SJVN Ltd (SJVNL)

IPO Note Invest from a long-term perspective (preferably at the lower band) April 29, 2010

Issue Snapshot: Background & Operations:

Issue Open: April 29 – May 03, 2010 SJVN Ltd (SJVNL) is a hydroelectric power generation company originally
established as a joint venture between the Government and the state government
Price Band: Rs. 23 – Rs. 26 (5% discount for retail of Himachal Pradesh to develop and operate the NJHPS (Nathpa Jhakri Power
investors and employees)
Station). The NJHPS is currently the largest operational hydroelectric power
Issue Size: Rs. 954.50cr –1079.00cr (entire issue generation facility in India based on installed capacity, with an aggregate
is offer for sale by Govt of India) generation capacity of 1,500 MW, and is located on the Sutlej River in the state of
Himachal Pradesh. The NJHPS is currently its only hydroelectric power project in
Issue Size: 415,000,000 equity shares operation. It is required to supply 12% of its annual generation from the NJHPS to
the state of Himachal Pradesh free of cost, and an additional 1% of its annual
QIB atleast 246,990,000 eq sh generation from projects located in the state of Himachal Pradesh to a local area
Retail upto 123,495,000 eq sh development fund established by the state government of Himachal Pradesh for
Non-Institutional upto 41,165,000 eq sh the purposes of providing a regular stream of revenue for income generation and
Employees atleast 3,350,000 eq sh
welfare schemes, creation of additional infrastructure and common facilities on a
Face Value: Rs 10 sustained and continued basis over the life of the project. Out of the remaining 88%
of power generated by the NJHPS (which will be reduced by 1% to 87% in the
Book value: Rs 16.45 (December 31, 2009) event it is required to supply power to the local area development fund), 25% is
supplied to the state of Himachal Pradesh and the remainder is supplied to various
Bid size: - 250 equity shares and in multiples states located in the Northern region of India.
thereof
SJVNL is currently constructing the Rampur Project, which is expected to be a 412
100% Book built Issue
MW hydroelectric power generation facility located downstream from the NJHPS. It
has been awarded the rights to develop and operate two hydroelectric projects with
Capital Structure:
an expected aggregate generation capacity of 825 MW by the state government of
Pre Issue Equity: Rs. 4136.63 cr
Post issue Equity: Rs. 4136.63 cr Himachal Pradesh (in each of which it is expected to have a 51% participation
interest) and has entered into a memoranda of understanding with the state
Listing: BSE & NSE government of Uttarakhand for three hydroelectric projects with an expected
aggregate generation capacity of 363 MW. It also has agreed to participate in a
Lead Manager: JM Financial consultants Pvt Ltd, joint venture with NHPC Limited and the state government of Manipur for the
IDFC Capital Ltd, IDBI Capital Market services Ltd, development and operation of a 1,500 MW hydroelectric power project to be
SBI Capital Markets Ltd. located in Manipur. It has diversified its operations to target hydroelectric power
projects available outside of India, and has been awarded the rights to construct
and operate on a build, own, operate and transfer (BOOT) basis, a 900 MW
Registrar to issue: Link Intime India Pvt Ltd
hydroelectric power project to be located in the Sankhuwasabha district of Nepal,
through participating in a competitive tender held by the Nepalese government.
Shareholding Pattern:
Through these projects, it expects to increase its total installed power generation
Shareholding Pre issue Post issue
Pattern % % capacity by approximately 3,588 MW.
Promoters &
Promoter Group 100 89.97 SJVNL has also agreed to take a minority interest in a joint venture to be
Public (incl established for the development of a transmission line in the territory of India, which
institutions & is part of a transmission line expected to connect Dhalkewar in Nepal to
employees) - 10.03 Muzaffarpur in India, and also intend to expand into providing technical advisory
Total 100.0 100.0 and consultancy services. It has historically been able to achieve high levels of
operational efficiencies, which is reflected through high average capacity indices for
CARE IPO grading: 4/5 indicating above average the NJHPS.
fundamentals
Objects of Issue:
The object of the Issue is to carry out the divestment of 415,000,000 (ie 10.03% of
the paid up capital) equity shares by selling shareholders, i.e. President of India
(POI). The company will not receive any proceeds from the Offer and all proceeds
shall go to the selling shareholder (POI).

