Vote of confidence

Looks like the newly-appointed joint managing director and CEO of JSW Energy is making a statement through his maiden stock purchase from the open market. Not someone uninitiated to the ways of JSW group, Prashant Jain has served as the head of corporate strategy and development for JSW Steel for more than two decades now. He took over as the CEO of the power utility arm of the group on June 16.

Close to two months after taking charge, Jain bought 25 lakh shares in two tranches on July 27 and July 28. The average price per share was Rs.69.15. Post this transaction, Jain’s stake in the firm is pegged at 0.15%, worth Rs.17.29 crore as on August 11. JSW Energy’s shareholders have agreed to Jain’s annual remuneration being capped at Rs.6 crore.

JSW Energy, which has a power generation capacity of 4,351 MW, has seen its share price decline by 20% over the past one year against a 12% increase in the benchmark BSE Power Index. It has lagged the sectoral index on a year-to-date basis as well with the stock rising a tepid 4% against 15% for the power index.

The poor sentiment could be driven by the fact that in FY17, the firm’s profit saw a steep y-o-y decline of 57% amid increase in commodity prices, declining plant load factor for thermal plants (owing to reduced merchant offtake), sluggish domestic demand and low tariffs. The declined efficiency was also reflected in a sharp drop in ROCE from 16.99% in FY16 to 10.45% in FY17. Analysts are, however, expecting a new long term power purchase agreement (PPA) with the Karnataka government this year which will contribute to increased demand.

The promoter and promoter group’s stake has largely remained unchanged for the past one year at about 75%. Foreign portfolio investment has increased marginally from 9.37% for the quarter ended June 2016 to 9.83% in June 2017. Among FPIs, Blackrock Global Asian Dragon Fund increased its stake from 1.22% to 1.79% during the same period. Meanwhile, domestic mutual funds have also marginally increased their stake, from 0.27% in June 2016 to 0.97% in June 2017. Life Insurance Corporation of India held 4.9% for the quarter ended June 2017. The stock is currently trading at 12.9x, one-year forward.