Stock of this PSU power generation company has zoomed 110% in 6 months

NLC today announced its foray into production of construction-grade sand from Mine Overburden with the inauguration of the proposed plant

Shares of NLC India (formerly Neyveli Lignite Corporation) rallied 10 per cent on the BSE to hit a nearly 15-year high of Rs 207.85 in Wednesday’s weak intra-day trade on the back of heavy volumes led by a healthy business outlook.

The average trading volumes on the counter jumped over two-fold today. A combined 9.1 million equity shares had changed hands on the NSE and BSE.

The stock of the public sector undertaking (PSU) power generation company was quoting at its highest level since January 2008.

In the past six months, the market price of NLC India has more than doubled or zoomed 110 per cent as against a 10 per cent rise in the benchmark index.

The company today announced its foray into the production of construction grade sand from Mine Overburden with the inauguration of the proposed plant.

This plant is expected to produce civil construction grade M-sand of 2.62 lakh cubic meter per year from Mine Overburden and it is very important in view of the scarcity of natural sand, it said. 

It is expected to be operational by end of January 2024. Similar and higher capacity plants will be installed in other Mines at Neyveli, in due course. 

NLC is a CPSE with ‘Navratna’ status and is engaged in the mining of lignite (30.10 MMTPA) and generation of electricity (6,061.06 MW) as on March 31, 2023.

The company is also into mining of coal (20 MMTPA capacity). It operates under the administrative control of the MoC, GoI, which has 79.20 per cent stake in NLC as on September 30, 2023.

CARE Ratings has a stable outlook on the company’s long-term rating, which reflects the company’s ability to sustain satisfactory generation levels along with timely receipt of payment from the off-takers in the medium term.

NLC serves as an important source of power generation in southern India and Rajasthan, and it plans to establish its footprint in the state of Jharkhand, Odisha, Uttar Pradesh and Assam by establishing power and mining projects in these states.

For power sales, it has entered into long-term PPAs with state discoms of Assam, Odisha, Rajasthan, Uttar Pradesh and all the southern states.

The rating agency said the ratings also draw comfort from assured off-take of the power arising from long-term power purchase agreements (PPA) backed by cost-plus tariff mechanism with power distribution companies (Discoms), presence of captive lignite and coal mines with adequate resources resulting in assured fuel supplies for its entire capacity and its financial performance characterised by healthy profit margins and cash accruals.

The ratings also favourably factor significant liquidation of its built-up receivables during the last two years pursuant to the ‘Atmanirbhar Bharat Scheme’, availment of bill discounting facility and consequent improvement in its liquidity profile and leverage.