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COMPANY

REPORT

September 20, 2011

NTPC Ltd. Most visible capacity play

COMPANY

REPORT

CMP Rs169

Target Price Rs188

Potential Upside/Downside +11%

Relative to Sensex

Summary

With ~35GW installed capacity NTPC is the second largest IPP in the world. The company is planning to

take its capacity to 67GW (~32GW additional) by the end of 12th plan, of which visibility over 27GW

is very high. However, fuel supply is expected to remain stretched in near term but operational

efficiency would remain intact. We expect NTPC to report 17% revenue and 20% earnings CAGR over

FY11FY14E.

AT CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E

earnings. Based on equal weightages to P/BV and SOTP methods, we arrive at a price target of

Rs188/share. Recommend ACCUMULATE.

Investment Highlights

Nearly double capacity by FY17

NTPC is set to add 3.8GW to take its capacity to 39.1GW by end-FY12. Moreover, NTPC has additional

27.4GW capacity under various stages of development (9.8GW-under construction, 13.1GW-under bulk

tendering and 4.5GW-under implementation stages). In our view, given the historical capacity addition rate,

the company should be able to add 2.8GW by end-FY12E and ~23GW during entire 12th plan, which

would take the total installed capacity to 62GW (v/s company’s plan of 66.5GW) by end-FY17.

Fuel supply to remain stretched

NTPC’s 90% of 35.4GW installed capacity is coal based. The company requires 164MMT coal for FY12, out

of which 141MMT (+14MMT compared to FY11) would be sourced domestically and 14MMT (+4MMT

compared to FY11) would be imported. However, CIL’s dispatches guidance for FY12 would lead to lower

supply to NTPC. Moreover, gas supply from K-G D6 to NTPC’s ~4GW gas based capacity has been

disappointing. We believe, even with higher imported coal and additional domestic coal from SCCL (recently

tied 5MMT at premium to existing contract) NTPC has to operate at lower than historical average PLF.

Operation and collection efficiency to be maintained

NTPC operated its plants at an average PLF/PAF of 87%/90% against all India 77%/82% during FY11.

However, given the stretched fuel supply, NTPC is expected to operate at below average PLF of 82%/80%

for FY12E/FY13E. However, the company should not lose in terms of incentives as we expect plant

availability to be maintained at 90%. Moreover, given the strict payment security mechanism, NTPC is

expected to maintain its 100% collection efficiency trend in future.

Outlook and Valuation

We arrive at a target price of Rs188/share based on equal weightages to P/BV and DCF based SOTP

methods. Our SOTP value stands at Rs184, and P/BV based value stands at Rs191 (2x FY13E BV).

At CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E

earnings. Recommend ACCUMULATE.

Source: Capitaline

ACCUMULATE

Nifty: 5,032; Sensex: 16,745

Analyst

Rohit Singh

+91-22-4322 1186

[email protected]

Sector Power

Bloomberg / Reuters NATP IN / NTPC.BO

Shares o/s (mn) 8,245.5

Market cap. (Rs mn) 1,393,483

Market cap. (US$ mn) 29,157

3-m daily average vol. 222,570

Key Stock Data

52-week high/low Rs222/160

-1m -3m -12m

Absolute (%) (3) (3) (18)

Rel to Sensex (%) (6) 1 (2)

Price Performance

Promoters 84.5

FIIs/NRIs/OCBs/GDR 3.6

MFs/Banks/FIs 8.3

Non Promoter Corporate 1.5

Public & Others 2.1

Shareholding Pattern (%)

Table: Financial snapshot (Rs mn)

Year Revenue EBITDA Adj. PAT EPS (Rs) BV (Rs) P/E (x) P/BV(x) RoE (%) RoCE (%)

FY09 419,752 138,285 83,096 10.1 69.6 16.8 2.4 15.1 13.0

FY10 463,777 152,666 86,503 10.5 75.7 16.1 2.2 14.4 12.8

FY11 549,387 150,457 74,639 9.1 82.3 18.7 2.1 11.5 11.7

FY12E 598,576 182,006 85,968 10.4 88.3 16.2 1.9 12.2 12.9

FY13E 696,012 208,884 96,564 11.7 95.6 14.4 1.8 12.7 12.8

Source: Company; IDBI Capital Research

70

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/11

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/11

May

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Jun/

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Jul/1

1

Aug

/11

Sep

/11

NTPC Sensex

2

Company Report – NTPC Ltd.