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The following table sets forth a summary of SJVNL’s projects under operation, construction, development and implementation:
Project State/Country Installed Capacity Actual/Anticipated)
Operational project
NJHPS Himachal Pradesh, India 1,500 MW
Project under construction
Rampur Himachal Pradesh, India 412 MW
Projects under development/implementation
Luhri Himachal Pradesh, India 775 MW
Dhaulasidh Himachal Pradesh, India 50 MW
Devsari Uttarakhand, India 252 MW
Naitwar Mori Uttarakhand, India 60 MW
Jakhol Sankri Uttarakhand, India 51 MW
Arun-III Nepal 900 MW
Tipaimukh Manipur, India 1,500 MW
Others
Transmission JV Nepal/India N.A.

Triggers:

Experience in hydroelectric power project development: SJVNL has experience in the development, execution and management of
mega-hydroelectric projects through its development and operation of the 1,500 MW NJHPS, which is the largest hydroelectric power
generation facility in India based on generation capacity, and is located in the geo-technically sensitive Himalayan region. The design of
the NJHPS is unique in its complexity, and has enabled it to achieve operational and maintenance efficiencies, which has translated
into, lower operational and maintenance costs for the NJHPS. It will be able to leverage its experience in developing the NJHPS to
effectively develop and operate its existing pipeline of projects, as well as obtain new projects in the future. SVJNL’s experience in
dealing with public interest groups, non-governmental organizations and local communities, as well as in the land acquisition process
and with geological issues peculiar to the Himalayan region will prove to be valuable in any development of new projects going forward.

Established track record of operational excellence: Since the commissioning of the NJHPS, SJVNL has consistently met or
exceeded Government-set performance targets for its operations, and has been upgraded to a Schedule A public sector undertaking
and designated as a Mini-Ratna Category-I public sector undertaking in recognition of itsefforts. It has also obtained ISO quality
certifications for its operations, and several awards for excellence in various fields, such as corporate leadership, engineering, financial
and operationalstrength, health and safety management, hydroelectric power development, social contribution and environmental
management. Its established performance track record and experience in executing, operating and managing the NJHPS will give
SJVNL a competitive advantage in developing large hydroelectric power projects, both in India and abroad.

Stable revenue stream through long-term power purchase agreements with state electricity boards and distribution licensees:
SJVNL has entered into ten power purchase agreements with state utilities in the Northern region of India, two of which are in the
process of being renewed, under which all of the power generated by the NJHPS (except for 12% of its annual generation which is
allocated to the state of Himachal Pradesh free-of charge and an additional 1% of annual generation from projects located in the state
of Himachal Pradesh, which is allocated to a state-established local development fund) is sold to state electricity boards. Payment for
sales of electricity to these state utilities are typically secured by forms of credit support such as letters of credit issued by reputable
financial institutions or by state government guarantees. It has not experienced any significant delays in payment or payment defaults
by such customers in the past, and it maintains strong working relationships with these customers.

Ability to capitalize on performance-based incentives under the current tariff regime: Since the full commissioning of the NJHPS
in May 2004, SJVNL has consistently achieved a monthly plant availability factor of more than 82%, which is the normative annual plant
availability factor which has been set by the CERC for the NJHPS under the new tariff regulations which are effective from April 1, 2009
to March 31, 2014. Subject to disruptions to its operations arising from factors not within control such as water supply availability, silt
levels, power evacuation constraints and prevailing weather conditions, it will be able to maintain its performance going forward, and
will thus be eligible to recover the full amount of capacity charges as well as qualify for certain performance-based incentives under the
new tariff regime based on excess generation and normative annual plant availability factor.

Strong cash position to support project development and operations: SJVNL’s strong historical financial performance and steady
cash flows from its existing operations at the NJHPS are sufficient to fund, through its internal resources, the equity contribution portion
for its existing pipeline of projects, and support its working capital requirements, while at the same time servicing and repaying its
existing debt on a timely and reliable basis, and maintaining a healthy level of cash on its balance sheet. For the years ended March 31,
2007, 2008 and 2009 and the nine months ended December 31, 2009, its cash and cash equivalents were approximately Rs. 621.04
crore, Rs. 693.60 crore, Rs. 1271.44 crore and Rs. 1487.15 crore, respectively. Its strong cash position and cash flow generation
capabilities from the NJHPS are attributable to a number of sustainable long-term factors, including stable customer demand, stable
cost structure and an experienced and capable management team.

