Mytrah Energy: The unknown innovator

In three decades of stock picking, I have rarely come across a company as exciting as Hyderabad-based Mytrah Energy Limited.

If you haven’t heard of it, this is possibly because the company works anonymously from Gachibowli, is unlisted, engages business-to-business and keeps a low profile. Its chairman sits in London (so never shows up for local photo ops).

Mytrah Energy is a corporate watcher’s orgasm.

One, the company, engaged in wind energy generation, has achieved what most doubters said would never happen in their lifetimes. The cost at which it generates power is at par with the cost achieved by thermal energy generators. Yes, at par.

Two, for every 1,000 megawatt (Mw) the company might generate, the prevailing industry dynamics indicate free cash generation of around Rs 400 crore (after debt servicing, debt repayment and overheads). That the company will invest in additional capacity is what any fool can conclude; the difference is that Mytrah adds three times the debt to its free cash, making it possible to invest Rs 1,600 crore yearly in fresh capacity (220 Mw approximately) without disturbing its desired gearing. This means Mytrah can potentially generate more cash each year, translating into even larger capacities.

Three, Mytrah generates a higher internal rate of return than most wind energy companies. Most wind energy companies elect to buy turbines from manufacturers which provide the land and a multi-year wind pattern reading. Mytrah’s pro-active investment in wind masts (one of the largest deployments in the country) has already generated multi-year insights into locational characteristics, inspiring proactive investments in land plots and a freedom to go with a turbine manufacturer providing the highest price-value proposition. This value chain — wind masts to power purchase agreements — is one of the most extensive in India’s wind energy sector, translating into possibly the highest margins here.

Four, a fusion of canny financial structuring and entrepreneurial foresight makes big things happen. Mytrah’s non-dilutive mezzanine financing ($120 million) within a year of commissioning is now not only an industry benchmark; all the company’s 543-Mw capacity creation (till date) has been woven around this original equity structure, one of the most efficient balance sheet optimisation instances within its sector.

Five, it would have been safe for Mytrah to invest in an established location. The company has instead extended across 10 project sites in six states, working with 26 senior lenders and three turbine manufacturers. What would otherwise have been a project-centric approach has evolved into a consolidated multi-state, multi-location, multi-lender and multi-vendor portfolio. This dispersed portfolio has helped transform uncertainty (wind patterns) into one of the lowest counter-party risks in India’s renewable energy industry.

The result is that Mytrah, already one of the fastest growing wind energy companies in the world, could raise 10-fold its capacity in a fraction of the time it has taken to get to 543 Mw, kick-starting an exciting phase in this country’s quest for clean energy.

Suddenly, everyone will say, “Oh, my god, it’s actually happening!”
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed