Sarda Energy & Minerals :BSE ID : 504614 Reco Price Rs. 60.35 CMP: Rs.66.

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The company is 100% self sufficient in its energy needs, which is the most
critical input in ferro alloys and steelmaking. The company has a 48MW power plant
sufficient to meet its own power requirements. The company�s operational Iron Ore
mine has reserves of nearly 20 million MT.

Sarda Energy & Minerals Ltd.

Sarda Energy & Minerals Ltd., formed through the merger of Raipur Alloys & Steel
Ltd. And Chhattisgarh Electricity Company Ltd. Is a fully ntergrated steel
manufacturer. The company has a captive Iron Ore, Manganese Mines and Coal
Sources. The company also has a captive power plant which provides it a clear
competitive advantage enabling the company to produce at most competitive costs.
The company is a manufacturer of Sponge Iron, Ferro Alloys and Rolled products. We
expect to benefit from this edge in 2008-09 and beyond. The company�s has a 250-
hectare plant located in Raipurwith a dedicated 8-km water pipeline from the
Kharoon river to the plant for uninterrupted water supply.

Self Sufficiency in Critical Inputs:

The company is 100% self sufficient in its energy needs, which is themost critical
input in ferro alloys and steelmaking. The company has a 48MW power plant
sufficient to meet ts own power requirements. The company�s operational Iron Ore
mine has reserves of nearly 20 million MT.In addition, the Company has got an in-
principle approval from the Government of India for five more mines possessing
sufficient reserves to meet its requirement for the next 25 years. The Company
secured coal reserves of more than 100 million MT. The first mine with reserves of
67 million MT has been commissioned. As regard Manganese Ore, the company acquired
mining rights from private parties in Goa. In addition, reconnaissance permits in-
principle approvals were granted in favour of the Company for three mines in
Madhya Pradesh.

Low Cost Producer:

The company is a low cost producer on account of its vertical integration,

economies of scale and reduced dependence on the external market forsupply of
critical inputs. The Company had foreseen the need to secure raw material
resources more than a decade ago and had taken adequate steps inthat direction.The
company today is completely integrated from iron ore to finished steel for end
users. The availability of captive resources within a radius of250km from its
manufacturing facility significantly saves logistic costs.

In the quarter July-Sep 08, the company total income is up to over 150% to Rs 348
crores, PBT and PAT have roughly doubled to Rs 58.12 crores and Rs 46.64 crores
respectively over the same period last year. The EPS on TTM basis comes to over Rs
55. The stock thus trades at a PE multiple of just over 1.

Conclusion:

Sarda Energy may be better placed than many other steel manufacturers to compete
in a difficult environment on account of its raw material linkages. Even though
steel prices are on a decline, we believe the drop in the stock price of Sarda
Energy from a High of Rs 695 to the current price of Rs 60 is largely overdone.
Investors may choose to buy the stock for a 50-100% gain over the next few months.
However, a close watch needs to maintained on Steel Cycle and any indications of
the prices stabilizing inching upwards after the fall witnessed recently may lead
to upward rerating of the stock. The short term downside from the current levels
looks negligible.