Reforms thrust drives power stocks

NTPC has appreciated 7.8 per cent since its listing on November 5

After the successful listing of the National Thermal Power (NTPC) and PTC India issues, the power sector stocks have generated aggressive buying interest.

Investors are lapping up power stocks on expectations that reform process in the Indian power sector will continue at a faster pace.

A leading foreign broking firm, in its latest research report said: "The Indian power sector is entering a phase of sustained high growth. We believe that changes in policy and regulatory framework have created a platform for acceleration in power sector reforms, going forward.

"Improving financials of distribution entities will create investment opportunities in power distribution, trading and generation," the report states.

"Large size issue such as the NTPC have forced global funds to track the Indian power sector extensively in the recent past. There is lot of interest specially because at least three other major power sector companies are planning fresh issues before end of the first quarter of (calendar) 2005," the head of equity with a domestic broking firm said.

The sheer size of the NTPC issue, and its successful record post-listing has made foreign funds sit up and take notice of Indian power stocks. Post-listing, NTPC has emerged as the second biggest public sector undertaking in terms of market capitalisation, next only to oil giant ONGC.

A host of power generation and power sector-related scrips have seen a smart rally in the last three months.

Power giant NTPC has appreciated 7.80 per cent since its listing on November 5 at Rs 75.55 to Tuesday's close of Rs 81.35.

In Tuesday's trading, the stock was up more than 2.3 per cent, backed by huge volumes. Power equipment major BHEL's scrip was up 2.2 per cent to Rs 700.50, Tata Power was up 1.6 per cent to Rs 363.25, while KEC Inernational was up 2.6 per cent to close at Rs 133.50. All these stocks have appreciated more than 15 per cent in the past three months, supporting the rally at the bourses.

Even the second-rung power sector companies have seen a smart rally. Neyveli Lignite has appreciated 7.6 per cent in Tuesday's trading to close at Rs 64.65.

Since September 14, 2004, Neyveli Lignite has appreciated 28.33 per cent from Rs 50.65 to Tuesday's close of Rs 65, Gujarat Power has appreciated 31.82 per cent from Rs 58.1 to Rs 76.59, Ahmedabad Electricity has appreciated more than 29 per cent from Rs 94.90 to Tuesday's close of Rs 122.45, CESC has appreciated 28.5 per cent from Rs 110 to Rs 141.35, Tata Power has gone up from Rs 287.64 to Rs 362.90, up 26.16 per cent, Surat Electricity has gone up from Rs 202.85 to Rs 253.95, up 25.19 per cent, Numeric Power Systems has appreciated from Rs 164.2 to Rs 201.8, up 22.9 per cent and Alstom Projects has appreciated by 16.5 per cent from Rs 130.85 to Rs 152.44 during the same period.

The losers among the power sector stocks are Reliance Energy and PTC. While PTC has lost 3.5 per cent in the past three months, the Reliance Energy stock has lost a massive 18.14 per cent from Rs 628.90 to Tuesday's close of Rs 514.79.

Analysts said that fundamentally, the sector is looking strong with additional power generation capacity of 107,000 MW has been planned over the next few years by the government.

Further, 13 state electricity boards have reduced losses in the current financial year and has forecast an aggregate reduction of Rs 2600 crore in financial year 2005.