NTPC gains on bargain hunting

NTPC rose 2.79% to Rs 139.80 at 14:06 IST on BSE on bargain hunting after the stock slumped 11.26% on Tuesday, 10 December 2013.

Meanwhile, the BSE Sensex was down 106.90 points, or 0.50%, to 21,148.36.

On BSE, so far 13.43 lakh shares were traded in the counter, compared with an average volume of 3.78 lakh shares in the past one quarter.

The stock hit a high of Rs 140.40 and a low of Rs 138 so far during the day. The stock hit a 52-week high of Rs 167.25 on 21 January 2013. The stock hit a 52-week low of Rs 122.65 on 28 August 2013.

The stock had underperformed the market over the past one month till 10 December 2013, sliding 10.88% compared with the Sensex's 2.85% rise. The scrip had also underperformed the market in past one quarter, falling 1.88% as against Sensex's 6.29% rise.

The large-cap company has an equity capital of Rs 8245.46 crore. Face value per share is Rs 10.

Shares of NTPC tumbled 11.26% to Rs 136 on Tuesday, 10 December 2013, after the Central Electricity Regulatory Commission (CERC), the electricity regulator, tightened certain rules for tariffs and operations for the sector in its draft 2014-19 guidelines.

The guidelines were posted on CERC's website late on Monday, 9 December 2013. CERC's draft regulations have tightened some operational parameters, reducing the use of financial incentives for achieving transmission and generation targets. The guidelines also propose that some of the savings from fuel costs be partially passed on to consumers. The rules need to be finalised by March.

NTPC's chairman & managing director, Arup Roy Choudhury, was quoted by the media as saying that the company would be able to meet investors' expectations. He pointed out the regulations were still in the draft stage and that it would communicate its views to the regulator.

Going by past experience, there is a lot of difference between the draft norms and the final version that is released after inputs from power companies, he said in a television interview, adding that issues relating to the plant-load factor incentive model and other negatives will be discussed with CERC.

Commenting on the draft itself, he said there were several positives for NTPC relating to assured return on equity remaining the same, water charges and annual escalation norms.

The CERC draft will set basis for regulations that will impact all regulated power generating and transmission companies like NTPC, NHPC, Sutlej Jal Vidyut Nigam and Torrent Power, etc.

The new draft is set to remove tax arbitrage that allowed companies to retain tax benefits by recovering higher tax from the consumer even if they actually pay lower tax.

While CERC has maintained the RoE (Return on Equity) at 15.5% with additional 0.5% for timely completion of projects for generating and projects, it has reduced incentives for generation as well as transmission.

The draft guidelines also proposed to change the incentive structure from Plant Availability Factor (PAF) to Plant Load Factor (PLF).

PAF is the average of daily declared capacities (of 'available for generation' capacity) of a generating station as a percentage of installed capacity while PLF is amount of power actually generated as a percentage of installed capacity.

NTPC's net profit declined 20.7% to Rs 2492.90 crore on 0.9% growth in net sales to Rs 16272.27 crore in Q2 September 2013 over Q2 September 2012.

NTPC, India's largest power company, has presence in the entire value chain of power generation business. The Government of India (GoI) holds 75% stake in NTPC (as per the shareholding pattern as on 30 September 2013).

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