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Investment Pick : NTPC

You see things and say ‘Why?’ but I dream things and say ‘Why not?’”

So let us start dreaming and give a thought to prove it. A good start of the week with an advise and suggestion from me every week for your secure future. So starting this week with my favourite company “NTPC” highlighting its history, fundamental and technical strategies, here an overview for you.

You see things and say ‘Why?’ but I dream things and say ‘Why not?’”

So let us start dreaming and give a thought to prove it. A good start of the week with an advise and suggestion from me every week for your secure future. So starting this week with my favourite company “NTPC” highlighting its history, fundamental and technical strategies, here an overview for you.

 

Finance minister of India is optimistic that India will achieve 8.5% to 9% GDP growth despite certain bottlenecks such as inflation, slowdown of American economy, poor growth rate of agriculture sector, increasing fossil fuel prices, infrastrucutral inadequacies etc. To achieve 8.6% GDP growth, POWER sector will play a key role. Development of all sectors of economy is possible only if adequate power is assured, and still there is a huge demand and supply gap in the power generation and distribution all over India. Viewed from this point NTPC (National Thermal Power Corporation) ,a power major PSU ,is poised for unprecedented growth.

NTPC was incorporated in 1975. In the last 31 years, it has grown into the largest power utility of India. NTPC is the Sixth largest thermal power generator in the World and the Second most efficient utility in terms of capacity utilisation. Developing and operating world-class power stations is NTPC’s core competence Out of 78000 MW targeted capacity during 11th plan, NTPC has set a target of 22000 MW. To meet this target, NTPC has inked MOU’s with ministry of power, coal India ltd, RINL (Rashtriya ispat nigam ltd), Govt of Srilanka, Nigeria, BHEL (Bharat Heavy Electricals ltd). Besides Thermal power generation, NTPC is entering into Hydro electric power generation.

It is ranked as no.3 in terms of Profit making PSU’s. NTPC ,which generated a net profit of Rs. 6885 crs in the last Fiscal year(06-07) on revenues of Rs. 35,381 crs, is seen as one of the best companies as far as project management skills are concerned. These management skills can be strapped on to multiple businesses along the energy value chain, be it Hydro, Renewable power or Nuclear power. The gap between requirement and availability of power has gone up from 7.8% in 2001 to 9.9% in 2007, representing a large growth opportunity. Besides, India’s per capita power consumption was a mere 630 units last year and the stated target to take this up to 1000 units by 2012. India’s generation capacity can be expected to grow from the current levels of about 120 GW to about 225-250 GW by 2017. NTPC currently accounts for about 20% of the country’s installed capacity and almost 60% of the total installed capacity in the Central sector in the country. Going forward, in its target to remain the largest generating utility of India, NTPC would endeavour to maintain or improve its share of India’s generating capacity. Towards this end, NTPC would target to build an overall capacity portfolio of over 66,000 MW by 2017.

NTPC which is part of 30 share sensitive index, had to resort to imports 2.43 million tonnes of coal in 2006-07.There is increasing gap between the demand for and supply of domestic coal in the country .Coal is key input for NTPC. To tide over this problem, NTPC is making a strategic entry into coal mining thereby ensuring fuel security and driving economy and stability of pricing. Apart from this, NTPC is also entering into equipment manufacturing with 50:50 joint venture with BHEL for Engineering, procurement and construction (EPC) activities. NTPC acquired 44.6% stake in transformers and Electricals Kerala LTD. (TELK).NTPC is also planning to set up 2,000 MW nuclear power plant through a joint venture route as soon as the Govt of India finalises the much awaited Nuclear deal with USA. With this dynamic diversification in all the activities related to power sector such as Trading, Hydropower, Nuclear power, Renewable energy, Distribution, International presence, Coal ,Gas, Equipment manufacturing, setting up a power exchange NTPC is engaged in all the upstream and downstream activities. Recently, a draft integrated energy policy has been issued, which addresses all aspects including energy security, access, availability, affordability, pricing, efficiency and environment. To meet the twin objectives of ensuring availability of electricity to consumers at competitive rates, as well as attract large private investments in the sector, a new Tariff policy has also been issued. The power sector thus offers a mixed bag of challenges and opportunities to players and NTPC would continue to review its business strategy and portfolio in light of these changes.

Considering all these factors, NTPC proves to be a protective cocoon in your portfolio but it requires your far-sighted vision and patience to protect your future. “That some achieve great success, is proof to all that others can achieve it as well.” Hence, I strongly recommend NTPC at the current levels (Rs. 235-240) and accumulate in every deep fall and hold it for at least 2-3 years.

 

Amol Dhake – Managing Director
Satvik Investments
5/1, Aakar builders
Chitnavis Layout
Nagpur-13
 
0712 – 6592986 / 3241921

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