technical & fundamental analysis of power sector firms (equity)

‐BY Richard RinuViral SoniViral Soni

Infrastr ct re t picall refers to the technicalInfrastructure typically refers to the technical structures that support a society, such as roads, water supply, wastewater, power grids, flood management

t i ti (i t t h lisystems, communications (internet, phone lines, broadcasting), and so forth.

I th t th t h t i ll b dIn the past, these systems have typically been owned and managed by local or central governments.

Th i l t ll ti l b t dThese various elements may collectively be termed civil infrastructure, municipal infrastructure, or simply public works, although they may be developed and

t d i t t t t ioperated as private-sector or government enterprises.

Social infrastructure refers to the facilities and mechanisms that ensureSocial infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment and social welfare. The economy cannot be looked at in isolation without considering the basic needs of the people, and a significant level of investment is needed in this sectorsignificant level of investment is needed in this sector

The term `Social Sector' refers to the factors, which contribute to human capital formation and human development Some of the important subcapital formation and human development. Some of the important sub-sectors of social sector are education, health and medical care, housing and water supply. Social development is recognised not only as a means to development, but also an end in itself, in terms of expanded individual opportunities capabilities and freedom Improvements in the social sectoropportunities, capabilities and freedom. Improvements in the social sector pave the way for equity and in turn for economic development. The Governments, both at the Centre and State, have been increasingly providing public goods in crucial areas such as education, health, sanitation housing etcsanitation, housing, etc.

They are large networks constructed over generationsThey are large networks constructed over generations which are not often replaced as a whole system

The system or network has a long life because its serviceThe system or network has a long life because its service capacity is maintained by continual refurbishment or replacement of components as they wear out.

The system components are interdependent and not usually capable of subdivision or separate disposal, and consequently are not readily disposable within the q y y pcommercial marketplace.

The assets have a high initial cost and a value which is diffi lt t d t idifficult to determine.

These have included promotion of Development Finance Institutions (DFIs) such as the Ind strial De elopment Bank of India (IDBI)Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI) and The Industrial Credit and Investment Corporation of India (ICICI)The Industrial Credit and Investment Corporation of India (ICICI)

and specialised entities such as the Power Finance Corporation (PFC),Infrastructure Development and Finance Corporation (IDFC),Urban Infrastructure Development Fund (UIDF) and Tamil Nadu Urban Infrastructure Development Fund (TNUDF).

h f bli i hi iThe concept of Public-Private -Partnership is generally seen as one of these models:

Build-Operate-Transfer (BOT)

Build-Operate-Own-Transfer (BOOT)

Build-Operate-Lease-Transfer (BOLT)

Design-Build-Finance-Operate-Transfer (DBFOT)

In INDIA full blown Private Sector Participation models have not been put into place, so far.models have not been put into place, so far.

POWER SECTOR

First Hydro Power Plant in Asia installed in India at Darjeeling onFirst Hydro Power Plant in Asia installed in India at Darjeeling on 10th Nov 1897. Capacity 65 kW

First Thermal Power Plant in India commissioned in India at Calcutta in 1899 by CESC Capacity 1000 kWCalcutta in 1899 by CESC. Capacity 1000 kW.

First High Voltage transmission line in India commissioned in 1902 of 78 kV in Mysore state for evacuating power to Kolar Gold Mines.Mines.

The Transmission and Distribution network was about 30000-circuit km in 1947, which by 2002 had grown to about 5000 million- circuit km.

Power Generating capacity in 1947 in India was 1345 MW.

Power Generating Capacity in Gujarat in 1960 was 315 MW i l di 110 MW f A E Cincluding 110 MW of A.E.Co.

CEA

Regional Electricity Boards

State Electricity BoardsRegional LoadDespatch Centers

OwnP

TransmissiN t k

LoadD t h

DistributionD

CommerciDepartmen

Despatch Centers

PowerStations

on Networkof SEB

Despatch Department Departmen

NTPC ,

Power GridCorporationof IndiaTransmissionNetwork

PrivatePowerPlants andCaptivepower NHPC and

NPC PowerPlants

NetworkpowerPlants withparalleloperating

El t i it A t 2003 b ht i t blElectricity Act 2003 : was brought in to enablethe process of privatisation of the Transmissionand Distribution of electricity in the country.y y

The effect of this act repealed the earlier IndianEl t i it A t 1910 d El t i it S l A tElectricity Act 1910 and Electricity Supply Act1948.

The Act provides to replace the Indian ElectricityRules 1956 which were formulated under section36 f I di El i i A 191036 of Indian Electricity Act 1910.

Thus a uniform Act is applicable now in the country toThus a uniform Act is applicable now in the country to regulate the power industry to ensure an integrated and disciplined grid.

The State Regulatory Commissions are vested with the responsibility to ensure the operational discipline and to ensure quality of service and quality power beingto ensure quality of service and quality power being delivered to consumers.

It is also their responsibility to define grid codesIt is also their responsibility to define grid codes, regulations and standards for electric supply in their jurisdictional areas and rationalise price of electricity in the state.

Central Electricity Regulatory

AuthorityAuthority

Central Power Generating Companies ( NTPC, NPC, NHPC)

National Load Despatch Company

State Electricity Regulatory Authority

( , , ) Company

Transmission Companies

Power Trading Companies

Regional Load Despatch Companies

Distribution Companies State

Load Despatch

State Gencos, Private Generating Companies, Captive Power Plants

Despatch Companies

According to the government, the country was facing a power shortage of 70,000 MW in 2006-07 and assured that several measures, including a change in policy, were being considered to fulfill the requirement.

Policy & IncentiveFDI up to 100% is permitted on the automatic route in all segments except atomic powerTen-year tax holiday for generation and distribution or transmission and distribution of power

Institutional ReformsThe Electricity Act 2003 allows trading in power and provides for further deregulation;

Share of Installed Capacity provides for further deregulation;Independent Regulator in most states

Investment Opportunities

Hydro+Wind

22%

Nuclear2%

Additional capacity required 100,000 MW till 2012Investment US$120 billion neededFinancial closure of over 6000 MW capacity achieved in last one year

Thermal76%

14

last one year

1. Longer maturity

2. Larger amounts

3. Higher risks

4. Fixed and low (but positive) real returns

NTPC, the largest power Company in India, was setup in 1975 to accelerate power development in the country. It is among the world’s largest and most efficient power generation companies. In Forbes list of World’s 2000 Largest Companies for the year 2007 NTPC occupies 411th placeCompanies for the year 2007, NTPC occupies 411 place.

NTPC has installed capacity of 29,394 MW. It has 15 coal based power stations (23,395 MW), 7 gas based power stations (3,955 MW) and 4 power stations in Joint Ventures(1,794 MW). The company has power generating ( , ) p y p g gfacilities in all major regions of the country. It plans to be a 75,000 MW company by 2017.

NTPC has gone beyond the thermal power generation. It has diversified into h d l i i i f i il &hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power trading & distribution. NTPC is now in the entire power value chain and is poised to become an Integrated Power Major.

NTPC's share on 31 Mar 2008 in the total installed capacity of the country was 19 1% and itNTPC s share on 31 Mar 2008 in the total installed capacity of the country was 19.1% and it contributed 28.50% of the total power generation of the country during 2007-08. NTPC has set new benchmarks for the power industry both in the area of power plant construction and operations.

With its experience and expertise in the power sector NTPC is extending consultancyWith its experience and expertise in the power sector, NTPC is extending consultancy services to various organisations in the power business. It provides consultancy in the area of power plant constructions and power generation to companies in India and abroad.

In November 2004, NTPC came out with its Initial Public Offering (IPO) consisting of 5 25% as fresh issue and 5 25% as offer for sale by Government of India NTPC thus became5.25% as fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed company with Government holding 89.5% of the equity share capital and rest held by Institutional Investors and Public. The issue was a resounding success. NTPC is among the largest five companies in India in terms of market capitalization.

