NTPC is again on the government?s disinvestment radar. In 2010, the government raised R8,500 crore by selling 5% of its shareholding in the power company.
When NTPC hit the market with the follow-on offer in 2010 for dilution of the government?s stake, the company was struggling to add generation capacity. But since then India?s largest thermal power generator has seen a turnaround in its project execution skills, thanks to some innovative and bold steps taken by the management.
The power CPSE added 2,820 MW capacity during 2011-12, which was the highest ever by the company in a year. During the same year, NTPC invested R15,954 crore on a standalone basis, the highest capital expenditure by it in a single financial year.
More recently, its investment in the first quarter of the current year (April-June 2012) was higher than the target for the period. Its investment during the quarter was R3,978 crore as against the target of R3,967 crore set for the period.
Capital expenditure in the quarter was almost 83% higher from the same period of the previous year. During the quarter, the company achieved a generation growth of 7.8%, compared with the national average of 6.4%.
As regards its financial performance, NTPC reported a 20% growth in its profit after tax in the April-June 2012 quarter. But the capital market is not convinced by the perormance. NTPC?s share prices remain depressed at stock markets for various reasons.
Though there is no serious risk to the CPSE?s growth prospects in the foreseeable future, the overall investor sentiment about the power sector has turned negative. Factors like the growing insolvency of state electricity boards, worsening fuel shortage and land acquisition problems have spoilt the investment climate in the power sector. The negative investor sentiments are also taking their toll on NTPC valuation, according to market analysts.
The message is clear for the government?it needs to fix the power sector problems before embarking on NTPC disinvestment, if it wants an attractive valuation.
For its part, the company has significantly improved its project execution skills. For example, the company has exceeded its 11th Plan capacity addition target. It added 9,610 MW capacity as against 9,220 MW target set for the period.
The company has also delivered better performance on financial parameters. For example, the company?s return on net worth (RoNW) was 16.35% in 2009-10. But the company reported RoNW of 16.92% and 16.88% in 2010-11 and 2011-12, respectively.
Similarly, the company has improved its performance in terms of return on capital employed (RoCE). Its RoCE was 13.97% in 2009-2010. Against that, it reported ROCE of 14.3% and 14.23% in 2010-11 and 2011-12.
The company has been allocated five captive coal mines with reserves of over 3 billion tonnes. It expects to start production from the Pakri Barwadih block next year.