Growing pains: NTPC expansion spawns companies and CEOs in equal measure

The power conglomerate is increasingly looking at downstream renewable energy projects and is creating new companies and chief executives to run them in without PSU-culture constraints

Think of an Indian public sector company that is in the energy business, so to speak, but is increasingly establishing a presence in all manner of renewable energy sectors, with no less than 36 companies under its umbrella. That would be NTPC, likely the largest conglomerate in the public sector. What's more, it will now focus only on downstream ventures in energy - bar NTPC Mining, which digs the coal for its vast network of thermal power plants.

 

The diversification into RE also means that NTPC will no longer be bound by a single ministry, a position no other major state-owned company in India has straddled, be it LIC, ONGC, SBI, or Coal India. This effectively makes NTPC, the country's largest energy producer, stand for NTPC Group of companies.  

 

In fact, the NTPC name now pops up in nuclear enterprises, green companies of all shades including solar, wind and even tidal, coal mining, critical mineral mining, and green hydrogen, among others. The latest to join the list could be green chemicals. If one were to look at the numbers NTPC has birthed a new company every single year for the past 10 years. To take on these burgeoning business possibilities, the energy behemoth has also begun to form joint ventures (JV) with state governments (see chart), and is in talks with others.

 

With consolidated gross fixed assets of Rs 4.04 trillion, NTPC is almost co-terminus with India’s energy supply footprint.

 

Creating new profit centres

 

Unlike private sector players, such as L&T, India’s state-owned companies typically do not have such a range of subsidiaries or JVs. One of the reasons for their reticence has been the delays involved in the process for most projects. For PSUs, approvals must be obtained from the finance ministry’s department of investment and public asset management (Dipam), which often means getting the Union Cabinet's nod as well. The other is fiscal comfort, since investors get access to the balance sheet of the parent company.

 

Bucking the trend, NTPC created Green Energy Ltd with a simple Board approval as a way to occupy the space between the mother company and the older NTPC Renewables. What's more, NTPC Green Energy's chief executive officer, Sarit Maheshwari, does not sit on the company's Board, an unusual management structure for a state-owned company.

 

The innovation has helped. NTPC Green is now itself a parent with six companies in its fold. The company is on course to raise finance, possibly at even better terms than NTPC, to steer the plans of the Group to develop 60 GW of RE by early next decade. A Reuters report earlier this month noted that NTPC Green Energy will make its debut in the bond market, raising upwards of Rs 20 billion through five-year bonds. While the rates are not yet public, they are likely to be better than NTPC would get as a coal-based power producer. Once the decision is made to foray into green chemicals (atoms that do not create pollution), the name of the company could be broadened accordingly, a company source said.

 

Does a surfeit of companies make the span of control within the group difficult? It is a question that Gurdeep Singh, chairman and managing director of NTPC for almost a decade now, considers often.

 

Financing made easy

 

Singh acknowledges that one of the reasons for setting up separate companies instead of incorporating them as divisions within the mothership was finance. There was the need to create space to invest within the relative financial rigidity under which state owned companies operate in India. The step-down process or JVs allows these companies to raise money on their balance sheet, without necessarily using the NTPC signage.

 

Another reason is that the chase for new opportunities in India’s difficult energy market has its own costs. For instance, owning NTPC Mining to mine coal is a peculiar venture for a power company to be involved in, since it then needs to straddle both ends of the supply chain. At 46 million metric tonnes (MMT) of extraction in FY25, it is on track to become the second largest government miner after Coal India and possibly more efficient. But the mines supplied only about 15 per cent of NTPC’s total coal needs for its 53 GW of thermal plant capacity. To wit, NTPC would have been better off hiving off the business to a specialist mine development/operator company. But the mining unit is unlisted, and unlike Green Energy Ltd, would likely see muted investor interest.

 

Not surprisingly, the NTPC stock has consequently underperformed the market for a long time, despite having a rating equivalent to India’s sovereign grade. Bank of America Securities has only recently upgraded the company from 'underperform' to 'neutral', citing valuation correction. The securities firm noted NTPC has trailed the Nifty index by 21 per cent and other defensive sectors, including IT, pharmaceuticals, and consumer staples, by 10-20 per cent since August 2024. Since NTPC regularly offloads new investment opportunities, except thermal power projects to these companies, the upside is captured by them. Look at NTPC Green Energy's valuation, for instance. It also helps the economy creating a larger pool of attractive companies. 

 

Adopting a culture of risk

 

For Singh one of the big plus points from this exercise is the talent creation. “Creating the human resources hunger for performance has been one of my biggest challenges for these ventures,” says Singh. Becoming CEOs of these downstream companies meant prodding the officers to take risks, something that a public-sector culture doesn't exactly promote. “The company now regularly sends officials to be picked up by the Public Sector Enterprises Board as chief executives of other companies," he says, noting that this was most unusual a few years ago.

 

The creation of subsidiaries has helped, given the circumstances, and is most evident in the latest: NTPC Parmanu Urja Nigam Limited, established January 2025 as a wholly-owned subsidiary to explore advanced nuclear technologies, including pressurised water reactors, small modular reactors and fast breeder reactors. The company already operates under a company in this space, Ashvini, a JV with NPCIL established in FY25, and which is building the Mahi Banswara Rajasthan Atomic Power Project, comprising four 700 MW reactors.

 

Singh is unwilling to commit if the two companies will be merged in the future. But he is clear that he will not get into the business of manufacturing nuclear products, even though the best margin lies in manufacturing them in what is an intensely capital-intensive business.  After all, there remain some constraints in being the chief of a state-run company, even one as large as NTPC: some decisions are still made outside of New Delhi's NTPC Bhawan.