NTPC set to move up, brokers say subscribe to OFS

Moneycontrol Bureau

State-owned NTPC slipped around 2% to Rs 152.90 after an Empowered Group of Ministers (EGoM) on Tuesday, approved its divestment programme which will be held tomorrow via offer for sale (OFS) route.  Overall, the stock has underperformed  the broader market by 10% in the past one year, yet brokerages recommend  'buy'  on improved business scenario in future.

What prompts analysts to advise 'subscribe' to the OFS issue?

Despite factors like fuel scarcity, unviable power purchase agreements and regulatory hurdles impacting power producers, brokerages believe the company will do well in long term on enhanced capacities and eased policy measures.

Large state-run entities like NTPC are traditionally shielded from industry wide concerns.

The market has already factored in issues like lower plant availability factors (PAF) and delay in power sector reforms along with fuel shortage.

The stock price will only rise from current levels on various positive factors like sufficient domestic and imported coal supply to its plants in future and regulated power purchase agreements will ensure healthy PAF.

Concerns on receivables has decreased with around 21 states issuing tariff orders.

Meanwhile, Karvy Broking finds OFS issue to be an attractive preposition as the stock can only rise from current levels.

Ventura Securities has also recommended  'subscribe' to the OFS issue, as the company has one of the safest business models in the power utility space. Its captive coal mining will also commence this year, enhancing overall performance.

"We believe the current market price has not taken cognizance of the growth in capacity and regulated nature of the business. We recommend subscribe to NTPC OFS as fuel availability will improve in future and capacity expansion will also stabilise, " states Antique Broking in a note.

CLSA expects NTPC OFS to be priced between 145-150/share and recommends 'buy' to it.

Read This: Subscribe to NTPC OFS issue, says Ventura Securities