NLC India climbs over 12-year peak, rallies 5% on stable outlook

The company is hopeful that the possession of the required land will be made available at the earliest and will reach to the lignite production level as per the requirement of thermal power station.

Shares of NLC India hit an over 12-year high of Rs 125.45, gaining 5 per cent on the BSE in Tuesday’s intra-day trade on stable outlook. The stock of state-owned power generation company has rallied 8 per cent in past two days. In comparison, the S&P BSE Sensex was down 0.11 per cent at 65,880 at 12:24 PM.

The market price of NLC India surpassed its previous high of Rs 121.45 touched on July 25, 2023. The stock has crossed Rs 125 mark for the first time in more than 12 years. It quoted at its highest level since January 2011. The stock had hit a record high of Rs 274 on January 4, 2008.

For April to June quarter (Q1FY24), the company reported 14 per cent year-on-year (YoY) dip in consolidated revenue from operations to Rs 3,316 crore from Rs 3,863 crore in a year ago quarter. Profit after tax declined 27 per cent YoY to Rs 414 crore from Rs 569 crore in Q1FY23.

The dip in profit and revenue was mainly attributed to the reduced production from lignite mines at Neyveli and the corresponding power generation from the lignite-based power stations at Neyveli. This was mainly on account of the non-availability of land for expanding the mining activities, which is why the lignite production is less than the requirement for power generation.

The management said with the support from the central government, state government, and district administration, almost all the issues are sorted out and the process of taking over of the land has begun. The first activity for taking over the land, the diversion of the river, has also already started. So the management is hopeful that the possession of the required land will be made available to NLC India at the earliest and the company will reach to the lignite production level as per the requirement of thermal power station.

NLC India is engaged in the business of mining of Lignite, Coal and generation of power by using lignite as well as Renewable Energy Sources. Lignite from mines is used as fuel for pit-head thermal power plants, providing continuous demand for the mining segment and leading to low fuel risks and supporting the tariff competitiveness of the thermal power plants.

The company secured the bid for Solar 600 MW including 300 MW under Green Shoe option in the auction conducted by the Gujarat Urja Vikas Nigam Limited (GUVNL).

On June 13, 2023, power purchase agreement was signed between Neyveli Uttar Pradesh Power (NUPPL) and Assam Power Distribution Company (APDCL) of Assam for power supply of 492.72 megawatt to the state of Assam.

Meanwhile, CRISIL Ratings believes that the company’s business risk profile will remain strong over the medium term, backed by efficient operations and fuel security. Financial risk profile is expected to continue to be healthy, driven by conservative gearing and adequate liquidity.

Despite large capex plans and expected regular dividend payout, the financial risk profile, especially liquidity, will remain strong over the medium term backed by robust capital structure, un-utilized bank limit and sizeable cash accrual. Larger-than-expected capex, adversely impacting cash position, will remain a key monitorable, the rating agency said in rationale.

For its power generation portfolio of 6,061 MW, NLC India has tied up long-term power purchase agreements (PPAs) with the state distribution utilities (discoms) of Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Kerala, Puducherry and Rajasthan, limiting demand risks. The company is a major supplier of electricity for the discoms in the five southern states. Also, the under-construction project in Uttar Pradesh has tied up long-term PPAs with Uttar Pradesh and Assam for the entire capacity. The tariff competitiveness of the projects is supported by the availability of captive mines, ICRA had said in rating rationale.