ntpc: a poor state of affairs

Here's a company which talked too much in the past. A sample from 2007-08 annual report: "The company's performance in the stock market has been steady and robust amid the fluctuations and shareholder wealth has increased over three times in a period of nearly three and a half years since its IPO in October 2004. Our investor base has crossed the number of 1 million shareholders, indicating that your confidence in our company is continuously rising." ...."We plan to become 50,000 MW plus by 2012 and 75,000 MW plus by 2017. ..." This is from the chairman and managing director. That sounded good at that time. Market value of the company was about Rs.162,000 crores and had a lot of promise.

After that the story changes track and becomes a new story, (un)worthy of attention. Five years and the stock is not moving up:

Any other alternative investment would have been better for the shareholder. Even that fixed deposit with banks.

Well, there must be some reason for that. After all, the investors are not (that) stupid. This is what happened in the previous 4 years ended 31 March 2012 (stand-alone basis):

• Capacity increased from 29,000 MW to 37,000 MW;
• Revenue increased with a compounded annual growth rate of 12.7%; but operating profit by only 4.9% and net profit by only 5.6%;
• EPS increased from Rs.8.99 to Rs.11.19;
• Return on capital decreased from 15% to 12%; 
• Return on equity decreased from 14% to 13%;
• Stock price decreased from Rs.196 to Rs.163.

The stock price on 1 March 2013 was Rs.150. Net result of the management and board actions was a loss of about Rs.38,000 crores in market value over the period. There are some dividends paid out during the period. 

With all the odds, the broader market has increased by about 21% whereas NTPC is down by about 24%.

There have been so many issues that are required to be resolved including fuel sourcing, credibility of state utilities, land acquisition and environmental clearances. Above all there is the need for superior financial performance.

In 2012 annual report, the chairman and managing director says " ..... In the 12th Plan period the company plans to add 14038 MW of installed capacity to maintain its leadership position in the sector. Work on the projects of the 12th Plan period is progressing satisfactorily. The clearances and approvals are in place. Fuel for these projects has also been tied up including that from the captive mines, the first of which is expected to yield coal from next year. Tying up finances for the projects has never been an issue given the excellent rating that the company enjoys...."

So far the performance in the current year has been better; but I need the final analysis. Let's wait until the annual report is out.