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Guaranteed return on capital under prevailing tariff regime: For the previous tariff regime with effect from April 1, 2004 to March 31,
2009, the guaranteed rate of return on equity was 14%, and under the new tariff regime currently with effect from April 1, 2009 to March
31, 2014, the guaranteed rate of return on equity is 15.5%. Under Government policies and prevailing regulations, up to 30% of
aggregate project costs in relation to a project is eligible for the guaranteed rate of return on equity. It obtained a special dispensation
for the NJHPS, under which its tariff rate charged for power supplied from the NJHPS incorporates a guaranteed rate of return on equity
on 50% of the project costs (being the amount of project costs which were financed by equity contributions). It anticipates that it will be
well positioned to benefit from Government policy incentives as the Indian energy sector continues to develop.

Business Strategy:

To pursue business and capacity expansion plans to meet rising energy demand and increase market share: SJVNL
anticipates that demand for energy in India will continue to increase, and it is well positioned to benefit from such increased demand.
SJVNL could add approximately 3,588 MW to its aggregate generation capacity through the development of its existing pipeline of
projects, subject to unforeseen circumstances, which may cause completion delays or revisions to project parameters, and intends to
pursue new opportunities for hydroelectric power projects as they become available, both in India and in surrounding regions in
countries such as Bhutan and Nepal and elsewhere, which have great development potential. It also intends to pursue opportunities
through direct tenders for projects, as well as through partnering with high quality power developers to tender for new projects, which
become available.

To continue to provide sustainable and reliable electricity supply to the customers: SJVNL will continue to focus on providing
reliable sustainable energy to new and existing customers through maintaining its performance standards at the NJHPS, as well as on
the development of new hydroelectric power projects in an environmentally and socially responsible manner. To this end, it intends to
focus on modernizing and maintaining its operations at the NJHPS in line with internationally recognized quality and technical
standards, as well as invest in viable equipment upgrades to further optimize its performance.

To pursue diversification initiatives: SJVNL intends to diversify its business operations into various alternative energy projects, such
as wind power and solar energy projects In addition to this, it also intends to pursue geographical diversification through tendering for
hydroelectric power projects outside of India, and to leverage its technical expertise and know-how in the hydroelectric power sector
into establishing a technical consultancy and advisory business focusing thereon. It has also agreed to take a minority stake in a joint
venture company with certain other private sector parties for the development of part of a power transmission line connecting India and
Nepal.

Increase profitability and shareholder value through capitalization on efficiency incentives under the current tariff regime and
the clean development mechanism scheme: SJVNL e intends to pursue improvements to its profitability with the objective of
increasing shareholder value through, among others, capturing to the maximum extent possible financial incentives and benefits
associated with increased operational efficiency which are available under the current tariff regime, as well as through registering its
hydroelectric power projects under the United Nations Framework Convention on Climate Change of 1994 to earn certified emission
reduction credits, which may be sold to industrialised countries. It is also in the process of investigating other carbon trading initiatives,
which may be applicable to its projects.

Industry:

The power industry in India has historically been characterised by energy shortages, with demand for electricity far exceeding the
supply. The continued growth of the Indian economy has accelerated the need for further investments in the power sector. The
Government has identified the power sector as a focus sector, in order to sustain industrial growth. for FY 2009, demand for electricity
exceeded supply by 11.0% (as compared to 9.9% in the preceding year). The total energy shortage during this period was 85,303 MU.
Similarly, India’s peak demand deficit during this period was 12.0% or 13,124 MW. it is anticipated that by FY 2012, India’s peak
demand for energy will be in the region of approximately 152,750 MW, and will have total energy requirements of 969,000 MU. As
India’s economy continues to grow, it is expected that India’s energy consumption will grow as well. A key risk to the continued growth
of the Indian economy is inadequate power infrastructure. Growth in power infrastructure investment in India may be constrained
without further improvements. In order to sustain a GDP growth rate of 8-9%, India would require additional capacity of about 66-79 GW
by 2012, 152-183 GW by 2017 and 271-334 GW by 2022 based on normative powers.

In addition, between FY 1950 and FY 2009, India’s population increased significantly from 0.3 Bn to 1.1 Bn (Source: World Population
Prospects & World Bank: World Development Indicators), representing a compound annual growth rate, or CAGR, of approximately
2%. The increase in India’s population is directly correlated to increased consumption of electricity. per capita consumption of electricity
has increased from 15 kWh/year in FY 1950 to 704 kWh/year in FY 2008, representing a CAGR of approximately 7%.and is expected
to increase to 1,000 kWh/year by FY 2012.

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Government plan for the development of the Indian power and hydroelectric sectors
In order to meet the growing demand and minimize shortages encountered in various regions, the Government has projected that
aggregate generation capacity in India will need to be doubled over the next 10 years. The Government has historically adopted a
system of announcing successive five-year growth plans known as Five Year Plans, that set out Government targets for economic
development in various sectors, including the power sector. Each Five Year Plan has increased projected targets for additional capacity
for power generation. Despite the benefits of hydroelectric projects, the share of electricity generated by hydroelectric power schemes
in India has steadily declined over the years, from 37% of total installed capacity in India at the end of the 1st Five Year Plan (1951 to
1956) to 23.67% in the current 11th Five Year Plan, although it rose to an aggregate of more than 45% by 1963 and continued to
represent more than 40% of aggregate installed capacity in India until the late 1970s, before declining to the present levels
commencing in the 1980s. 40% of aggregate installed capacity is considered by Ministry of Power to be the ideal hydro-thermal
generation mix for meeting demand in an efficient manner. The table below sets forth certain information relating to installed capacity
arising or projected to arise from hydroelectric power schemes from the beginning of the 1st Five Year Plan in 1951. As a result of the
decreasing share of hydropower, thermal generation, which should ideally be used only for base load operations, is increasingly being
used to meet peak requirements, which leads to sub-optimal utilisation of economic and non-renewable resources]. The 11th Plan
(2009 to 2014) envisages that in order to meet projected energy requirements of 1,038,000 MU and a peak load of 152,746 MW with a
5% spinning reserve, total capacity addition of approximately 82,500 MW is required during the period. The 11th Plan proposes that
aggregate capacity addition of approximately 78,700 MW be undertaken during the relevant period, to comprise 36,874 MW by the
Government, 26,783 MW by the various states and the remaining 15,043 MW to be undertaken by private development. Of this,
approximately 15,627 MW is targeted to be added by way of hydroelectric power schemes, comprising 8,654 MW (representing 55.4%
of the planned installed capacity for hydroelectric power schemes) by the Government, 3,482 MW (representing 22.3%) by various
states and 3,491 MW (22.3%) to be undertaken by private development.

Concerns:

SJVNL may be subject to future litigation, including public interest litigation, instituted in connection with the environmental
impact of its projects or in connection with land acquisition activities carried out with respect to such projects: Generally, the
development and construction of a hydroelectric project may have significant consequences on the surrounding environment, including
on the ecosystem of the affected areas, grazing, logging, agricultural activities, mining and land development. There can be no
assurance that SJVNL will not be subject to litigation and/or other forms of opposition from public interest groups, local communities or
non-governmental organizations, including public interest litigation, in relation to the environmental impact of its projects or in relation to
land acquisition and construction activities for its projects and the consequent displacement and rehabilitation of affected communities.

Dependent on the NJHPS for revenues and operating cashflows and to finance the development of other hydroelectric power
project: All of SJVNL’s revenues are generated from the NJHPS located in the state of Himachal Pradesh on the Sutlej River, which is
one of the principal tributaries of the Indus river in the southwest Himalayas. In the event of significant disruptions to its operation of the
NJHPS, its ability to continue the development of its pipeline of projects or to service its debt obligations incurred for the purposes of
financing the development of such projects may be significantly and adversely affected. If any of these events occur, its business,
prospects, profitability, financial condition and results of operations may be materially and adversely affected.

