Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
'Power'ful Year - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 1, 2004

    'Power'ful Year

    Power stocks gained substantially in 2003. As can be seen from the graph below, Rs 100 invested in BSE-Sensex" style="color:blue" target="_blank">BSE-Sensex would have fetched around Rs 172 where as Rs 100 invested in stocks like Neyveli Lignite, Tata Power and Reliance Energy would have resulted in Rs 280, Rs 281 and Rs 229 respectively.

    Let's have a look at the reasons for the rally in the power stocks.

    Lot of optimism in the Indian power sector came as a result of the recent Electricity Act. With the relaxation in licensing norms, the path for setting up new generation capacities has been cleared. Generation companies have right to take up distribution of power and visa-versa. Generation companies have been paid back the dues for power supplied to SEBs. Independent power regulatory authority has been set up to ensure the smooth functioning of the power sector. As a result, the stocks of both the private and state owned companies gained significantly on the bourses.

    With all these measures coming into place, the confidence level of the generation companies has got a boost. Reserve Bank of India (RBI) has already issued bonds to government power companies like NTPC and Neyveli Lignite in lieu of dues against various SEBs. As a result, all the major power generating companies have huge expansion plans in the pipeline.

    The government has plans to add another 40,000 MW capacity in the eleventh plan. Out of which, NTPC alone will be adding 20,000 MW. State owned Neyveli Lignite also has big plans going ahead. The company's expansion plans include a Thermal Power Plant at Tuticorin with a capacity of 1,000 MW as a joint venture with Tamil Nadu Electricity Board (TNEB). Apart from Tamil Nadu, the company is in talk with various state governments to add another 3,500 MW. Neyveli's additional 210 MW thermal power generation project is expected to commence operation by the end of FY04.

    On the other hand, private sector companies like Tata Power and Reliance Energy are also on track to take advantage of the improved sector scenario. Tata Power plans to add another 1,500 MW generation capacity by FY09. Where as Reliance Energy has plans to add another 3,000 MW over next 4 years. The government's endeavor to reduce T&D losses has encouraged the private players to increase the power distribution circles.

    What to expect?

    The outlook for the Indian power sector remains positive in view of the government plans to add 150,000 MW of generation capacity over the next decade (including 50,000 MW hydro capacity) in order to bridge the current demand-supply gap. This is almost 1.5x current capacity. Also, if India has to achieve a consistent 7% GDP growth, then power generation has to grow by 8%-9% per annum. Thus, demand is not an issue in this industry. However, poor health of the SEBs has kept both private and public investments away for some time now. While it is clear that power sector is a sunrise industry in India going forward, the pace of the growth depends largely on power sector reforms.



    Equitymaster requests your view! Post a comment on "'Power'ful Year". Click here!


    More Views on News

    NTPC: Higher Tax Provision Impacts Profits (Quarterly Results Update - Detailed)

    Mar 30, 2017

    NTPC declared results for the quarter ended December 2016. The company reported revenue growth of 10.9% while profits declined by 7.5% YoY.

    NTPC: Capacity Addition a Key to Earnings Going Ahead (Quarterly Results Update - Detailed)

    Nov 23, 2016

    NTPC declared results for the quarter ended September 2016. Here is our analysis of the results.

    Power Grid: Robust Performance Continues (Quarterly Results Update - Detailed)

    Nov 23, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended September 2016. The company reported a revenue and profit growth of 28% YoY and 32% YoY respectively.

    Power Grid: Steady Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended June 2016. The company reported a revenue and profit growth of 31% YoY and 35% YoY respectively.

    NTPC: Good Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    NTPC declared results for the quarter ended June 2016. Here is our analysis of the results.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 22, 2017 (Close)