Investment Positives

Nearly double capacity by FY17

NTPC has installed capacity worth 35.4GW capacity (3.4GW owned under JV) as on September 20, 2011. The company has

added highest ever capacity of 2.5GW (1.6GW commercially operational) during FY11 and also synchronized 660MW

at Sipat and 500MW at Simhadri II as on September 20, 2011. The company plans to add 3.8GW more during FY12,

which would take the total capacity to 39.1GW at the end of 11th plan. During FY12, NTPC is expected to add

1x 500MW at Simhadri II, 2x 660MW at Sipat, 1x 500MW at Mauda I. Additionally, under JVs route, the company is

expected to add 2x 500MW at Jhajjhar and 2x 500MW at Vallur. However, given the historical capacity addition trend,

we expect NTPC to add another 2.8GW during FY12. Consequently, the company would be closing 11th plan

(FY08FY12) with 38.2GW capacity in place.

Figure: FY12 targeted capacity addition


Moreover, NTPC has additional 27.4GW capacity under various stages of development, out of which, 9.8GW is under

construction, 13.1GW is under bulk tendering and 4.5GW is under implementation stages for 12th plan commissioning.

13.1GW under bulk tendering includes 9 units of 660MW and 9 units of 800MW to be commissioned during 12th plan. Of

the 9.8GW under construction, NTPC would add 8.5GW (3.3GW under JV) coal based and rest 1.3GW hydro capacity to

diversify fuel mix. Keeping in view, the capacity under construction, under bulk tendering and other visible capacity to get

commissioned during 12th plan, NTPC is aspiring to attain 66.5GW by the end-FY17. However, in our view, the company

would see slippages to the extent of 4.5GW (lower visibility over other planned projects) and add ~23GW during entire 12th

plan, which would take the total installed capacity to ~62GW (v/s company’s plan of 66.5GW) by end-FY17.

Figure: NTPC aspired to achieve 67GW by the end of 12th five year plan


500

1000 1000

1320

0

200

400

600

800

1,000

1,200

1,400

1,600

Mouda, Stage- I Jhajjar Vallur Sipat, Stage- I

(MW

)

35.4

66.5

62.13.8

9.8

13.1

4.5

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70

Q1FY12 FY12 Under construction for 12th plan

Bulk tendering Other capacity FY17 IDBIe- FY17

(GW

)

We expect NTPC to

close FY12 with

38.2GW capacity

Our own view is that

NTPC will have a

shortfall of 5GW for its

12th plan target and

would have 62GW

capacity by end-FY17


3

Figure: Projects under construction


Recent ordering of 9x800MW improves visibility

NTPC has ordered BTG for its 9 units of 800MW. The company has finalized its international competitive bidding, under

which Korean equipment manufacturing company Doosan has emerged as L1 (would get 5 units) and BHEL is L2

(would get 4 units) for boilers’ order. For T-G orders, BGR Energy Systems has been finalized L1 (would get 5 units),

BHEL L2 (would get 2 units) and L&T L3 (would get 2 units). The company has been able to negotiate for very

competitive prices (Rs0.9 mn/MW for T-G sets and Rs16 mn/MW for boilers). These units would be used at Lara in

Chhattisgarh (2x800MW), Darli Palli (2x800MW), Gajmara in Orissa (2x800MW) and Kudgi in Karnataka (3x800MW).

Table: Supercritical TG set order wins

Company Projects MW Client Order size (Rs mn) Realization (Rs mn/MW)

L&T Krishnapattnam 1600 APPDCL 15,570 9.7

BHEL Barh-II 1320 NTPC 14,540 11.0

BHEL NA 1320 NTPC-DVC 11x660MW 15,665 11.9

BHEL Mauda 1320 NTPC-DVC 11x660MW 15,665 11.9

BF-Altsom NA 3300 NTPC-DVC 11x660MW 39,163 11.9

Toshiba-JSW NA 1320 NTPC-DVC 11x660MW 15,663 11.9

BGR NA 4000 NTPC-DVC 9x800MW 36,000 9.0


Table: Supercritical Boilers order wins

Company Projects MW Client Order size (Rs mn) Realization (Rs mn/MW)

BHEL Krishnapattnam 1600 APPDCL 25,000 15.6

BHEL Barh-II 1320 NTPC 18,000 13.6

Doosan NA 7200 NTPC 9x800MW 1,15,200 16.0

L&T NA 7200 NTPC 9x800MW 1,26,000 17.5

BGR NA 7200 NTPC 9x800MW 1,29,600 18.0


1980

1500

1320

1320

1000

1000

1000

1000

1000

800

750

520

490

0 400 800 1200 1600 2000 2400

Barh-I

Vallur

Sipat-I

Barh II

Jhajjar

Mauda-I

Rihand III

Vindhyachal -IV

Nabinagar

Koldam

Bongaigaon

Tapovan Vishnugad

NCTPP- II, Dadri

(MW)

0

10

20

30

40

50

60

70

80

Total

(MW

)

Coal-own Hydro-own Coal-JV

4


9x660MW would be ordered before March 2012

The bulk tendering for 9 units of 660MW by NTPC has got further delays on account of Ansaldo Caldaie Boilers India

Pvt. Ltd. (Ansaldo) filling a suit in the High Court, after being disqualified from the bidding process for the steam

generator (SG) package of this bulk tender. However, NTPC has already issued Letters of Intent (LoI) for the TG

packages of its Solapur STPP, Mauda-II TPP and Meja TPP to Alstom-Bharat Forge JV, BHEL and Toshiba,

respectively. Further, the company plans to order SG and TG sets for all the 9 units of 660MW. These units would be

used at Solapur (2x660MW), Mauda II (2x660MW), Meja (2x660MW) and Nabinagar (3x660MW) power projects.