Recognising its excellent performance and vast potential Government of the India hasRecognising its excellent performance and vast potential, Government of the India has identified NTPC as one of the jewels of Public Sector 'Navratnas'- a potential global giant. Inspired by its glorious past and vibrant present, NTPC is well on its way to realise its vision of being "A world class integrated power major, powering India's growth, with increasing global presence".

Recognised as India’s largest private sector power utilityRecognised as India’s largest private sector power utility, with a reputation for trustworthiness, built up over nearly nine decades, Tata Power surges ahead into yet another year with plans of sustained growth greater value to consumerwith plans of sustained growth, greater value to consumer and reliable power supply.

Led by a powerful vision, Tata Power pioneered theLed by a powerful vision, Tata Power pioneered the generation of electricity in India. It has now successfully served the Mumbai consumers for over ninety years and has spread its footprints across the nation. Today, it is the p p ycountry’s largest private player in the sector. Apart from Mumbai and Delhi, the company has generation capacities in Jojobera, Jharkhand and Karnataka.

Tata Power has an installed power generation capacity of above 2300 Mega Watts, with the Mumbai power business, which has a unique mix of Thermal and Hydro Power, generated at the Thermal Power Station, Trombay and the Hydro Electric Power Stations at Bhira Bhivpuri andTrombay, and the Hydro Electric Power Stations at Bhira, Bhivpuri and Khopoli, accounting for 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money.

Among its many achievements that Tata Power can proudly boast of are the installation and commissioning of India’s first 500 MW unit (at its Thermal Power Generating Station, Trombay) the 150 MW Pumped Storage Unit at its Hydro Generating Station Bhira and environmentalStorage Unit at its Hydro Generating Station, Bhira, and environmental control systems like the Flue Gas Desulphurisation plant.

Tata Power has a first of its kind joint venture with Power Grid Corporation of India for the 1200 km Tala Transmission ProjectCorporation of India for the 1200 km Tala Transmission Project.

(Rs in Cr.)

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04Mar 08 Mar 07 Mar 06 Mar 05 Mar 04

SOURCES OF FUNDS

Owner's Fund

Equity Share Capital 8 245 50 8 245 50 8 245 50 8 245 50 7 812 50Equity Share Capital 8,245.50 8,245.50 8,245.50 8,245.50 7,812.50

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves & Surplus 44 393 1 40 351 3 36 713 2 33 530 8 28 116 0Reserves & Surplus 44,393.1 40,351.3 36,713.2 33,530.8 28,116.0

Loan Funds

Secured Loans 8,688.10 7,479.60 6,173.50 4,778.10 4,743.50

U d L 19 875 9 17 661 50 14 464 60 12 647 10 10 868 40Unsecured Loans 19,875.9 17,661.50 14,464.60 12,647.10 10,868.40

Total 81,202.60 73,737.90 65,596.80 59,201.50 51,540.40

USES OF FUNDS

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04

Fixed Assets

Gross Block 53,368.00 50,604.20 45,917.60 42,996.10 39,933.70

Less : Revaluation Reserve 0.00 0.00 0.00 0.00 0.00

Less : Accumulated Depreciation 27,274.30 25,079.20 22,950.10 20,791.40 18,773.60

N Bl k 26 093 70 25 525 00 22 967 50 22 204 70 21 160 10Net Block 26,093.70 25,525.00 22,967.50 22,204.70 21,160.10

Capital Work-in-progress 22,478.30 16,962.30 13,756.00 10,038.60 7,589.70

Investments 15,267.20 16,094.30 19,289.10 20,797.70 17,338.00

Net Current Assets


Current Assets, Loans & Advances 30,527.80 25,858.80 18,234.80 14,721.80 14,642.40

Less : Current Liabilities & Provisions 13,164.40 10,702.50 8,650.60 8,561.30 9,189.80

Total Net Current Assets 17,363.40 15,156.30 9,584.20 6,160.50 5,452.60

Mi ll t itt 0 00 0 00 0 00 0 00 0 00Miscellaneous expenses not written 0.00 0.00 0.00 0.00 0.00

Total 81,202.60 73,737.90 65,596.80 59,201.50 51,540.40

Note :

Book Value of Unquoted Investments 15,453.10 18,008.20 18,409.60 17,684.90 17,318.80

Market Value of Quoted Investments 304.30 316.40 951.60 3,524.90 19.20

Contingent liabilities 29 361 80 25 218 80 16 429 80 16 680 00 8 746 50Contingent liabilities 29,361.80 25,218.80 16,429.80 16,680.00 8,746.50Number of Equity shares outstanding (Lakhs) 82,454.64 82,454.64 82,454.64 82,454.64 78,125.49


SOURCES OF FUNDS

Owner's Fund

E i Sh C i l 220 72 197 92 197 92 197 92 197 92Equity Share Capital 220.72 197.92 197.92 197.92 197.92

Share Application Money 60.99 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves & Surplus 7,771.12 5,793.03 5,315.91 4,896.74 4,810.61

Loan FundsLoan Funds

Secured Loans 2,331.09 1,354.30 946.00 1,059.07 721.73

Unsecured Loans 752.26 2,321.22 1,850.81 1,842.75 1,041.50

Total 11,136.18 9,666.47 8,310.64 7,996.48 6,771.76

USES OF FUNDS


Gross Block 6,481.99 6,229.71 5,924.74 5,465.84 5,534.70

Less : Revaluation Reserve 0.00 0.00 0.00 0.00 0.00

Less : Accumulated Depreciation 3,476.50 3,199.40 2,921.72 2,657.37 2,364.36

Net Block 3,005.49 3,030.31 3,003.02 2,808.47 3,170.34

Capital Work-in-progress 1,681.74 781.05 211.81 438.19 306.39

Investments 4,430.00 3,570.15 3,412.17 3,502.92 2,728.83

Net Current AssetsCurrent Assets, Loans & Advances 3,956.73 4,105.04 3,035.72 2,587.88 2,005.23Less : Current Liabilities & Provisions 1 939 47 1 826 25 1 367 54 1 363 69 1 454 64Provisions 1,939.47 1,826.25 1,367.54 1,363.69 1,454.64

Total Net Current Assets 2,017.26 2,278.79 1,668.18 1,224.19 550.59Miscellaneous expenses not written 1.69 6.17 15.46 22.71 15.61

Total 11,136.18 9,666.47 8,310.64 7,996.48 6,771.76Note :Book Value of Unquoted Investments 3,736.23 2,810.80 2,579.70 2,794.29 2,065.59Investments 3,736.23 2,810.80 2,579.70 2,794.29 2,065.59Market Value of Quoted Investments 910.02 995.10 1,284.68 972.97 803.12Contingent liabilities 1,231.08 1,314.86 313.09 434.04 471.53

Number of Equity sharesNumber of Equity shares outstanding (Lakhs) 2,207.00 1,978.98 1,978.98 1,978.98 1,978.98


Income :

Operating Income 37,091.00 32,631.70 26,142.90 22,565.00 18,868.40

Expenses

Material Consumed 26.80 23.70 25.00 17.90 15.10

Manufacturing Expenses 23,080.70 20,790.50 17,202.20 14,390.80 12,826.50

Personnel Expenses 2,229.30 1,362.60 1,137.50 997.10 961.00

Selling Expenses 45.00 57.70 40.40 46.40 43.20

Adminstrative Expenses 682.60 656.00 569.60 -101.30 77.40

Expenses Capitalised -544 70 -418 40 -256 40 -74 80 -256 20Expenses Capitalised -544.70 -418.40 -256.40 -74.80 -256.20

Cost of Sales 25,519.70 22,472.10 18,718.30 15,276.10 13,667.00

Operating Profit 11,571.30 10,159.60 7,424.60 7,288.90 5,201.40

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04Mar 08 Mar 07 Mar 06 Mar 05 Mar 04Operating Profit 11,571.30 10,159.60 7,424.60 7,288.90 5,201.40

