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| A section of analysts feels that the run-up in Neyveli Lignite is far from over. Others are not so sure |
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| The Tamil Nadu-based Neyveli Lignite Corporation (NLC) was practically unheard of among big investors a year ago. Not any more. The company's stock price has vaulted over 80 per cent since January 2003. |
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| A section of analysts feels that the rally is far from over. The reasons are two-fold. Firstly, NLC is expected to gain tremendously from the recent power reforms. Secondly, the government has expressed its intention to offload a part of its stake in the company. |
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| Neyveli Lignite is a public-sector firm engaged in the business of lignite mining and power generation. |
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| It is one of the largest power-generating companies with a capacity of over 2000 MW. The lignite mined is used as feedstock for power generation in its plants. |
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| The company's three main customer s are the state electricity boards (SEBs) in Tamil Nadu, Karnataka and Andhra Pradesh. |
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| All three are amongst the most creditworthy SEBs in India. NLC also enjoys advantages in the form of captive lignite mines, which help it lower power generation costs. |
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| NLC registered a net profit of Rs 1150.84 crore for the year ended March 31, 2003, a growth of 40.48 per cent compared with the year-ago period. |
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| For the fiscal year 2002-03, its sales grew 19.87 per cent to Rs 2,681.48 crore compared with Rs 2,236.95 crore in the previous year. |
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| NLC has also proposed a dividend of 14 per cent for the year. NLC is among the lowest-cost power suppliers to SEBs. Its average price per unit stands at Rs 1.72. |
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| This is possible because at Rs 680 per tonne, the company's lignite cost is 21 per cent lower than the commercial price of lignite, which is Rs 864 per tonne. |
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| NLC's fuel cost per unit generated is, therefore, the lowest after NTPC. NLC has a mining capacity of 18 million tonnes and capacity-expansion plans are in place. |
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| The power shortage in the South would encourage NLC to leverage its captive mining capacity to add generation capacity. |
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| Analysts opine that the expansion of existing projects would result in a doubling of capacity in the next five years. |
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| Their optimism about NLC's medium-term growth is driven by the company's capacity expansions and improvement in the plant load factor of existing plants. |
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During 2002-03, NLC
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