Power stocks have put up a disappointing show since the last Budget, with many losing between 3 and 46 per cent of their value. And this is in line with the financial performance of the companies. While most grew revenues during the half-year ended September 2014, this did not translate into higher profits. Some have posted losses, at the net level.
The uncertainty caused by coal block de-allocations in September 2014 turned out to be the biggest overhang on the sector last year. The subsequent enactment of an Ordinance and commencement of coal block auctions, however, brought some clarity, stemming the sharp slide.
Apart from dealing with the cancellation of their coal blocks, though non-operational in many cases, power producers have also had to grapple with a shortfall in coal supplies from Coal India. Reduced demand from the financially weak State distribution utilities also constrained generation.
Shortage in domestic gas production, too, has forced most gas-based power plants to turn almost inoperative. But fuel supply has not been the only concern. For Tata Power (down 18 per cent) and Adani Power (down 12 per cent), uncertainty over the revision in their tariffs has weighed them down. The fate of their large plants that run only on imported coal hangs in the balance. For NTPC, an adverse change in the tariff regulations applicable from the current fiscal has taken a toll on the stock, which has lost 5 per cent.
But almost untouched by these concerns is India’s central transmission utility, Power Grid Corporation of India. The stock of this company has managed to buck the trend with an 11 per cent gain.
While the budget may have something on offer for the power sector, further developments on the coal block auctions and favourable orders from the regulator on companies’ tariff review petitions are very important for the sector.
(This article was published on February 13, 2015)
