NTPC a good investment bet, says Roy

NTPC is a good investment bet and Power Grid remains defensive bet, says Gautam Sinha Roy, Motilal Oswal.

Roy told CNBC-TV18, “Power sector, there are a lot of questions that still need to be answered. One is on the coal supply bid we have 60 GW of capacity for which coal allocation is still not clear. We are moving in that direction in terms of clarity emerging with coal price pooling mechanism being said, so hopefully in another year’s time a lot of the problems could be resolved. The other part is the Power Purchase Agreement (PPA) prices need to be revised. The State Electricity Boards (SEB) need to take tariff hikes aggressively which they have started doing. So directionally some positives have happened.”
He further added, “On the individual companies side we still see extremely stretched balance sheets and a lack of capacity to service the debt meaningfully which is preventing us from being positive on many of these stocks, but something like National Thermal Power Corporation (NTPC) from a very conservative approach could be positive, because it would be the biggest beneficiaries of coal price pooling mechanism coming in and coal availability coming in for NTPC. Valuations are also quite attractive. So maybe we should stick to some of the front line stocks, there NTPC being a clear one and a low beta perennial favorite name would be Power Grid. This company continues to deliver very robust set of numbers. Their profits have been up 35 percent plus in the past two quarters and they never really had a very bad profitability problems or anything of that sort. So that is a evergreen name that we have to play on, but that is more of a defensive bet, but I think from a longer term investment perspective NTPC has started to look good now.”