The company has guided for the entire equipment ordering before March’ 12.

Table: Capacity under bulk tendering

Name State Capacity (MW) Fuel Type

Solapur Maharashtra 1320 Coal

Mauda II Maharashtra 1320 Coal

Lara Chhattisgarh 1600 Coal

Darlipalli I Orissa 1600 Coal

Gajmara I Orissa 1600 Coal

Kudgi I Karnataka 2400 Coal

JVs and subsidiaries

Meja UP 1320 Coal

Nabinagar Bihar 1980 Coal

Total 13140


Fuel supply to remain stretched

90% of NTPC’s 35.4GW installed capacity is coal based. The company requires 164MMT coal for FY12, out of which

141MMT (+14MMT compared to FY11) would be sourced domestically and 14MMT (+4MMT compared to FY11) would

be imported. The company is expecting additional 12MMT coal from Coal India (CIL), which is ~50% of the Coal India’s

additional coal production for FY12. Moreover, CIL is committed to supply coal to other projects worth 4.5GW during

FY12, which would lead to lower supply to NTPC. Therefore, NTPC has to rely on other costlier domestic and

international sources for coal. NTPC has entered into an MoU with SCCL, under which SCCL would supply 5MMT coal

to NTPC stations for a period of one year from July 1, 2011-June 30, 2012, in addition to supply of 10.2MMT coal per

annum under the existing fuel supply agreement. NTPC would pay Rs814/tonne extra on the long term contract price of

Rs600-1,900/tonne.

Figure: NTPC Coal requirement


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0

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12000

18000

24000

30000

36000

42000

FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E FY14E

(MM

T)(M

W)

Coal based capacity (MW) Coal requirement (MMT)


5

Gas supply to power sector has been dismal; the sector realized an average supply of less than 75% of the

requirement of ~82MMSCMD (for 90% PLF). NTPC with gas based capacity of 3955MW (~24% of all India gas based

capacity) requires 15.46MMSCMD gas for operating at a PLF of 85%. During Q1FY12, the company received

12.0MMSCMD (-23% of the requirement), the shortfall was mainly caused by 2.37MMSCMD less supply from K-G D6.

NTPC has already entered into long term contract for the supply of 9.0MMSCMD APM/PTM, 4.46MMSCMD from K-G

D6 and 2.0MMSCMD RLNG from GAIL. However, fall in gas production from K-G D6 (~20% from peak production of

60MMSCMD) would keep the gas supply to NTPC under stress.

Figure: Securing fuel requirement through various means


Mine cancelation dented captive coal supply

Coal Ministry has cancelled NTPC’s 5 coal blocks, citing a reason of no progress in those mines. The canceled coal

blocks are Chhati Bariatu, Chhati Bariyatu South, Kerandari, Brahmini (JV with CIL) and Chichro Pastimal (JV with CIL)

with a total reserve of ~3 bn tonnes. Meanwhile, NTPC reported the current status of these mines, which suggests that

de-allocated mines would take another 3-4 years (9 years from the date of allocation) for the production. NTPC is in line

with the time taken for the mine development domestically. Moreover, the power ministry has approached coal ministry

on behalf of NTPC, asking it to review its decision. We expect the coal blocks to be re-allocated to NTPC.

Table: Cancelled mines-May be re-allocated

Block State

Date of

allocation

Date of

de-allocation

Minable reserve

(MMT)

Reasons for de-

allocation

Chhati-bariatu Jharkhand 25-Jan-06 14-Jun-11 151 No progress made

Kerandari Jharkhand 25-Jan-06 14-Jun-11 142 No progress made

Brahmini (JV with CIL) Orissa 25-Jan-06 14-Jun-11 1,100 No progress made

Chichro Pastimal (JV with CIL) Orissa 25-Jan-06 14-Jun-11 1,164 No progress made

Chhati-bariatu (South) Jharkhand 25-Jul-07 14-Jun-11 543 No progress made


Currently, NTPC has 3 coal blocks (Pakri Barwadih, Dulanga and Talaipalli) with a mineable reserve of 1.5 bn tonnes.

