A larger capacity base and higher generation helped NTPC Ltd report double digit-growth in revenues during the June quarter. Earnings, however, remain suppressed with the profit seeing a slight fall from the year ago, as the chart shows. The management is meeting analysts on 1 August, when more clarity on prior period adjustments, if any, should emerge.

The reported numbers indicate a mixed performance.

Coal power plant utilization levels continue to trend lower against expansion at the thermal sector level in Q1. This can be due to slow ramp-up of the newly added plants. But as interest and depreciation costs rose sharply tracking the new capacity additions, profit dropped. This indicates insufficient revenue accretion.

Apart from prior period adjustments, investors will also be keen to know the fuel availability situation. NTPC’s performance in earlier quarters was weighed down by cost under-recoveries due to insufficient fuel supplies.

June quarter numbers show an improved situation. Coal supplies saw a notable improvement. The drop in plant availability factor (on which the incentives are based) also reduced considerably from March quarter.

Nevertheless, it has to be seen how much succour it can provide to investors. The stock has been underperforming the broader markets, even as the company embarked on a strong capacity addition plan that assures growth and revenue visibility.

Tepid earnings reflected in subdued quarterly results have been a reason. Fuel availability challenges and the resultant cost under-recoveries added to the concerns. Even so, the strong capacity addition pipeline has been a major selling point for sell side analysts. This assumption came under threat last week.

The stock slumped last week after reports said that the NTPC may be asked to purchase hydro power producer NHPC Ltd. Both companies work on regulated business model, earning fixed return on equity. But NHPC, due to its nature of projects—hydropower plants in hill stations—has been a laggard, facing huge cost overruns and execution delays. Placing NHPC in the NTPC fold may help the government shore up its revenues, but it can take the sheen out of NTPC’s long awaited capacity-addition-led earnings growth envisaged by the Street.

While no firm plans have been announced yet and earnings are yet to see a meaningful acceleration, wary investors may as well wait on the sidelines.