Caparo Energy

Determined to cash in on India's hunger for electricity is Ravi Kailas, head of AIM-quoted wind power play Caparo Energy (CEL).

The company, which came to AIM last autumn with a £50.2m placing at 115p, has raised £70m in mezzanine finance in India for wind power projects in that country and targets 5,000 megawatts of capacity by 2016.

Based in Hyderabad, India, and registered in Guernsey, Caparo, which is poised to change its name to Mytrah (approximately meaning 'energy source'), is so far funded for 700 megawatts of capacity, most to be delivered by major turbine-maker Suzlon.

Entrepreneur Kailas, who founded and runs the company as chairman and chief executive, argues that cash flow from operating power stations will pay for most of the rest, pointing out that India's climate enables wind power generators to operate predictably for eight months a year.

Commissioning has started on a 100-megawatt project in the state of Rajasthan, and analysts at house broker Mirabaud suggest 700 megawatts should generate annual cash flow of more than $95m (£60m), enough to fund more than 2,000 megawatts organically in five years.

Kailas says India's tax regime favours capital spending on power sources, with more benefits for 'green' sources, while Delhi's rules now permit pricing freedom as well as potentially lucrative trading in renewable energy certificates and foreign ownership.

Angad Paul, son of Lord Paul, who created the Caparo Group industrial conglomerate, was until recently chairman of Caparo Energy/Myrtah, in which he still has a stake. The company lost £441,000 in the six months to September, but Mirabaud suggests that likely losses of £1.25m for the year to last March could turn into pre-tax profits of nearly £900,000 for 2011-12 before soaring to £31m the following year and almost £70m the year after. 

Caparo's tightly held shares have fallen to 86p since flotation. But, if Kailas's ambitious strategy looks like bearing fruit, they could start to make significant gains before too long.