The Government has historically provided financial support for the development of the NJHPS, which may not be forthcoming
in the future: Historically, the Government has provided up to 75% of the equity funding for the NJHPS, in addition to a direct pass-
through fixed-rate loan of Rs. 1537.90 crore, using proceeds of a loan obtained from the World Bank for that purpose. With effect from
April 1, 2004, the CERC framed tariff regulations, which imposed a maximum threshold of 30% for equity funding of a power project.
While the Government provided SJVN with financial support for the construction of the NJHPS, the Government did not provide it with
financial support for the Rampur Project, the Government equity portion of which it has funded through its internal resources. There can
be no assurance that the Government could provide it with any further equity funding, or that it will be able to generate adequate funds
for the completion of all its current and planned future projects without the assistance and support of the Government.

With effect from January 2011, SJVNL may require to sell electricity generated at its new projects through competitive tender
processes conducted by distribution licensees for long term procurement of power: In the event that the exemption for new
projects being developed and commissioned by central and state public sector undertakings is not extended, it will be required to
participate in competitive bidding processes for the sale of energy generated by projects which have been newly developed and
commissioned by it, against private developers and other public sector undertakings. It cannot be assured that it will be able to bid
competitively against such competitors, and selling its power to distribution licensees through long term for such power purchase
agreements. If this occurs, its business, prospects, profitability, financial condition and results of operation couls be materially and
adversely affected.

Sales of electricity are regulated by directives issued by the Government and are subject to prevailing tariff policies and
regulations: SJVN is required to charge its customers at a tariff rate determined by the CERC for sales of electricity, which is also set
forth in the PPAs between its Company and such customers. Under the current tariff regime, actual operation of the power generation
facility is required to recover capacity charges, whereas under the previous tariff regime, recovery of capacity charges was based on

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available capacity rather than actual plant availability. This means that while it was previously able to recover capacity charges based
on its available capacity, its ability to recover such charges could now depend on its actual production of electricity, which is in turn
dependent on certain factors which may not be within control, such as sedimentation, rainfall levels and availability of water supply. The
switch to a performance-based tariff regime could have an adverse impact on its revenues, profitability, financial condition and results of
operation.

Sole operational project is located, and a significant proportion of SJVNL’s expected generation capacity will be located, in
the state of Himachal Pradesh and it is therefore vulnerable to developments or events occurring therein: SJVNL’s sole
operational hydroelectric power project, the NJHPS and three of its pipeline projects are located in the state of Himachal Pradesh.
Together with its current generation capacity of 1,500 MW under the NJHPS, it expects its aggregate generation capacity located in the
state of Himachal Pradesh to account for approximately 53.3% of its total generation capacity, assuming the commissioning of all its
existing pipeline projects. In the event that the state government of Himachal Pradesh decides to withdraw its support of SJVNL, its
business, prospects, financial condition and results of operation could be materially and adversely affected.

Significantly all of the revenue is derived from sales of power to state electricity boards and distribution licensees: For the
year ended March 31, 2009 and the nine month period ended December 31, 2009, approximately 91.19% and 94.25% respectively of
SJVNL’s total revenues was attributable to its sales of electricity to state electricity boards and distribution licensees pursuant to long
term power purchase agreements entered into between SJVNL and such state electricity boards. There can be no assurance that these
state electricity boards or distribution licensees will always be required to, or be in a position to, secure their payments to it. In the event
that it experience any defaults or delays in payments for electricity supplied by SJVNL to these parties, its profitability, cash flows,
financial condition and results of operations could be materially and adversely affected.

Current business strategy involves, among others, the diversification of its operations into various alternative energy
projects, such as wind power and solar energy, in which SJVNL has no prior operational history: Current business of SJVNL
strategy requires, among other things, the diversification of itsr business operations into various alternative energy projects, such as
wind power and solar energy projects. It is currently in the process of evaluating the feasibility of such alternative energy projects, and
has obtained board approval to engage professional consultancies with the appropriate technical know how and expertise, to identify
any suitable business opportunities in these alternative energy sectors. It currently has no prior experience in designing, constructing or
operating such alternative energy projects or in the development or operation of transmission lines, and there can be no assurance that
it will be able to successfully leverage its operational expertise with hydroelectric power projects in these sectors.

