National Thermal Power Corporation – NTPC
NTPC is India’s largest energy conglomerate with roots planted way back in 1975 to accelerate power development in India. Since then it has established itself as the dominant power major with the presence in the entire value chain of the power generation business. From fossil fuels, it has forayed into generating electricity via hydro, nuclear and renewable energy sources.
Govt. decided to divest 5% of its stake in a Maharatna Company, NTPC via Offer For Sale (OFS) to collect around Rs. 5000 Crore. This will be the second biggest divestment this fiscal year after ONGC. Nonretail investors and High Net worth Individuals (HNIs) were allowed to place the bid today and depending on the OFS allotment price retail investors will be offered 5% discount.
The company is trading 13% less the industry PE, 1.17 times the Book Value(BV). Even though Return On Equity (ROE) is around 13.5%, sales and profit growth are discouraging. The company is maintaining healthy dividend pay out over the years and at current market price dividend yield is nearly 2%.
The stock is at critical junction and slip can cause stock price testing a good accumulation region placed @ Rs.111-92 Range.
Because of the following major reasons, I do not have great affection towards PSU stocks for long term investments.
1) Policy Paralysis affects competitive capabilities
2)Union activities affect the Industrial relationship
3)Social responsibility takes preference over minority share holders
4)Used for subsidizing the products
5)No monopoly as olden days
6)Late subsidy payments affecting the cash flow
Above reasons are just my views and not intended to discourage anyone about investing or participating in OFS of NTPC. If an objective of the investment is matching the criteria of one’s Financial Goals and conviction of investment Idea is stronger opportunity to be seized at appropriate valuations. I wish you happy Learning and Earning!
Note: Information presented in the above article is available in public domain and it should not be treated as “Research Report”
Information presented in the above article is available in public domain and it should not be treated as “Research Report”
Registration Status: I am not a SEBI registered Research Analyst.
As per SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 and clarifications provided by SEBI “Any person who makes the recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.”
Disclaimer: I do not hold any position in NTPC.