Shares of NTPC Ltd have lost 19% over the past year as tight fuel supplies impacted utilization levels at its power plants, weighing on earnings. The December quarter has been relatively better on the operations front. Compared to a fall in the past three quarters, both availability and utilization levels of the coal plants improved year-on- year.

The improvement drove up generation, helping the company clock a 15% rise in revenue. But as was the case in earlier quarters, this growth yielded limited earnings benefits. Reported profit was up just 1%. Perhaps to assuage investors’ concerns, the NTPCboard recommended a 1:5 bonus issue of equity shares.

Further the company’s efforts to resolve fuel issues are bearing fruit. It issued an import tender and began lifting additional coal from Coal India Ltd.

The measures will almost halve the cost under-recoveries due to fuel constraints in the current fiscal year (vis-à-vis the previous one), the management told analysts.

But how much of a boost these measures and the bonus issue can provide to investor sentiment has to be seen. Though cost under-recoveries due to fuel constraints are falling, they remain sizeable. Last quarter the company was unable to recover as much a 160 crore.

With NTPC planning to add 4,000 megawatts (MW) in the rest of the fiscal year and an estimated 5,000MW in FY20, some wonder if the company will be able to find the required fuel at affordable rates.

Adding to the concerns is payment delays from several state utilities. The delays are attributed to weak financial position of the concerned states. Also the company is making advance payments to Indian Railways, a major vendor.

As a consequence, NTPC’s working capital is getting stretched, adding to finance costs.

The company does have a redressal mechanism in place. For instance, it levies a surcharge on delayed payments. But the net impact of all this— cost under-recoveries, large advances to Indian Railways and delay in payments—is a huge impact on NTPC’s earnings. The reported profit in the first nine months of FY19 was flat from year-ago levels.

So while NTPC may continue to have an enviable capacity addition pipeline assuring growth trajectory, other concerns are weighing on investor sentiment. This can limit the much awaited expansion in stock valuations.