The company has fast tracked the development process of Pakri Barwadih mine. Thiess Minecs India Pvt. Ltd. has

been appointed MDO for a period of 27 years. Pakri-Barwadih has received stage II forest clearance from MOE and is

in process of acquiring 9,206 acres of land for this mine. The company has approved an investment of Rs31.9 bn

(Rs2.6 bn already incurred); funding would be done with debt to equity ratio of 70:30. The mine is expected to be ready

for production by FY13. 2.34MMT coal is expected to be mined during FY13 and 15MMTPA from FY15 onwards.

Fuel Security

Coal

Gas

Long term FSA with CIL for 20 years

Standing linkage committee accorded approval for long term coal linkage/ of

LOA for all 11th plan projects

Developing captive coal blocks, Pakri Barwadih is expected to reach 15 MTPA by

FY14; Theiss has been appointed as an MDO for the project

International Coal Ventures Ltd. incorporated for acquisition, operation of coal mine/

block in Indonesia, Australia and Mozambique

Long term supply agreement with GAIL for 14.48MMSCMD

Supply of 2.5MMSCMD of RLNG with GAIL till 2019

Fall back agreements with GAIL, BPCL. IOC and GSPL

Government allocated 4.46MMSCMD from KG – D6

Hold 40% in a block awarded under NELP – V

Allotted 4 blocks under NELP-VIII; NTPC has 100% interest in one block and 10%

each in other 3 blocks

6


The development of Dulanga (reserve-195 MMT) and Talaipalli (reserve-844 MMT) are also progressing gradually. The

company has incurred an overall expenditure of ~Rs5 bn and is expected to produce ~40MMTPA from FY17 onwards

(~15% of the total coal requirement then).

Table: Development of coal blocks

Pakri Barwadih Dulanga Talaipalli Chatti-Bariatu Kerandri

Date of allotment Oct-04 Jan-06 Jan-06 Jan-06 Jan-06

Mineable reserve (MMT) 503 195 844 151 142

Est. capacity (MMTPA) 15 7 18 7 6

Stripping ratio 4.2 2.7 4.1 1.8 4.4

End use project

Shortfall:

Lara (4000MW),

Darlipali (3200MW)

Darlipali

(3200MW) Lara (4000MW)

Barh II

(1320MW),

Tanda II

(1320MW)

Barh II

(1320MW),

Tanda II

(1320MW)

GR availability

Mining plan approval Y Y Y Y Y

Feasibility report Y P P P P

Investment approval Y N N N N

Expected commissioning FY13 FY15 FY15 NA NA

Stands canceled for now.


Funding CAPEX comfortably

NTPC has 13.7GW projects under construction, which requires significant capital spending. The company has finished

CAPEX of Rs121 bn for full year FY11 and plans CAPEX worth Rs164 bn for FY12. We anticipate Rs158 bn, Rs203 bn

and Rs363 bn of capital expenditure during FY12, FY13 and FY14 respectively. NTPC would be able to raise funds

comfortably as their debt to equity is around 0.6x, which would go to comfortable level of 1.0x after raising required debt

by FY14.

Figure: Required CAPEX


88

119

101

121

158

203

363

(20)

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140

210

280

350

420

FY08 FY09 FY10 FY11 FY12E FY13E FY14E

(%)

(Rs

bn)

Capex (Rs bn) Growth (%)


7

Figure: Enough headroom available to borrow funds


Operational efficiency provides with performance incentives

At the end of Q1FY12, the company had 34.4GW capacity under operation. The company operated its plants at an

average PLF and PAF of 87% and 90% against all India PLF and PAF of ~77% and ~82%. However, on account of

stretched fuel supply, the company would witness a dip in PLF going forward. We expect, NTPC to operate its plant at

an average PLF of 82% for FY12 and 80% for FY13. That said, the company should not lose in terms of incentives as

its based on plant availability, which we expect to be maintained at 90%.

Figure: Leader in operational efficiency as well


NTPC earns 15.5% post tax return on equity as a regulated player under CERC’s 2009-14 tariff guidelines. Moreover,

NTPC being very efficient power generator earns incentives over its fixed return. The company earned Rs16 bn as

unscheduled interchange revenue and incentives for PLF. We anticipate the similar revenue stream would keep coming

from UI and other incentives. However, due to CWIP to the tune of Rs459 bn/ Rs490 bn during FY12E/FY13E, RoEs

would remain under pressure. We expect RoE to remain at 12.2%/12.7% for FY12/FY13E.

