X

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 stocks: More pains than gains! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 23, 2010

    Power stocks: More pains than gains!

    There you have it! What the government has been denying all these years has come true, yet again! We are referring to the lowering of the capacity addition target for the power sector in the XIth five-year plan. The reduction is to the tune of 21%. This is to say that India will now add around 62,000 megawatt (MW) of capacity during the five year period of 2007-2012. This is as compared to the 78,000 MW that were originally targeted!

    So, who's the culprit here as the country yet again suffers on account of government's over-promising and under-delivering? We would not like to hazard a guess here. This is because even the government isn't clear who's to blame for the slippage in execution.

    Some blame engineering companies like BHEL for delaying the supply and setting up of key equipments. There are others who blame the government for delays in granting the necessary approvals. Insufficient supply of fuels like coal and gas is also blamed for the delays. But no one connected to the sector is ready to take the blame on itself. Neither the engineering companies, not the power producers. Not even the government. Everyone is pointing fingers towards everyone else!

    Amidst all this, the Indian economy remains the one that is suffering. The power ministry, on its website, has explained why power generation needs to grow by 1.5 times the annual GDP growth rate. What we are seeing is nowhere near this target. In fact, the sector has been continuously underperforming the economic growth.

    The moot question is - how far is this sustainable? How far can the Indian economy grow with its baggage of poor power infrastructure? We do not see this sustaining for a long time now. Maybe the next few years! The GDP might grow at 7-8% for the next few years with the current power setup. But if one is to take a 10-15 year view, things do not seem to be falling in line.

    We are reaching a do or die situation as for the power sector is concerned. The private sector has shown some interest of late. But we remain worried about the huge execution issues these companies are likely to face in the future. It's not just about the huge amount of money that they require to expand over the next few years. It's also about the same issues, as we have discussed above, that have hampered the power sector's growth in the past.

    As for the future of power sector stocks, it's better to be cautious as an investor than to pay a high price for the cash flows many of these companies are promising 5-6 years down the line. Seeing the opportunity, many companies from unrelated businesses have also jumped into the power fray. Investors would also do well by staying away from them. It's always important to remember that good prospects for a company/sector do not always mean good returns for shareholders.

     

     

    Equitymaster requests your view! Post a comment on "Power stocks: More pains than gains!". Click here!

    4 Responses to "Power stocks: More pains than gains!"

    Dr Zubair Shaikh

    Apr 5, 2010

    What are the future prospects of a company like POWER GRID CORPORATION OF INDIA ??
    Thanx

    Like 

    DrHA!

    Mar 27, 2010


    The stock prices of power companies of private sector would easily discount for a period of 3 to 5 years from the date they get listed on the exchanges. Whereas it may be easily 10 to 15 years for a public company. So the private companies should work to keep the aspirations of investors or they will loose their confidence. Whereas the so called public companies will take their own time as they are not answerable to anyone. So the private companies like Adani,JSW,Reliance etc should buck up and get the good will of retail investors and become investor friendly like Tata Power.

    Like 

    Siva

    Mar 26, 2010

    Understandbly the power stock have not performed well inspite of the overall market doing well. Among the new entrants like Reliance, Adani, IB etc... who will be able to deliver is a big question?

    Like 

    sundaram

    Mar 23, 2010

    What is the point in blaming government alone for this. What is the contribution from private sector. Can you publish what is capacity addition from private sector in last five years. It will be minuscule. Four UMPPs are awarded so far. What is the progress. The earliest one was Sasan around three years ago. Collectively, we should be ashamed for this mess. Don't blame government alone.

    Like 
      
    Equitymaster requests your view! Post a comment on "Power stocks: More pains than gains!". 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 Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    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?

    More
    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

    S&P BSE POWER


    Aug 21, 2017 11:56 AM

    S&P BSE POWER 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS