Regulator's edict may not hit CESC earnings much: IIFL

Shares of power utility company CESC (Calcutta Electric Supply Corporation) slipped over 6 percent today after the West Bengal electricity regulator disallowed higher coal costs to be passed on, raising potential risks to company’s earnings.

However, according to Harshvardhan Dole, VP-Institutional Equities of IIFL the stock impact seems to be over-exaggerated as the likely hit on earnings could be roughly around Rs 30-40 crore per annum in FY18. He does caution the hit could be higher if the regulation is retrospective in nature.

There are several powers which give operators flexibility to cut down their generation and power purchase procurement costs and help limit the impact on the profit and loss (P&L), he says.Sources representing the company on the order also concur. Not much impact is likely on the earnings as the burden of being unable to pass on costs will be mitigated by higher savings and incentives. Watch video for more...