0.00

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1.00

1.20

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100

150

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250

300

FY09 FY10 FY11 FY12E FY13E FY14E

(x)

(Rs

bn)

Debt required (Rs bn) Debt/Equity (x)

65

70

75

80

85

90

95

FY07 FY08 FY09 FY10 FY11 FY12E FY13E

(%)

All India PLF NTPC PLF NTPC PAF

8


Figure: Huge CWIP compresses RoEs


Collection efficiency stands strong

The company is enjoying 100% realization for last eight years and CERC’s 2009-14 payment guideline assures no

uncertainty on revenues. However, given the overall poor financial health of SEBs (forms major chunk of NTPC’s

customer base); the company is strictly following the strong payment security mechanism. State utilities are required to

establish Letter of Credit (LCs) to cover 105% of the average monthly billing. Additionally, the company has signed for

first charge over customers’ receivables after FY16.

0

3

6

9

12

15

18

0

100

200

300

400

500

600

FY07 FY08 FY09 FY10 FY11 FY12E FY13E

(%)

(Rs

bn)

CWIP (Rs bn) RoE (%)


9

Outlook and Valuation

With ~35GW installed capacity NTPC is the second largest IPP in the world. The company is planning to take its

capacity to 67GW (~32GW additional) by the end of 12th plan, of which visibility over 27GW is very high. However,

fuel supply is expected to remain stretched in near term but operational efficiency would remain intact. We expect

NTPC to report 17% revenue and 20% earnings CAGR over FY11-FY14E.

AT CMP, the stock is trading at 1.9x/1.8x of FY12E/FY13E book value, 16.2x/14.4x of FY12E/FY13E earnings. Based

on equal weightages to P/BV and SOTP methods, we arrive at a price target of Rs188/share. Recommend

ACCUMULATE.

Table: Peer group comparison

Company

Mkt. cap.

(US$ mn)

P/BV (x) EV/EBITDA (x) RoE (%)

Year-end

CY11E/

FY12E

CY12E/

FY13E

CY11E/

FY12E

CY12E/

FY13E

CY11E/

FY12E

CY12E/

FY13E

Torrent Power 2,264 March 1.7 1.5 5.9 5.7 21.0 18.4

Adani Power* 3,981 March 2.2 1.6 9.7 5.5 22.1 29.2

JSW Energy* 2,154 March 1.5 1.4 6.2 4.9 17.6 16.1

CESC* 739 March 0.6 0.5 5.2 5.5 8.2 8.4

Tata Power* 4,892 March 1.4 1.2 7.9 7.6 14.3 10.5

NTPC* 29,529 March 1.9 1.8 9.7 9.1 12.2 12.7

Median 3,123 1.6 1.5 7.1 5.6 16.0 14.4

Prem./(Dis.) to

Indian peers (%) 19 24 38 63 (24) (12)

Ratchaburi 2,128 Dec 1.3 1.2 8.1 7.7 12.4 12.2

Glow Energy 2,315 Dec 1.9 1.8 12.9 8.9 13.4 19.2

Huaneng Power 8,660 Dec 0.7 0.7 10.1 8.9 5 6.2

Huadian Power 2,614 Dec 0.4 0.4 12.9 10.5 0.6 2.3

Datang Power 7,871 Dec 0.6 0.6 11.6 9.9 6.2 7.2

GD Power 5,767 Dec 1.4 1.2 12.5 10.8 10.5 12.7

Median 4,191 1.0 1.0 12.1 9.4 8.4 9.7

Prem./(Dis.) to

Asian peers (%) 90 89 (20) (3) 46 31

* Companies under coverage Note: Conversion rates (US$1= Rs48.1= THB30.5 = CNY7.8 = HK$6.4), as on September 20, 2011

Source: Company; IDBI Capital Research; Bloomberg

We value NTPC at Rs191 based on P/BV multiple

Historically, on an average, NTPC has traded at 2.2x 1-year forward book value multiple. However, based on low RoEs

expectation over FY13, we have assigned ~20% discount to historical book value multiple. We value stock at 2.0x FY13

book value, which translates to Rs191 per share.

Table: P/BV multiple valuation

Parameter Multiple assigned FY13E BV Price/ share (Rs)

P/BV 2.0 93.5 191


NTPC trades at a

premium to most Indian

peers largely going to

capacity visibility and

lower fuel risk

Within large Asian

peers, NTPC scores in

terms of RoEs, and thus

trades at a premium

10


SOTP value stands at Rs184/share

We have also valued stock on DCF based SOTP method, which comes to Rs184/share. Core business translates to

Rs150/share (13% RoE, 2% terminal growth after FY18), whereas cash and investments contribute Rs20/Rs15 per

share respectively.

Table: SOTP valuation

Rs/share

Core Business 150

Cash 20

Investments 15

Total Value per share 184

Source: Bloomberg; IDBI Capital Research

Table: Weighted average value

Method Value (Rs/share) Weightage (%)

SOTP 184 50

2x FY13 P/BV 191 50

Weighted average value 188

Source: Bloomberg; IDBI Capital Research


11

Figure: 12m fwd PER (x)

Source: Bloomberg; Company; IDBI Capital Research

Figure: 12m fwd PBR (x)


Figure: 12m EV/EBITDA (x)


Figure: Premium / Discount (%)


0

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3,000,000

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Historically, NTPC has

traded at average 17x

12m fwd EPS, with a

low of 10x and high of

27x. The company is

trading at 16.2x FY12E

EPS

At 1.9x P/BV, NTPC is

trading at ~10%

discount to its average

P/B multiple of 2.2x

NTPC is trading at 9.7x

EV/EBITDA (~10%

discount to its average

EV/EBITDA multiple)

The company has

traded at an average

premium of ~9% to Nifty

12m fwd P/E multiple

12


Key Risks

Delays in bulk tendering of 9x660MW

The company is expected to add more than 27GW capacity during 12th plan, out of which 13GW comes from two bulk

tenders. There have been delays in ordering of these units on account of various reasons. According to the current

status, Ansaldo has filed a suit in the High Court to reconsider them, after being disqualified from the bidding process

for the steam generator (SG) package of this bulk tender. NTPC has put the case on fast track and expected to get

decision by the end of April 2011. However, any significant delays in decision process or ordering after that would

cause further capacity slippages. Moreover, in similar delays in ordering of equipments for all other planned capacity

would adversely affect the commissioning schedule and hence the cash inflow.

Fuel unavailability in near future

NTPC’s 89% of 35.4GW installed capacity is coal based. The company requires additional 26MMT coal during FY12

over FY11. This requirement would be fulfilled by additional 12MMT supply by CIL, ~4MMTadditional import (equivalent

to 6MMT domestic coal) and 10.2MMT additional coal supply contracted with SCCL. However, CIL’s despatch guidance

may lead to lower coal supply to NTPC. Which in turn would lead NTPC to either resort on costlier imported coal or

operate plants at lower PLF. In the event of plant operating at lower PLF, NTPC’s plant availability may also come

under pressure and lose in terms of incentives.


13

Company Profile

NTPC is India’s largest power company, which was set up in 1975 with the mission of accelerating power capacity addition

in India. The total installed capacity of the company is 35,354MW (including JVs) with 15 coal based and 7 gas based

stations, located across the country.

Table: Installed capacity fuel wise Figure: Installed capacity region wise

Installed Capacity No. of Plants Capacity (MW)

NTPC Owned

Coal 15 28,035

Gas/Liquid Fuel 7 3,955

Total 22 31,990

Owned By JVs

Coal & Gas 4 3,364

Total 28 35,354

Source: Company


NTPC has set a target to have an installed capacity of 128GW by the FY32. The company is mainly into coal based power

generation (88% of 34GW at the end of FY11). However, the company is diversifying itself in terms of fuel mix so that to

reduce its dependence on coal. At the end of 12th plan (FY17), the company is expected to have 70% coal based, 14% gas

based, 12% Hydro and 4% Nuclear power plants.

Figure: Diversifying fuel mix


Northern31%

Western25%

Southern12%

Eastern22%

JVs10%

88%

80%

70%

12%

16%

14%

4%

12% 3% 1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

FY11

After 11th Plan

After 12th Plan

Coal Gas Hydro Nuclear Renewables

14


Figure: Largest by far; holds 30% of all India thermal capacity

Source: CEA; Company; IDBI Capital Research

The company is moving towards supercritical and ultra supercritical technology, which helps in reducing CO2 emission, improving efficiency and containing fuel requirement. The company is in process of ordering 9 units of 660MW. Further tendering of 9 units of 800MW is in pipeline.

NTPC has ventured into consultancy, power trading, ash utilization, equipment manufacturing and coal mining. 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned subsidiary is the second largest power trading company in the country. NTPC holds ~17% in ‘National Power Exchange Ltd.’, a JV of NTPC, NHPC, PFC and TCS. NTPC has formed JVs with BHEL and Bharat Forge Ltd. for power plant equipment manufacturing. Moreover, the company has ~45% stake in Transformers and Electricals Kerala Ltd. (TELK) for manufacturing and repair of transformers.

NTPC ranked 341st in the ‘2010, Forbes Global 2000’ ranking of the World’s biggest companies. The company was ranked #1 and #2 IPP in Asia and World by number of plants. NTPC became a Maharatna company in May, 2010, one of the only four companies to be awarded this status.

Diagram: Group NTPC - 5 Subsidiaries and 17 Joint ventures

Note: Figures in brackets indicate holding of NTPC

1 Pipavav Power Development Co. Ltd. (100%) under winding up; Source: Company; IDBI Capital Research

0

5

10

15

20

25

30

35

40

0

5000

10000

15000

20000

25000

30000

35000

40000

1991-92 1996-97 2001-02 2006-07 2009-10 2010-11

(%)

(MW

)

NTPC (MW) % of all India thermal capacity % of Total capacity

Power

Trading

National Power Exchange Ltd.

(16.67%)

Equipment Manufacturing

Transformers and Electricals

Kerala Ltd. (44.6%)

Coal Acquisition

CIL NTPC Urja Pvt. Ltd.

(50%)

Power

Generation¹

Ratnagiri Gas and Power

Pvt. Ltd. (29.65%)

Services

Energy Efficiency

Service Limited (25%)

NTPC Vidyut Vyapar

Nigam Ltd. (100%)

NTPC BHEL Power

Projects Pvt. Ltd. (50)%

BF NTPC Energy

Systems Ltd. (49%)

International Coal Ventures

Pvt. Ltd. (14.28%)

NTPC SCCL Global

Ventures Pvt. Ltd. (50%)

NTPC Hydro Ltd.

(100%)

Kanti Bijlee Utpadan

Nigam Ltd. (64.57%)

Bhartiya Rail Bijlee

Company Ltd. (74%)

Aravali Power Company

Pvt. Ltd. (50%)

NTPC Tamil Nadu Energy

Company Ltd. (50%)

Nabinagar Power Generating

Company Pvt. Ltd. (50%)

Meja Urja Nigam Pvt. Ltd.

(50%)

NTPC SAIL Power

Company Pvt. Ltd. (50%)

NTPC Electric Supply

Company Ltd. (100%)

Utility Powertech Ltd.

(50%)

NTPC Alstom Power

Services Pvt. Ltd. (50%)

National High Power Test

Laboratory Pvt. Ltd. (25%)

Subsidiaries

Joint Ventures

Synergy fuelling growth


15

Diagram: Pan India Presence


KAYAMKULAM (350MW)

RGPPL (1480MW)

Kawas (645MW)

Gandhar (648MW)

ANTA (413MW)

Auraiya (652MW)

Faridabad (430MW)

Dadri (817MW)

Koldam (800MW)

Tapovan Vishnugad (520MW)

BTPS (705MW) NCTPP (1820MW)

Tanda (440MW)

UNCHAHAR (1050MW)

Rihand (3000MW)

Singrauli (2000MW)

Vindhyachal (4260MW)

Korba (2600MW)

Sipat (2980MW)

Ramagundam (2600MW)

Simhadri (2000MW)

Talcher Kaniha (3000MW)

Talcher Thermal (460MW)

Kahalgaon (2340MW)

Farakka (2100MW)

Bongaigaon (750MW)

BARH (3300MW)

Mauda (1000MW)

VALLUR (1000MW)

IGSTPP (1500MW)

Under Construction

Coal-own

Coal-JV

Hydro-own

Existing Presence

Gas-own

Coal- own

Gas-JV

Nabinagar (1000MW)

16


Financial Summary

Profit & Loss Account (Rs mn)

Year-end: March FY09 FY10 FY11 FY12E FY13E

Net sales 419,752 463,777 549,387 598,576 696,012

Growth (%) 13.2 10.5 18.5 9.0 16.3

Operating expenses (314,176) (339,801) (423,617) (440,224) (512,902)

EBITDA 138,285 152,666 150,457 182,006 208,884

Growth (%) (4.4) 10.4 (1.4) 21.0 14.8

Depreciation (23,645) (26,501) (24,857) (27,227) (32,276)

EBIT 114,640 126,165 125,600 154,779 176,608

Interest paid (19,962) (18,089) (21,491) (26,468) (32,483)

Other income - - - - -

Pre-tax profit 94,678 108,076 104,109 128,311 144,125

Tax (11,582) (21,573) (29,470) (42,343) (47,561)

Effective tax rate (%) 12.2 20.0 28.3 33.0 33.0

Net profit 83,096 86,503 74,639 85,968 96,564

Adjusted net profit 83,096 86,503 74,639 85,968 96,564

Growth (%) 8.1 4.1 (13.7) 15.2 12.3

Shares o/s (mn nos) 8,246 8,246 8,246 8,246 8,246

Balance Sheet (Rs mn)


