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The March-quarter earnings of state-run hydropower producer NHPC Ltd would have been disappointing had it not been for higher other income.

On a standalone basis, NHPC’s hydropower generation declined 25% on a year-on-year (y-o-y) basis to 2,946 mega units (MUs) for Q4FY21.

Power generation was hit by low water flow at most of the company’s plants. But thanks to a late payment surcharge of 330 crore, other income rose 13% y-o-y.

Consequently, net profit rose about 6% y-o-y to 404 crore in Q4FY21.

Rising capex intensity
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Rising capex intensity

While NHPC has managed to sail through the March quarter, elevated receivables remained a pain point. At the end of FY21, the company’s receivables narrowed to 3,206 crore from 3,585 crore in the previous fiscal, but trade receivable days remained high at around 140 days.

Analysts attribute this to delayed receipts relating to the Atmanirbhar Bharat scheme and pending payments from states.

Despite the ongoing pandemic, NHPC is in an aggressive expansion mode. The management said the company has plans to expand its solar and wind power portfolio across India, along with its core business of hydropower development.

Further, the management added that NHPC had inked initial agreements in the last fiscal to execute five projects. These projects have a total installed capacity of 4,134 megawatts. The company aims to complete these projects as per schedule, the management said.

NHPC’s capital expenditure run rate is expected to increase as it invests in new projects, which will reduce free cash flow and drag return on equity in the near term, said analysts at Motilal Oswal Financial Services Ltd.

From 3,600 crore, NHPC’s capital expenditure is expected to jump to 9,100 crore in FY22.

Frequent delays in commissioning timelines and cost over-runs are also a cause for concern, according to analysts.

Meanwhile, in the past year, the NHPC stock has risen 33%, underperforming the benchmark index Nifty Infrastructure, which climbed 54% in the same span.

Timely execution of planned expansions would be among the key factors deciding the future course of the stock, analysts said.

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