The country’s largest power producer, NTPC Ltd, posted a tepid 5% growth in net profit for the quarter ended 31 December.
The results, which were announced just a week before its follow-on public offer (FPO), showed a net profit of Rs2,365 crore, compared with around Rs2,251 crore during the year-ago period. Net revenue for the period, which is a function of both volumes and pricing of power, was lower by around 1% at around Rs11,184 crore.
An important factor that one must take into account is that the lower fuel cost incurred during the quarter gets directly reflected in revenue. The cost of fuel, according to persons in the firm familiar with the development, fell to Rs7,693/mmBtu (million metric British thermal units) from around Rs12,541/mmbtu in the previous corresponding period. But this cost, being just a “pass-through” figure, will not impact the profit.
Another striking point in the results is the drastic dip in interest outflow from around Rs548 crore to Rs342 crore. A large portion of this is due to the forex gains that the firm had vis-a-vis a forex loss during the year-ago period. Besides, the firm has also repaid some loans on existing projects.
However, despite its efficiencies in generation, concerns remain on the execution front as the company has fallen short of its targets for 2009-10. In the first quarter, the company had guided 3,300MW to be added during the year, but until now, it has completed only around 1,000MW. Indeed, NTPC’s guidance is that around 17,400MW will be added by around 2013.
Graphic: Yogesh Kumar / Mint
Far-fetched as it seems at this point in time, the firm is expected to meet a generation target of 75,000MW by 2017.
But what will pan out well for investors is the year-on-year accretion to the capacity and the capex. “Given a cost of around Rs4.5 crore/MW, for every MW added, there will be an addition of around Rs1.3 crore to its project equity,” said an analyst from a leading equity research and investment banking firm in Mumbai. About a year ago, the return on equity for these fixed-return power projects too has been enhanced from 14% to 15.5%, which is favourable for investors.
The NTPC share fell by around 4% to Rs214 in the week prior to the results announcement. For the immediate future, the stock price movement hinges on the base price that will be fixed in the coming week for the FPO. Although the share price suddenly jumped a couple of months back to outperform the Nifty briefly when there were reports of the public offering, it has largely moved in tandem with the market indices.
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