Net fixed assets 593,426 668,656 775,066 898,357 1,054,562

Investments 139,835 148,071 123,448 131,412 146,027

Other non-curr assets 9,734 3,652 4,592 - -

Current assets 309,253 308,157 353,968 382,647 424,281

Inventories 32,434 33,477 36,391 40,095 46,882

Sundry Debtors 35,842 66,514 79,243 98,396 114,413

Cash and Bank 162,716 144,595 161,853 161,594 166,985

Loans and advances 68,467 55,131 66,011 71,155 82,738

Total assets 1,052,248 1,128,536 1,257,074 1,412,417 1,624,870

Shareholders' funds 573,701 624,174 678,923 728,232 788,136

Share capital 82,455 82,455 82,455 82,455 82,455

Reserves & surplus 491,246 541,921 596,468 645,777 705,681

Total Debt 345,678 377,970 431,882 537,246 669,182

Secured loans 345,678 377,970 431,882 537,246 669,182

Unsecured loans - - - - -

Other liabilities 371,661 396,781 447,422 551,195 683,131

Curr Liab & prov 139,381 138,286 158,253 169,443 194,549

Current liabilities 106,886 107,581 130,729 132,989 153,603

Provisions 32,495 30,705 27,524 36,454 40,947

Total liabilities 478,547 504,362 578,151 684,185 836,734

Total equity & liabilities 1,052,248 1,128,536 1,257,074 1,412,417 1,624,870

Book Value (Rs) 70 76 82 88 96


Cash Flow Statement (Rs mn)


PAT 82,263 87,286 91,026 85,968 96,564

Depreciation 23,645 26,501 24,857 27,227 32,276

Def rev account against AAD - - 3,352 (624) -

Op. Cash flow before WC 82,222 94,539 105,163 117,163 128,839

(Inc)/Dec in Debtors (6,014) (30,671) (28,041) (19,153) (16,017)

(Inc)/Dec in Inventory (4,833) 119 (1,698) (3,704) (6,787)

Inc/(Dec) in Creditors & Prov. 16,577 (5,647) 14,787 2,260 20,613

(Inc)/Dec in Advances (14,428) 21,263 (6,933) (5,144) (11,583)

Other Current Assets (1,288) 641 (2,731) (937) (1,857)

Gross Cash flow from ops 72,236 80,244 80,546 90,485 113,210

Cash flow frm operations 72,236 80,244 80,546 90,485 113,210

Purchase of Fixed Assets (99,839) (107,701) (110,855) (150,519) (188,480)

Increase in Investments 16,920 (812) 34,199 (7,963) (14,615)

Investment in Subs and JVs (4,218) (7,402) (9,577) - -

Cash flow frm investing act (75,004) (104,977) (76,589) (158,482) (203,095)

Proceeds from Debt 50,934 43,276 50,476 105,363 131,936

Payment of Div. & Div. Tax (34,718) (36,639) (36,513) (36,659) (36,659)

Others (64) (25) (663) (965) -

Cash flow frm financing act 16,152 6,612 13,300 67,739 95,277

Change in Cash 13,384 (18,121) 17,258 (259) 5,391

Opening Cash 149,332 162,716 144,595 161,853 161,594

Closing Cash 162,716 144,595 161,853 161,594 166,985

Financial Ratios


Adj EPS (Rs) 10.1 10.5 9.1 10.4 11.7

Adj EPS growth (%) 8.1 4.1 (13.7) 15.2 12.3

EBITDA margin (%) 32.9 32.9 27.4 30.4 30.0

Pre-tax margin (%) 22.6 23.3 19.0 21.4 20.7

ROE (%) 15.1 14.4 11.5 12.2 12.7

ROCE (%) 13.0 12.8 11.7 12.9 12.8

Turnover & Leverage ratios (x)

Asset turnover (x) 0.4 0.4 0.5 0.4 0.5

Leverage factor (x) 1.8 1.8 1.8 1.9 2.0

Net margin (%) 19.8 18.7 13.6 14.4 13.9

Net Debt/Equity (x) 0.3 0.4 0.4 0.5 0.6

Working Capital & Liquidity ratios

Inventory days 28 26 24 24 25

Receivable days 31 52 53 60 60

Payable days 86 83 89 80 80

Valuation


PER (x) 16.8 16.1 18.7 16.2 14.4

Price / Book value (x) 2.4 2.2 2.1 1.9 1.8

PCE (x) 13.1 12.3 14.0 12.3 10.8

EV / Net sales (x) 3.8 3.5 3.0 3.0 2.7

EV / EBITDA (x) 11.4 10.7 11.1 9.7 9.1

Dividend Yield (%) 2.1 2.2 2.2 2.2 2.2


17

Notes

Vikrant Oak – Head Institutional Equities (91-22) 4322 1385 [email protected]

Sonam H. Udasis – Head Research (91-22) 4322 1375 [email protected]

Dealing (91-22) 6637 1150 [email protected]

Key to Ratings

Stocks:

BUY: Absolute return of 15% and above; ACCUMULATE: 5% to 15%; HOLD: Upto ±5%; REDUCE: -5% to -15%; SELL: -15% and below.

IDBI Capital Market Services Ltd. (A wholly owned subsidiary of IDBI Ltd.) Equity Research Desk

3rd Floor, Mafatlal Centre, Nariman Point, Mumbai – 400 021. Phones: (91-22) 4322 1212; Fax: (91-22) 2285 0785; Email: [email protected]

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