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NTPC, the country’s largest power generator, posted a 21 per cent fall in net profit to Rs 2,492 crore for the quarter ended September, due to lower demand for power from state utilities and a rise in imported fuel cost, which took a toll on margins.
However, the performance was better than analysts’ expectations of an almost 25 per cent decline in net profit. While this seems to be a marginally positive surprise for the Street, analysts say if one compares the performance with last year’s adjusted profits, in this quarter the company has reported only a 14 per cent growth in net profits.
NTPC reported a better result than the estimates on all fronts, said analysts at Microsec Research.
“The decline in profit is a combination of a lot of factors. The demand from state distribution companies has come down. So, overall generation growth has been impacted. Also, the imported coal component in our coal use has gone up.” The company has imported eight million tonnes of coal against a target of 16 mt for this financial year. “Broadly, there are three reasons for the dip in profitability. Other Income has declined by 38 per cent to Rs 143 crore during the quarter. Interest expense has more than doubled, to Rs 620 crore. Also, there has been a dip in the Previous Year Sales item, which came down to Rs 117 crore in the second quarter as compared to Rs 1,023 crore in the corresponding period last fiscal,” said Salil Garg, director, corporate ratings, India Ratings & Research.
The 21 per cent decline in profit comes even as the company’s total income was up by a marginal 0.3 per cent, indicating pressure on margins. Profit before interest and tax from generation activities dipped a little over 12 per cent to Rs 3,570 crore during the quarter, indicating Plant Availability Factor (PAF) took a hit during the quarter. The company did not release PAF figures.
Total income declined to Rs 16,415 crore from Rs 16,351 crore in the year-ago quarter. Net revenue from electricity sales, 99 per cent of total income, dipped 0.9 per cent to Rs 16,272 crore against Rs 16,120 crore in the corresponding quarter of 2012-13.
Analysts also attribute the decline in total income to falling output from gas-based power stations, which accounts for 14 per cent of total generation capacity. For instance, in September, despite a 17.5 per cent growth in coal-based power generation, gas-based output fell 35 per cent. The trend is expected to continue, as lack of gas will put pressure on its gas-based generation capacity. Positively, coal-based capacity (86 per cent of the total) should take care of growth.
At the end of September, the company's total capacity was 41,174 Mw, about 1,000 Mw more as compared to the same quarter last year. By the end of 2013-14, NTPC is expected to add 1,800 Mw of new capacity, which is why the Street is expecting the growth over the next two quarters to be better.
NTPC’s total expenditure during the three-month period ended September rose 3.5 per cent to Rs 13,131 crore. Fuel cost, 77 per cent of total expenses, increased two per cent to Rs 10,139 crore during the quarter, the company told the BSE exchange. Fuel cost as a percentage of net sales was 61.6 per cent versus 60.7 per cent in the year-ago quarter.
Its unbilled amount to coal mining companies jumped 60 per cent from Rs 2,531 crore as on March-end to Rs 4,065 crore at the end of the September quarter. The unbilled amount, shown as a contingent liability, is due to a recent dispute over the quality supplied by coal companies that is yet to be resolved.
