System, launched into Indian market an year back, has stirred the hornet's nest in the

UPS Market in India. NEPC Solar Dual Power System is not the conventional UPS but a unique product, where the system could be charged both by Solar Energy and Grid Electricity. These products are innovation in action, fine tuned to sync with the sensitive gadgets as well as heavy duty equipments. The system is designed to take advantage of the abundant source of Solar Energy in the country & to give a value addition to the normal UPS, available in the market. NEPC India Ltd had recently launched a galaxy of new models of Sine Wave Solar Duel Power Systems, offering a solution to a wide range of power applications. High capacity models have also been introduced which can even operate Lifts / Petrol Pumps/ Power Looms etc. The products are generating huge response from the customers. Thus, NEPC's Sine Wave Solar Dual Power Systems is a great success story and it is able to consolidate and garner a 25%--30% of the total market share in Northern India. It is trying to foray into Southern Region. Strategic marketing arrangements are being organized to reach / access customers in the Southern Region. Its high capacity Since Wave Solar Duel Power System is likely to achieve 40-50% market share by mid 2008, if the present statistics are any indication. NEPC is setting up a manufacturing facility for Thin Film Solar Photo Voltaic (PV) modules which is considered to be an advanced technology to generate cost effective power and will cater to the high demand for Solar PV modules all over the world. The Thin Film Solar (PV) Modules project is located at NEPC's own land near Coimbatore (160 acres), which will be converted into a SEZ. NEPC SEZ will be developed in 160 acres of land. The Thin Film Solar (PV) Modules project will occupy around 20 acres and the rest of the land will be offered to manufacturers of engineering, electronics and electrical products. This project is expected to completed by mid/end of 2008. This is expected to generate additional revenues for the company from Q3FY08/Q4FY08.

The Company is in a high growth trajectory and has proposed to augment funds by way of GDR / FCCB issue for an amount up to US$ 150 million. Also it has been into profits for the last few quarters due to the good response to its Sine Wave Solar Dual Power Systems. The Vice Chairman of the company has been traveling overseas to market some of its products which are in the pipeline in advance and till now it is getting good response. There are also some offers for underwriting the production, which is under serious consideration. NEPC Textiles Ltd has increased their market share with fast recovery of Knit Wear Exports from Tiruppur. NEPCs growth strategies are working well and the trend is positive. With Oil Boiling at around $110 plus per barrel, the companys products have suddenly started to generate huge interest. It is because the companys products no only addresses the issue of pollution but also promotes renewable adhering to the Kyoto Protocol. The increase in awareness in India has compelled the government and public to focus on Renewable Energy. Also the long gestation of period of mega thermal power projects and publics concern over the environmental damage is already driving them to Solar and Wind Power. Sun is available for about 265 days to 300 days in a year. Moreover, Indias major population lives in villages where there are dearth of adequate grid power from the local electricity boards. This increases the chances of marketing the companys products across India and hence the growth potential is immense. The company hopes to generate a good growth in this space and could be more if the government comes up with more incentives in the form of tax cuts, cheap loans etc. The company last year launched Solar Power House machines in North India which were a runaway success. With a firm belief in R&D to provide the cutting edge, leading scientists are working together to unearth new ideas, designing new applications and constantly improving on products at advanced hi-tech laboratories. The world at present is using 0.1% of the total Energy used through Solar Energy and hence there is huge potential in this space. It is anomalous to observe that a country like Germany with long winter, dominated by damp and cold climate generates 3% of Energy through Sun, while a Sun drenched country like India with long summer and hot climate generates only a miniscule percentage through Solar Energy. Hence, the company hopes that this aberration will soon be ironed out and huge demand for its products will come from the domestic market. The Wind Energy division of the Company had been transferred to M/s. Southern Wind Farms Limited (SWL) as going concern basis effective May 01, 2006. Consequent to this transfer of Wind Energy Division, SWL would be allotting fully paid up equity shares of Rs 10/- each representing 12.5% of total paid up share capital of SWL to a trust formed for the benefit of NEPC Shareholders. The Company has initiated suitable action to ensure that substantial payments including consideration, liabilities and obligations as agreed are fulfilled by SWL. It is not known when Anil Ambani will be listing Southern Wind Farms Ltd (Global Wind Power Limited) but SWFL has ambitious growth and expansion plans. Norwin (a Denmark Company) entered into an agreement with the Global Wind Power Limited last year (in September) for manufacture of the Norwin 750 kW generators. A state of the art unit is being set up at Silvassa for manufacturing wind turbines of different capacities up to 2 MW. It will allow for a production capacity of 300 turbine per year. In January 2008, Norwin and Global Wind Power Ltd. signed an agreement that gave Global Wind Power Ltd a minority share in Norwin. There was a talk of SWFL opening an office in Copenhagen. As per the earlier reports, SWFL is likely to be profitable by Q4FY08. It is worth noting that the shareholders in NEPC were to be allotted 12.5 shares of Southern Wind Farms for every 100 shares held in the former. Current value of SWFL is much higher than few years ago when NEPC sold its wind power division to SWFL. So NEPC shareholders will be getting 12.5 shares of a profitable company in the high growth renewable energy sector managed by ADAG (Anil Dhirubhai Ambani Group) for every 100 shares they own in NEPC. According to the latest shareholding pattern, SWFL also holds around 6% shares in NEPC. Khemkas own only 12% shares in NEPC. So we can not rule out the chances of ADAG taking over NEPC by increasing SWFL's stake in NEPC. Also if the Court verdict is against SWFL (the case filed by Khemkas relating to the sale of Wind energy division to SWFL), then NEPC will be getting CRORES of money. In that case, NEPC shares will cross Rs.50 in no time and we could expect a price of Rs.150 plus, if that happens.

Conclusion: The demand for UPS has increased by leaps and bounds when compared to year 2006/ 2007. Indian

market for UPS is roughly estimated at Rs.10, 000 Cr and it is growing year after year which is further aggravated by the Power shortage in metros and rural areas. I have already informed that the company has made a strong presence in the market with 30% share and the trend is very encouraging. In this context, it may not be out of place to mention that the phenomenal increase in computerization in schools / offices, commercial, non commercial establishments, Government and Non Government Bodies, Office Automation, Infrastructure development, Housing Projects and industrialization has further escalated the demand for Power-backup systems. In this context, its recent introduction of High Capacity SOLAR DUAL SINE WAVE POWER SYSTEMS for heavy duty and industrial application through Induction of advanced Technology has been well received. Surprisingly, the demand has exceeded production targets. The company is rescheduling its production, streamlining the supply and reorganizing its Logistics. NEPC India Ltd. which pioneered Wind Energy is fast progressing into a Premier Power Solution Company in the country with their noiseless, modular, sustainable, Green POWER Generation systems. Thus considering all the factors mentioned above it has been found that the companys share price is highly undervalued at the CMP of Rs.17.3 and will soon go for re-rating. Buy with a 12 months---18 months time frame for a target of Rs.51, keeping suitable stop losses for the very short term trades.

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