Exposed to interest and exchange rate fluctuations: All of SJVNL’s revenues are denominated in Rupees while a significant portion
of its outstanding debt obligations is expected to be denominated in foreign currencies such as the U.S. dollar. As of December 31,
2009, approximately 34.8% of its aggregate indebtedness is denominated in foreign currencies. All unsecured borrowings are
denominated in foreign currencies. Accordingly, any depreciation of the Rupee against the U.S. dollar or other foreign currencies in
which its future indebtedness may be denominated could significantly increase its funding costs. If it is unable to recover the cost of
foreign exchange variations through its tariff pricing or through undertaking hedging activities, its profitability, financial condition and
results of operations could be materially and adversely affected.

Certain hydroelectric power projects are cascading projects: Three of SJVNL’s hydropower projects in the state of Himachal
Pradesh, including the NJHPS, the Rampur Project and one other pipeline project, are located on the main Sutlej river or its tributaries
and is expected to have an aggregate generation capacity of up to approximately 2,687 MW. The NJHPS and the Rampur Project are
cascading projects, and the Rampur Project is dependent on the NJHPS for its supply of water. Consequently, if operations at the
NJHPS are disrupted, concurrent disruptions may result at the Rampur Project.

Dependent on the Government for the acquisition of land for the projects: There can be no assurance that the Government will be
able to successfully acquire the land required for the construction of its hydroelectric power projects in a timely manner, at a reasonable
price, or at all. Any delays in the land acquisition process, including delays due to the unwillingness of landowners to sell their land or
opposition from affected communities or public interest groups, may result in construction delays for a hydroelectric project, which may
in turn result in increased project costs and delay in the commencement of commercial operations of that project.

May not be able to fulfill certain obligations with respect to the Dhaulasidh Project in the future: Under the terms of the
Memorandum of Understanding dated October 27, 2008 entered into by SJVNL with the state government of Himachal Pradesh for the
purpose of developing and maintaining the Dhaulasidh Project, the equity funds for the Dhaulasidh Project will be contributed in the
ratio of 51:49 by the Government (through SJVNL) and the state government of Himachal Pradesh (through SJVNL and individually)
respectively. To achieve the same, funding will be provided by SJVNL from internal cash flows and the difference will be funded by the
state government of Himachal Pradesh through equity subscriptions, so as to bring its overall equity contribution in the Dhaulasidh
Project up to 49%. There can be no assurance that the equity contribution in the aforesaid ratio will be made by the Government and
the state government of Himachal Pradesh. If this occurs, its rights to develop, own and operate the Dhaulasidh Project may be
revoked or rescinded and its business, prospects, profitability, financial condition and result of operations could be materially and
adversely affected.

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The development of hydroelectric power projects may be subject to unexpected complexities and delays, which may cause
the actual timeframes of such project development to differ significantly from original estimates: SJVNL typically perform
feasibility studies on each project proposal before determining whether it wish to proceed with undertaking the development of a
particular hydroelectric power project which has been awarded or proposed to it. The estimates and assumptions used in its preparation
of feasibility studies are based on certain tariff regulations published by the CERC. It supervises construction work carried out on its
hydroelectric power projects, and select subcontractors for the purposes of constructing its projects based on a competitive tender
process. There can be no assurance that bids received from third party contractors will match the project cost estimates as approved by
the CEA and the PIB. If it is unable to obtain approval for the revised amounts to be included as annual fixed charges recovered under
its electricity tariffs, or experience significant delay in doing so, it will not be able to recover such costs and its profitability, financial
condition and results of operation may be affected.

The development of hydroelectric power projects typically requires substantial initial capital expenditure: The development of
hydroelectric power projects is capital intensive and typically requires a longer period of time as compared to other power projects such
as thermal power projects. It expects to finance its existing pipeline of projects through financing arrangements with third party lenders,
as well as through internal cash flows. There can be no assurance that it will be able to obtain such financing, or to do so on
commercially acceptable terms. In addition, even if it is able to obtain financing for its projects, lender financing commitments and draw
down of funds pursuant to such financing are typically subject to the fulfilment of certain conditions precedent. It has not incorporated
separate subsidiaries for the development and operation of its existing pipeline of projects. Consequently, if it is to experience
difficulties on a project, which result in being in default of its obligations pursuant to the financing arrangements for that particular
project, it may be deemed to be in default under all of its financing arrangements, and may be declared to be insolvent as a result. If
this occurs, its business, prospects, financial condition and results of operation could be materially and adversely affected.

