India’s electricity demand is on an upward trajectory, projected to grow by a solid 5% annually, according to the International Energy Agency (IEA). This growth isn’t just a statistic; it represents a significant opportunity for companies that can tap into the renewable energy and coal production sectors. As India positions itself as a key player in the global energy market, the focus on energy transition and infrastructure development becomes paramount.
Power Mech Projects Limited is making strategic moves to capitalize on this burgeoning market. Recently, the company has ventured into the mining business, securing substantial orders that signal a strong commitment to diversifying its operations. With the receipt of Mine Developer and Operator (MDO) licenses from Coal India and Steel Authority of India Limited (SAIL), Power Mech is poised to enhance its business portfolio significantly. This transition into mining isn’t just a side hustle; it’s a calculated step that aligns with India’s energy needs and the company’s growth strategy.
The company’s stock has shown resilience, closing at Rs. 2,755 per share with a modest 0.40% increase in the latest trading session. Over the past year, Power Mech has delivered a commendable return of around 31%, outperforming the Nifty Index. This performance reflects investor confidence in the company’s strategic direction and its ability to adapt to the changing energy landscape.
Looking at the financials, Power Mech’s revenue from operations for Q2FY25 hit Rs. 1,035 crore, marking an 11% increase year-on-year. The net profit surged by 37.25%, indicating robust operational efficiency. The company’s revenue mix reveals a strong focus on construction and maintenance activities, with civil works contributing 38% and operations and maintenance 37%. Notably, mining orders now represent a hefty 68.30% of the order backlog, showcasing the company’s shift toward this lucrative sector.
The future outlook for Power Mech is promising. The company has set an ambitious target of achieving 30% growth to reach Rs. 5,500 crore for the current year, bolstered by its MDO operations. As it ramps up its mining activities, Power Mech anticipates generating revenues of Rs. 2,100 crore from MDO at peak capacity by FY28. Achieving a cumulative peak rated capacity from Coal India and SAIL mines could push profit margins to 12-13% by the end of FY27, a significant leap from current levels.
The financial health of Power Mech is also noteworthy, with a debt-to-equity ratio of 0.28, down from 0.43 in FY23, indicating a strengthening balance sheet. The return on equity (RoE) improved to 15.96%, while the return on capital employed (RoCE) rose to 21.46%. This financial prudence, combined with a robust order book of Rs. 58,067 crore, positions Power Mech well for sustained growth.
As of October 2024, the shareholding pattern reveals a strong promoter holding of 58.29%, alongside significant stakes from domestic institutional investors and foreign institutional investors. This mix of ownership suggests a solid foundation of support for the company’s strategic initiatives.
Founded in 1999 by S. Kishore Babu, Power Mech Projects Limited has evolved into a leading infrastructure and construction company, specializing in power generation projects. With its expansion into mining and a diversified portfolio that includes water projects and railways, the company is on a path to enhance operational efficiency and profitability.
The energy landscape in India is changing, and companies like Power Mech are not just participants; they are shaping the future of the sector. With strategic investments and a clear vision, they are well-positioned to ride the wave of growth that lies ahead.