Other Recurring Income 2,957.60 2,760.90 2,669.40 2,459.70 6,132.80

Adjusted PBDIT 14,528.90 12,920.50 10,094.00 9,748.60 11,334.20

Financial Expenses 2 026 40 2 055 70 2 004 60 1 701 60 3 372 70Financial Expenses 2,026.40 2,055.70 2,004.60 1,701.60 3,372.70

Depreciation 2,138.50 2,075.40 2,047.70 1,958.40 2,023.20

Other Write offs 3.10 9.90 1.30 0.40 9.50

Adjusted PBT 10,360.90 8,779.50 6,040.40 6,088.20 5,928.80

Tax Charges 2,994.20 2,163.70 1,082.40 834.80 1,658.30

Adjusted PAT 7,366.70 6,615.80 4,958.00 5,253.40 4,270.50


Adjusted PAT 7,366.70 6,615.80 4,958.00 5,253.40 4,270.50

Non Recurring Items 162 10 114 70 228 50 -21 10 -23 20Non Recurring Items 162.10 114.70 228.50 21.10 23.20

Other Non Cash adjustments -114.00 134.20 633.70 574.70 1,013.50

Reported Net Profit 7,414.80 6,864.70 5,820.20 5,807.00 5,260.80po d o , 80 6,86 0 5,8 0 0 5,80 00 5, 60 80

Earnigs Before Appropriation 7,504.70 6,939.90 5,901.40 5,863.60 5,328.90

Equity Dividend 2,885.90 2,638.50 2,308.70 1,979.00 1,082.30

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Dividend Tax 490.50 389.60 323.80 268.00 138.70

Retained Earnings 4,128.30 3,911.80 3,268.90 3,616.60 4,107.90


Income :

Operating Income 5,909.60 4,918.53 4,553.23 3,918.85 4,197.73

Expenses

Material Consumed 4,300.69 3,456.54 3,198.23 2,474.83 2,389.04

Manufacturing Expenses 241.47 187.92 167.45 171.66 122.50

P l E 249 69 196 35 173 68 155 40 191 61Personnel Expenses 249.69 196.35 173.68 155.40 191.61

Selling Expenses 35.18 255.39 54.48 61.27 127.61

Adminstrative Expenses 179.04 125.95 124.13 171.50 101.95

Expenses Capitalised -2.22 -5.36 -5.38 -20.30 -4.14p p

Cost of Sales 5,003.85 4,216.79 3,712.59 3,014.36 2,928.57

Operating Profit 905.75 701.74 840.64 904.49 1,269.16

M ' 08 M ' 07 M ' 06 M ' 05 M ' 04Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04Operating Profit 905.75 701.74 840.64 904.49 1,269.16

Other Recurring Income 151.40 335.89 170.49 143.17 143.61

Adjusted PBDIT 1,057.15 1,037.63 1,011.13 1,047.66 1,412.77

Financial Expenses 171.82 187.11 152.62 179.75 279.94pDepreciation 290.50 291.92 278.34 359.62 333.95Other Write offs 5.01 9.82 9.82 18.20 108.52

Adjusted PBT 589 82 548 78 570 35 490 09 690 36Adjusted PBT 589.82 548.78 570.35 490.09 690.36

Tax Charges 132.35 70.03 130.68 170.11 209.67

Adjusted PAT 457 47 478 75 439 67 319 98 480 69Adjusted PAT 457.47 478.75 439.67 319.98 480.69

M ' 08 M ' 07 M ' 06 M ' 05 M ' 04Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04

Adjusted PAT 457.47 478.75 439.67 319.98 480.69

Non Recurring Items 380.30 39.88 175.18 265.30 42.09Other Non Cash Ot e o Casadjustments 32.13 178.17 -4.41 -33.92 4.07

Reported Net Profit 869.90 696.80 610.54 551.36 509.08

Earnigs Before Appropriation 869.90 696.80 610.44 551.36 526.85

Equity Dividend 241.38 188.22 168.41 148.60 138.69

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Dividend Tax 26.95 31.99 23.42 21.30 17.77

Retained Earnings 601.57 476.59 418.61 381.46 370.39

Per share RatiosProfitability Ratios (%)Leverage Ratios


PER SHARE RATIOS(Rs.)

