At a time the government is planning to list a number of state-owned power utilities, experts have warned that the current weak market conditions are not likely to ensure the best valuations for these companies.
NHPC Ltd, the country’s largest hydro power generator, is likely to float its public offer in October from which it hopes to raise around Rs 1,600 crore. Analysts, however, say the company may not be able to raise this much amount.
The government is also planning to offer shares in Damodar Valley Corporation (DVC) and North Eastern Electric Power Corporation (Neepco) later this year. “A weak market sentiment, coupled with the decline in prices of shares of major power companies, has led to an overall bleak outlook. With almost all public issues of the power companies quoting at a discount, the forthcoming offers are expected to be delayed till the market conditions improve,” said a Mumbai-based analyst who tracks the sector.
The stock price of Reliance Power, part of the Reliance Anil Dhirubhai Ambani Group (R-ADAG) was Rs 164.5 on Thursday as against the listing price of Rs 450. But it should be noted that the company issued bonus shares to all shareholders except the promoter group immediately after the stock was listed.
The share of Rural Electrification Corporation, which listed at Rs 121 on March 12, has declined nearly 25 per cent to Rs 91.25.
The Bombay Stock Exchange’s power index, which tracks the share prices of 15 power companies, has declined nearly a fifth in the last one month whereas the benchmark Sensex rose 2,048 points, or 16 per cent, in the same period — clearly indicating that investors are losing interest in the power sector.
The extent of the decline in the prices of stocks within the power index can be gauged from the performance of NTPC and BHEL — both leaders in their respective fields. NTPC, the largest power generator, was at Rs 181.65 on Thursday, down 38 per cent from its 52-week high, while BHEL, the country’s largest power equipment manufacturer, was down 72 per cent from its 52-week high.
India is planning to add 78,900 Mw generation capacity by 2012, which will increase the country’s installed capacity by over 55 per cent from the current 143,000 Mw.
“The capacity addition targets are never met. The shortage of coal and gas to fuel even the installed capacity has put a question mark on the performance of the power companies. Investors are not sure if the power sector reforms will be implemented successfully,” said a Delhi-based analyst.
Government officials say the capacity addition target in the current Plan period is unlikely to be met.
NHPC has already expressed its concern over the weak marker sentiment. “We are waiting for the market condition to improve to float our public offer,” said Chairman SK Garg.
Analysts also pointed out that weak markets and high inflation were keeping investors away from the public offers. Between January and July this year, 32 companies have floated their public offers, compared with 60 in the same period last year.
