NTPC hits five-year low post CERC order

The stock has plunged 11% to Rs 117, its lowest level since October 2008, in intra-day trades on the BSE.

NTPC has dipped 10% to Rs 119 after the Central Electricity Regulatory Commission (CERC) allowed higher tariff as well as compensation of Rs 329 crore for Tata Power's 4,000-MW Mundra project in Gujarat.

The stock opened at Rs 130 and touched a low of Rs 117, its lowest level since October 2008 on the BSE. A combined 16.4 million shares have already changed hands on the counter till 1100 hours, as against an average of less than 5 million shares that were traded daily in past two weeks on the BSE and NSE.

The CERC has released final regulations for tariff determination applicable from 2014-15 to 2018-19 for projects based on an assured return on equity (RoE) business model.

According to Business Standard report the electricity regulatory order would be negative for the NTPC, the largest power generating company in the country.

"In our assessment the final regulations impact NTPC’s core RoE further by -0.8% (-7.3% in draft) to 15.8% in FY15 (23.9% in FY14) against our expectation of RoE gain of 2 – 2.5%. The overall RoE drop is on account of retaining shift of incentives to PLF from PAF and no tax grossing up of RoE, and further tightening of normative O&M, SFO, and Aux. consumptions norms," points out Amit Golchha, an analyst with Emkay Global in his report dated February 24.

"PGCIL remains our preferred pick on back of strong capitalisation led EPS growth of 15-16% over next 2-3 years vs no growth in NTPC. Further, given the negative impact of regulations we may see de-rating of NTPC, leading to lower levels. Hence we would suggest shifting to PGCIL," he adds.