May face opposition from local communities and other non-governmental organizations in connection with the construction
and operation of hydroelectric power projects, which may delay the construction or development of such projects or
negatively affect corporate image: Generally, the development of hydroelectric power projects globally and in India has faced
opposition from special interest groups, as well as local communities located in the vicinity of such projects. It has also encountered
similar opposition in its construction of the Rampur Project, as well as certain instances of sabotage during the construction process.
Significant opposition by parties, including by way of litigation or acts of sabotage against its project facilities or projects under
construction, may result in delays in the construction or the commencement of commercial operations of projects under construction,
require it to cease operations at operational projects, or result in the incurrence of increased or additional costs, expenses and
contingent liabilities. Its reputation and corporate brand equity may also be adversely affected as a result of negative publicity
associated with such opposition. If this occurs, its business, prospects, reputation, brand equity, profitability, financial condition and
results of operation could be materially and adversely affected.

Generation capacity is subject to substantial variations in water flow, due to climatic conditions and varies seasonally: The
amount of power generated by hydroelectric generation facilities is dependent on available water flow, and fluctuates due to variations
in water flow which in turn depends on factors such as rainfall, snowfall, snowmelt or other seasonal and climatic conditions, as well as
the carrying capacity of the river. SJVNL has typically generated most of its power during the May through September period due to
snowmelt and the monsoons. Substantial snowmelt or rainfall during these months generally leads to higher generation at the NJHPS
due to the increased water flow, subject to silt levels. Adverse hydrological conditions, whether seasonal or for an extended period of
time, that result in inadequate or inconsistent water flow may render its hydroelectric generation facilities incapable of generating
energy in accordance with current estimates, which could adversely affect its business, prospects, and increase the period of cost
recovery associated with such projects.

Dependent on various contractors for the construction and development of projects and for the supply of materials and
equipment, any failure on their part to perform their obligations could affect SJVNL’s operations: SJVNL relies on third party
contractors for the construction and development of its projects. It also relies on third party suppliers to provide it with raw materials
used in the construction of its projects, such as cement and steel. It does not have direct control over the quality of materials supplied
by such suppliers or over the logistics by which such materials are supplied to it. Its relationships with its contractors and suppliers are
cordial, it cannot be assured that such contractors and suppliers will continue to be available at reasonable rates and in the areas in
which it conduct its operations. If some of these third parties do not complete its orders satisfactorily or within the stipulated time, its
reputation and financial condition could be adversely affected.

May not be able to effectively manage growth or development of existing pipeline of projects: As of December 31, 2009, SJVNL
has one operational project, the NJHPS, and is in the process of constructing the Rampur Project. All of its other pipeline projects are in
various developmental stages. As it proceeds with the development of additional projects, it may not be able to continue to execute
such projects efficiently, which could result in delays, increased costs and diminished effectiveness and quality. An inability to manage
its growth effectively on favourable terms and at acceptable quality standards could have an adverse effect on its business, prospects,
cashflows, other resources, profitability, financial condition, reputation, corporate brand equity and results of operations, and may
consequently impact the trading price of its Equity Shares. As it is a development stage company and due to the long gestation period
required for hydroelectric power projects, its historical financial statements may not be an accurate indicator of its future financial
performance.
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Faces extensive competition for the award of new hydroelectric power projects: Large Indian businesses that already have a
presence in the Indian power sector, specifically in captive power generation, may seek to expand their operations in the sector. The
power sector in India may also attract increased investment from international companies with greater resources and assets than
SJVNL and which may be able to achieve better economies of scale allowing them to bid profitably at more competitive rates. In
addition, there may be increased competition from national and state power utilities.

