First of All we have to understand the need of This Deal as Genus is already capable of bidding smart meter projects and they in this business of meter solution provider from more than two decades.
The Model under which most of the tenders are floating:
Design-Build-Finance-Operate-Transfer (DBFOT) is a project delivery method which involves Designing and Building the infrastructure, Operating them for a specific time period and Transferring the ownership of the project to the Government after specific time frame.
In UP Gov Has awarded contracts of smart meters worth Rs 25000 Cr in four to five clusters of Rs 5000 TO 6000 to Adani Transmission(Best) and GMR Infra and later on cancelled as they are not into the manufacturing of meters. They are sourcing the meters from some vendor and installing. So the bidding was was high and it was difficult to provide after installation O & M Services.
Now Genus power has formed JV Because:
1:They want to focus only on manufacturing(design) and O & M part of the business not bidding because there debtors days are more than 200 days and in will start bidding such large orders there debtors days will become more worse and it will effect there balance sheet.
2:They formed a JV and only Kept 26% not 50% or 51% stake because they only want to provide technical expertise of bidding and GIC Singapore entity has only money to invest in such high opportunity but they lac knowledge about the industry like at what price to bid and how to bid, which are the projects to bid and which are not.
3:For this reason they kept there option open to provide meters and O & M Services to other successful bidders as there is no exclusivity contract with this jv(as per there concall on 6th july).
4; They will bill the jv and receive money in 30 to 45 or say 50 days and there debtors days will be significantly down with less working capital required.
5.The projects require large Capital as one of the group companies of Lakshmi Group already stated in there Annual Report FY 2023.
“The evaluation of DBFOT model in the smart meter business tends big players only to have the access due to the need of large financials.”
6.Chances of getting orders to this jv are high as they The JV Has the Expertise in Design-Build-Operate-Transfer in the form of Genus Power(26% stake) and Finance in the form of GIC Singapore (74% Stake).
The valuation of the company is on higher side and there any many risks are also evolved like Some years back Shakti Pumps and other companies promises big order Inflow from state gov under Project Kusum of Installing Solar Pumps but nothing happened Much.
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