Reported EPS 8.99 8.33 7.06 7.04 6.73

Dividend Per Share 3.50 3.20 2.80 2.40 1.39

Operating Profit Per Share 14.03 12.32 9.00 8.84 6.66


PER SHARE RATIOS(Rs.)

Reported EPS 39.42 35.21 30.85 27.86 25.72

Dividend Per Share 10.50 9.50 8.50 7.50 7.00

Operating Profit Per Share 41.04 35.46 42.48 45.70 64.13

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04Operating Margin 31.19 31.13 28.40 32.30 27.56

Gross Profit Margin 25.43 24.77 20.56 23.62 16.84N t P fit M i 18 51 19 39 20 20 23 20 21 04Net Profit Margin 18.51 19.39 20.20 23.20 21.04Reported Return On Net Worth 14.08 14.12 12.94 13.90 14.64Return On long Term Funds 15.25 14.69 12.26 13.15 18.04


Operating Margin 15.32 14.26 18.46 23.08 30.23

Gross Profit Margin 10.41 8.33 12.34 13.90 22.27

Net Profit Margin 14.35 13.26 12.92 13.57 11.72Reported Return On Net Worth 10 88 11 64 11 10 10 87 10 19Worth 10.88 11.64 11.10 10.87 10.19

Return On long Term Funds 7.05 7.62 8.72 8.40 14.38


Long Term Debt / Equity 0.54 0.51 0.45 0.41 0.43

Total Debt/Equity 0.54 0.51 0.45 0.41 0.43Owners fund as % of total Source 64.82 65.90 68.53 70.56 69.70Fixed Assets Turnover Ratio 0.69 0.64 0.56 0.52 0.47


Long Term Debt / Equity 0.34 0.60 0.49 0.55 0.33g / q y

Total Debt/Equity 0.38 0.61 0.50 0.56 0.35Owners fund as % of total Source 72.15 61.97 66.34 63.71 73.96Fixed Assets TurnoverFixed Assets Turnover Ratio 0.91 0.78 0.76 0.71 0.75

Trend AnalysisSimple Moving Average

lSupport – Resistance Level

NTPC

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NTPC TATA POWER

Buy/Sell Date Price Profit Buy/Sell Date Price Profit

Sell 23-01-2008 223.70 Sell 23-01-2008 1,233.90

Buy 04-03-2008 194.25 29.45 Buy 27-02-2008 1,376.10 ‐142.20

Sell 04-09-2008 187.70 Sell 03-07-2008 1,136.30

Buy 29-04-2008 194.65 ‐6.95 Buy 15-04-2008 1,277.85 ‐141.55

Sell 20-05-2008 186.00 Sell 06-04-2008 1,165.85

Buy 16-07-2008 162.30 23.70 Buy 31-07-2008 1,160.10 5.75

Sell 27-08-2008 171.20 Sell 19-08-2008 1,018.35

Buy 26-09-2008 174.10 ‐2.90 Buy 10-09-2008 1,049.10 ‐30.75

Sell 10-07-2008 175.90 Sell 17-09-2008 970.1

Buy 28-11-2008 159.60 16.30 Buy 18-11-2008 682.7 287.40

Total= 59.60 Total= ‐21.35

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2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

