Jitendra Sriram, MD & Head-Research of HSBC India told CNBC-TV18, "NTPC is something that we are seeing the triggers fall in place from multiple directions on an return on equity (RoE) expansion here on. So, the first part has to do with the fact that they issued the bonus debentures to alter their capital structure to make it more productive in terms of shareholder return on equity. So that is an exercise that got done by March end. Secondly, we are seeing some amount of under construction projects move into operational stage which should be a natural fillip for RoE as they become income earnings rather than being dud assets on the balance sheet."
"In terms of their renewable foray where they are talking of putting up a lot of solar stations and other installations, we believe that could be the other added trigger because the leverage rates allowed there are better than what is allowed on thermal plants in terms of the RoE profile," he said.
"So, putting all of this together we believe that this story is definitely capable of delivering a 200-250 basis point improvement in RoE over the next two to three years which makes us quite constructive. The valuations are not very rich given the market move of almost about 40-45 percent last year. The stock has been a relative laggard which makes us quite positive on the name."
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