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Sterlite Energy has already commissioned 2 units of 600 MW each of power capacity. Remaining 2 units will be commissioned in 2QFY12 and 3QFY12.

First 600 MW is being sold to state grid at ~Rs.3.2/kwh. Balance 1800 MW will be sold to merchant buyers in a mix of short term and spot contracts.

Balco will commission first 300 MW of power capacity in 1QFY12 and 2nd, 3rd and 4th unit in 2QFY12, 4QFY12 and 1QFY13 respectively.

VAL continues to source 50% of bauxite from Balco’s mines, while remaining requirement is met form 3rd party purchases.

Minority buy-out in HZL and Balco now appears remote though Sterlite maintains that it has valid rights over call options.

Stock performance of Sterlite has been subdued due to delays in projects and at the current price, clearly offer value in our view. SOTP at Rs220 results in an upside of 30%. Stock is likely to get re-rated as the projects commence production. Sterlite trades at a FY12 PE of 7.9x and EV/EBITDA of 5.6x.
Maintain Buy.