Standalone P&L:
Rs. In Cr.
Particulars 9MFY10 FY09 FY08 FY07 FY06
Sales 1423.10 1490.78 1356.75 1409.46 1062.36
Other Income 86.90 144.06 105.53 66.71 288.58
Increase/(Decrease) in stock 0.00 0.00 0.00 0.00 0.00
Total Income 1510.00 1634.84 1462.28 1476.17 1350.94
Expenditure 109.91 177.51 149.87 138.33 124.82
% of sales 7.72 11.91 11.05 9.81 11.75
Operating Profit 1400.09 1457.33 1312.41 1337.84 1226.12
OPM % 98.38 97.76 96.73 94.92 115.41
Interest & Financial Charges 139.62 220.55 254.69 322.98 341.53
Depreciation 325.99 234.23 239.92 245.61 232.56
PBT 934.48 1002.55 817.80 769.25 652.03
PBTM % 65.67 67.25 60.28 54.58 61.38
Tax (incl. FBT & DT) 159.11 243.23 100.89 119.27 66.60
Effective Tax Rate % 17.03 24.26 12.34 15.50 10.21
PAT 775.37 759.32 716.91 649.98 585.43
PATM % 54.48 50.93 52.84 46.12 55.11
Equity 4108.81 4108.81 4108.81 4108.81 4108.81
EPS (on pre-issue equity) 1.89 1.85 1.74 1.58 1.42
EPS (on fully diluted equity) 1.87 1.84 1.73 1.57 1.42
(Source: RHP)
Peer Comparison based on 9MFY10 / FY09 numbers:

Company Sales PBIDT PAT CMP EPS PE* BV PBV

9MFY10 FY09 9MFY10 FY09 9MFY10 FY09 9MFY10 9MFY10 Latest
JP Power Venture Ltd 518.86 296.67 483.24 287.46 190.96 147.15 75.25 3.89 14.51 12.79 5.88
KSK Energy Venture Ltd# 287.62 349.61 228.89 336.45 80.24 131.32 196.50 2.15 68.44 66.13 2.97
NHPC Ltd 3469.12 #3493.71 3205.49 #2994.92 1700.35 #1213.69 30.25 1.38 16.44 19.34 1.56
SVJN Ltd 1423.10 1490.78 1400.09 1457.33 775.37 759.32 23.00 1.89 9.14 16.45 1.40
SVJN Ltd 1423.10 1490.78 1400.09 1457.33 775.37 759.32 26.00 1.89 10.33 16.45 1.58
* = based on annualised EPS # = Consolidated numbers (Source: Capitaline, RHP)

Conclusion:

SJVNL’s business profile is stable marked by firm offtake arrangements for its operational power projects and cost plus basis of tariff
determination ensures minimum return on equity. The issue derives strength from the sovereign ownership, experienced management
team, satisfactory corporate governance practices, consistent growth in revenues and profitability since commencement and
comfortable solvency profile. However significant capital expenditure plans expose the company to project execution, funding and
regulatory risks which are largely mitigated by the company’s demonstrated ability to execute large scale projects, likely adequacy of
funding arrangement, and favourably industry scenario which is expected to result in steady off take and stable earning profile.

SJVNL’s overall gearing is comfortable as has improved over the periods. In line with the improvement in gearing levels interest costs
have also been declining. The average collection period declined in FY 08 on account of quicker recoveries from the state power
utilities. The collection efficiency was particularly higher owing to rebates given by the company for prompt payment. SJVNL has a
stable revenue stream on account of long term PPAs with various state electricity utilities and consistent saleable energy.

The issue seems reasonable priced when compared to the private sector peers. However when compared to NHPC, another large PSU
in similar space, the issue is not cheap from a P/BV basis, while being cheap from a P/E basis. Retail investors with a long-term
perspective can subscribe to the issue (preferably at the lower band) as retailers have an added incentive of 5% discount to the finally
determined price.

Please read important disclosures on the last page

Retail Research 7
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Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for
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services for, any company mentioned in this document. This report is intended for Retail Clients only and not for any other category of
clients, including, but not limited to, Institutional Clients
Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of Refund Bankers to the
issue and will earn fees for its services. This report is prepared in the normal course, solely upon information generally available to the
public. No representation is made that it is accurate or complete. Notwithstanding that HDFC Bank is acting for SJVN Ltd. this report is
not issued with the authority SJVN Ltd. Readers of this report are advised to take an informed decision on the issue after independent
verification and analysis.
Please read important disclosures on the last page
Retail Research 8