13‐02‐2

20‐02‐2

27‐02‐2

03‐05‐2

13‐03‐2

24‐03‐2

31‐03‐2

04‐07‐2

15‐04‐2

23‐04‐2

30‐04‐2

05‐08‐2

15‐05‐2

23‐05‐2

30‐05‐2

06‐06‐2

13‐06‐2

20‐06‐2

27‐06‐2

07‐04‐2

07‐11‐2

18‐07‐2

25‐07‐2

08‐01‐2

08‐08‐2

18‐08‐2

25‐08‐2

09‐01‐2

09‐09‐2

16‐09‐2

23‐09‐2

30‐09‐2

10‐08‐2

16‐10‐2

23‐10‐2

31‐10‐2

11‐07‐2

17‐11‐2

24‐11‐2

1,600.00

1,200.00

1,400.00

800.00

1,000.00

Cl P i

400.00

600.00

Close Price

50 Days Avg

0.00

200.00

13‐02‐20

0820‐02‐20

0827‐02‐20

0803‐05‐20

0813‐03‐20

0824‐03‐20

0831‐03‐20

0804‐07‐20

0815‐04‐20

0823‐04‐20

0830‐04‐20

0805‐08‐20

0815‐05‐20

0823‐05‐20

0830‐05‐20

0806‐06‐20

0813‐06‐20

0820‐06‐20

0827‐06‐20

0804‐07‐20

0811‐07‐20

0818‐07‐20

0825‐07‐20

0801‐08‐20

0808‐08‐20

0818‐08‐20

0825‐08‐20

0801‐09‐20

0809‐09‐20

0816‐09‐20

0823‐09‐20

0830‐09‐20

0808‐10‐20

0816‐10‐20

0823‐10‐20

0831‐10‐20

0807‐11‐20

0817‐11‐20

0824‐11‐20

08

As per this model dividends given in the previous years is used to fix a As per this model dividends given in the previous years is used to fix a future price for the security.

Here we have taken the divedend values of both the companies and with the help of dividend values of past five years and with the help of the help of dividend values of past five years and with the help of dividend values the expected rate of return by the investors is calculated.

The expected rate of return is calculated by the formula Ke= D1/P0+ g

P0 is taken as the market price on 30th march 2008.

D1 is the expected dividend on 2009

Growth rate is the average rate of growth rate of dividends for the past five years.

t t (Rj Rj')*(RYear

return onsecurity

return onmarket Rj‐Rj' Rm‐Rm'

(Rj‐Rj')*(Rm‐Rm') (Rm‐Rm')^2

2002

20032003

2004

2005

2006 36.04 42.44 ‐12.98 18.24 ‐236.78 332.782006 36.04 42.44 12.98 18.24 236.78 332.78

2007 10.5 13.71 0.42 ‐10.49 ‐4.40 109.99

2008 23.9 16.44 0.42 ‐7.75 ‐3.26 60.13

23.48 24.20 ‐244.45 502.9023.48 24.20 244.45 502.90

cov(Rj,Rm) ‐122.22 251.45

beta 0.49

yearreturn on security

return on market Rj-Rj' Rm-Rm'

(Rj-Rj')*(Rm-Rm') (Rm-Rm')^2

2002

2003

2004

2005

2006 38 32 42 44 11 29 18 24 205 91 332 822006 38.32 42.44 11.29 18.24 205.91 332.82

2007 -13.74 13.71 -40.77 -10.49 427.58 109.97

2008 56.52 16.44 29.49 -7.76 -228.72 60.17

27.033 24.20 404.76 502.9627.033 24.20 404.76 502.96

cov(Rj,Rm) 202.38 251.48

beta- tata 0.80

NTPC

risk free return 8%risk free return 8%Re 15.87

price -147.494price on 31st march2009 49.50567

TATA POWER

risk free return 8%Re 21 03 price 122 0969Re 21.03 price 122.0969

price on 31st march2009 1293.097

Then the value of beta is calculated for both the companiesThen the value of beta is calculated for both the companies.

Using the beta values and assuming risk free return as 8% returns from the company is calculatedby the formula

Re= Rf+ (Rm‐Rj)*beta

Returns from market and the returns from the security is calculated from 2004‐ 2008.

From the Re values price of the stock on march 30 2009 is estimated by the formula

P= D1/Re‐g

The price of NTPC share on 30th march 2009 is found to be 49rs approximately

Similarly the price of TATA power share is expected to be Rs. 1293.

THANK YOU

technical & fundamental analysis of power sector firms (equity)

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