1. Submitted by: Group 3, Section S3 1. Anirvaan Ghosh 12DM-022 2. Dharma Teja 12FN-043 3. Jency John 12DM-065 4. Sameer Doda 12DM-126 5. Sarthak Mukkar 12IB-041 6. Sourabh Dang 12FN-133 7. Tripti Bansal 12FN-146

2. Was incorporated in 26th March 1993 as Lanco Constructions Limited, 24th Nov 2000 the Company name was changed to Lanco Infratech LITL has been driving growth in the domains of (EPC), Power, Solar and Infrastructure over the last two decades Successfully completed projects-Kondapalli (700mw) in AP, Udupi (2x 660 mw) Karnataka, Anpara (2x600mw) UP…….. LANCO Resources Australia has acquired Griffin Coal Mining Company &carpenter mine management, with capacity of 20 mtpa. Became a listed entity in November 2006 following the IPO of shares. ABOUT COMPANY Financial Data Full Year Mar'12RATIOSNP-Latest 4 Qtrs FVBVCMPMCapNPEPSDiv %Int. CovEPSP/ESep'12Jun'12Mar'12Dec'11 Unit Curr. (Rs. Cr) Unit Curr. (Rs. Cr) 114.914.743534.651200.501.2007.2-47.39-8.2424.7

3. LANCO’s Fall CRISIL downgraded LANCO credit rating to D from BB-/CRISIL A4 + Rs. 800 cr of debt obligation in 2012-13 with the overall debt of over Rs. 13,000 crore Need Rs. 600 cr extra funds to meet working capital in 3 power projects All these above funds requirement has lead to high interest cost Continues to have large exposure to under-implementation projects Lanco reported a net loss of Rs 455 crore for the first six months ended September Legal battle with Perdaman Chemicals and Fertilisers Ltd & Griffin power over CSA

4. High raw material cost Capacity growth at all plants done based on assumed coal linkage with Coal India Under Utilization of capacity of power plant due to low fuel supply Default from state-run electricity distribution companies Power sector is in dire state of investment Under capacity of Griffin coal block Low power tariff Behind The Scene

5. ANALYSIS

6. Lanco Infratech have an Bank exposure of over Rs. 9000 Cr. Taking 4500 cr as base for calculation We are not considering depreciation for calculation conveneince Standalone figures taken to keep Indian operations as basis for comparison Long term PLR in China is 4-6% p.a. With Lanco infratech having low a D/E, we assume interest rate of 4% p.a. Corporate tax rate is 30% Analysis has been conducted only for one year Operating Margin CAGR for Lanco Infratech is 15.5% ASSUMPTIONS:

7. PROFIT & LOSS STATEMENT 9/30/20126/30/201212-Mar11-Mar10-Mar9-Mar8-Mar Operating Profit521.37585.66648.57818.65866.29567.12314.32 PBDIT533.78662.83712.83830.12977.81582.18342.35 Interest314.39769.13505.12337.74197.94138.6134.47 PBDT219.39-106.3207.71492.38779.87443.57307.88 Depreciation279.87255.36101.4472.0659.7740.5311.62 Other Written Off 00000 Profit Before Tax-60.48-361.66106.27420.32720.1403.04296.26 Extra-ordinary items 0-0.59000.83 PBT (Post Extra-ord Items)-60.48-361.66106.27419.73720.1403.04297.09 Tax62.5921.83-9.41141.41233.72138.1796.91 Reported Net Profit-123.07-383.49115.67278.32486.38264.87200.18 Debt-Equity (1.25)1.140.990.810.550.24 Interest Cover (4.67)1.212.244.643.919.62 FINANCIAL LEVERAGE2.4330188253.4318521.6859336281.2538121.3124873191.1119592 FINANCIALS

8. CURRENT Amount (Rs. Crores) ProportionCostWeighted Cost DEBT4221.260.54012.50%6.7494 EQUITY3596.530.46018.40%8.4648 TOTAL7817.79 WACC15.2143 CAPITAL STRUCTURE CAPITAL ASSET PRICING MODEL BetaRisk free returnAverage market return 2.46558%12.20% COST OF EQUITY: 18.4%

9. OPTION 1. Equity Infusion Either Through Fresh Equity Or Stake Dilution Additional equity: Rs. 4500 cr. Interest: 527.6575 D/E : 0.52137 FINANCIAL MIX OPTION Amount (Rs. Crores)ProportionCostWeighted Cost DEBT4221.260.34312.50%4.2837 EQUITY8096.530.65718.40%12.0944 TOTAL12317.79 WACC16.3781

10. OPTION 2. Issue Zero Coupon Bond For 5 Year Bond value : Rs. 4500 cr. Interest: 527.6575 D/E : 2.42491 FINANCIAL MIX OPTION Amount (Rs. Crores)ProportionCostWeighted Cost DEBT8721.260.7086.05%4.2837 EQUITY3596.530.29218.40%5.3724 TOTAL12317.79 WACC9.6561

11. OPTION 3. External Commercial Borrowing From CDB @ 4% Bond value : Rs. 4500 cr. Interest: 707.2942 D/E : 2.42491 FINANCIAL MIX OPTION Amount (Rs. Crores)ProportionCostWeighted Cost DEBT8721.260.7088.11%5.7421 EQUITY3596.530.29218.40%5.3724 TOTAL12317.79 WACC11.1145

12. Option 1Option 2Option 3 Operating Profit750 Interest527.65527.6707.2942 Profit Before Tax222.35222.442.70581 Tax @30%66.70566.7212.81174 Reported Net Profit155.645155.6829.89407 PREFRENCE DIV000 Earning fro shareholder155.645155.6829.89407 NO. OF SHARES539.7241 EPS x102.883926.4597511.240418 FINANCIAL LEVERAGE3.373063.37230217.56201 DEBT- EQUITY0.521372.42491 WACC3.89445.797219.9869 FINANCIAL LEVERAGE, EPS, WACC & D/E

13. Option 1, has highest cost of capital, but scores well in other parameters Option 2, in our opinion is the most suitable alternative Option 3, will lead to highest financial leverage & high enough cost of capital. But considering the fact that large principal amounts to 2 billion USD. Hence it cannot be ruled out. Our Summary & Recommendations

14. Fresh funds through cheap ECB Raise funds through stake sales & refinancing maturing debt To maintain regular coal supply lanco is enchancing Griffin coal capacity. Central Government support Tariff increase by State Electricity boards Won the case in Australian courts enabling the company to revise its coal supply agreement (CSA) with Griffin Power High operational Excellency Mitigation Measures

15. http://crisil.com/ratings/ratings-rationales.jsp http://www.capitaline.com/user/framepage.asp?id=1 http://www.moneycontrol.com http://www.moneycontrol.com/news/business/lanco-infra-may-look-at-stake-sale-option-for- new-projects_803330.html http://www.moneycontrol.com/news/business/lanco-infra-may-look-at-stake-sale-option-for- new-projects_803330.html http://www.dealcurry.com/20121126-Lanco-Infratech-To-Raise-Funds-From-Chinese-Banks- And-FIs.htm http://www.dealcurry.com/20121126-Lanco-Infratech-To-Raise-Funds-From-Chinese-Banks- And-FIs.htm REFRENCES