Be cautious on power stocks, says SP Tulsian

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Be cautious on power stocks, says SP Tulsian

Be cautious on power stocks, says SP Tulsian, sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about NHPC See messages about NHPC

Be cautious on power stocks, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "I won't be placing NHPC in power category being the hydropower and I have expressed my view earlier also that I am maintaining my negative view because of the high debt of about Rs 11000-12000 crore, high equity of Rs 12000-13000 crore."

He further added, "If you come on the thermal based power projects in which you can include Adani Power , you can include JSW Energy , Indiabulls Power . I don't think Indiabulls Power have really commenced any capacity and there are many other integrated players like GMR , GVK , Sterlite , Jindal Steel & Power - all of them are facing now a big problem. In fact there is no sanctity of the long-term contracts for the feedstock having entered by them for procurement from the South-East Asian countries and all that and that is putting a big pressure on them. In fact Tata Power is a case in point where they have provided impairment loss of about Rs 800 crore for their Ultra Mega Power Projects (UMPP), Mundra. So taking all this into consideration, on the hand they have fixed Power Purchase Agreement (PPA) with the State Electricity Board or with the government for 70% of their generation capacity, on the other hand the raw material cost, which was estimated earlier at about Rs 1-1.10 per unit as the coal cost, now seem to have moved upto Rs 160-170 and inspite of that there is no easy availability of the feedstock."

"So taking all this into consideration all the power stocks are - in fact I am referring again, the thermal based ones are doing very badly and I don't think that there is going to be any relief. You are not going to see any escalations in the PPA in the near-term. You won't be able to operate your plans on a economical basis, going forward. So taking all this into consideration naturally the cautious to negative view remains on all these stocks."