India - Politics, Industrials, IT and Large Caps, EMAlpha

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

Equity Bottom-Up

There are news reports that Govt of India wants to sell its 63.79% stake in <a href="https://www.smartkarma.com/entities/19945" target="_blank" data-smartkarma-citation="entities:19945:1">Sjvn Ltd (SJVN IN)</a> to <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> which will cost approximately Rs70 bn and <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> is also interested in some distressed assets of <a href="https://www.smartkarma.com/entities/5773" target="_blank" data-smartkarma-citation="entities:5773:1">Rattanindia Power (RTPOW IN)</a> and <a href="https://www.smartkarma.com/entities/5343" target="_blank" data-smartkarma-citation="entities:5343:1">Jaiprakash Power Ventures (JPVL IN)</a> which will require another Rs170 bn even after 30% discount. <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> can afford these plants and if the pricing is attractive should look at good assets. However, the balance sheet of <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> can only be strained up to a point. We think another key issue is timing. <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> has been struggling with several problems including a serious dip in operating parameters such as Plant Load Factor (PLF) and Plant Availability, less competitive tariffs vs. renewable sources of power generation despite using mostly domestic coal. Considering <a href="https://www.smartkarma.com/entities/11842" target="_blank" data-smartkarma-citation="entities:11842:1">NTPC Ltd (NTPC IN)</a> has a strong project pipeline under construction, the company may not actually be in the need to add so much of new capacity. As we have seen earlier in several other cases, it is hard to resist Govt pressure for PSUs, no matter how the investors may think about a move.

There are news reports that Govt of India wants to sell its 63.79% stake in Sjvn Ltd (SJVN IN) to NTPC Ltd (NTPC IN) which will cost approximately Rs70 bn and NTPC Ltd (NTPC IN) is also interested in some distressed assets of Rattanindia Power (RTPOW IN) and Jaiprakash Power Ventures (JPVL IN) which will require another Rs170 bn even after 30% discount. NTPC Ltd (NTPC IN) can afford these plants and if the pricing is attractive should look at good assets. However, the balance sheet of NTPC Ltd (NTPC IN) can only be strained up to a point. We think another key issue is timing. NTPC Ltd (NTPC IN) has been struggling with several problems including a serious dip in operating parameters such as Plant Load Factor (PLF) and Plant Availability, less competitive tariffs vs. renewable sources of power generation despite using mostly domestic coal. Considering NTPC Ltd (NTPC IN) has a strong project pipeline under construction, the company may not actually be in the need to add so much of new capacity. As we have seen earlier in several other cases, it is hard to resist Govt pressure for PSUs, no matter how the investors may think about a move.

NTPC Ltd (NTPC IN)​: It May Not Need More Power Plants but Can't Say "No" Under Govt Pressure

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

It is a stark reminder that India is far from being out of its bad loan cycle, given events at Infrastructure Leasing and Financial Services (IL&amp;FS). A look at the 10 most indebted companies in India, with some of the worst interest cover deterioration may provide insights as to additional non-performing loan (NPL) risk facing banks. As we have seen in the past with <a href="https://www.smartkarma.com/entities/6614" target="_blank" data-smartkarma-citation="entities:6614:1">Jindal Steel &amp; Power (JSP IN)</a> weakening corporate metrics are often clear, well before there is visibility as being a troubled loan within bank disclosure. This is one reason it is important in bank analysis to keep a watchful eye on corporate financial metrics, such as debt/ebitda and interest cover. A continued worsening of India credit metrics, can put banks with exceptionally low provisioning at higher risk of a surge in credit costs, including <a href="https://www.smartkarma.com/entities/558" target="_blank" data-smartkarma-citation="entities:558:1">HDFC Bank (HDFCB IN),</a>  <a href="https://www.smartkarma.com/entities/767" target="_blank" data-smartkarma-citation="entities:767:1">Yes Bank Ltd (YES IN)</a> and <a href="https://www.smartkarma.com/entities/126" target="_blank" data-smartkarma-citation="entities:126:1">Kotak Mahindra Bank (KMB IN)</a>.

It is a stark reminder that India is far from being out of its bad loan cycle, given events at Infrastructure Leasing and Financial Services (IL&amp;FS). A look at the 10 most indebted companies in India, with some of the worst interest cover deterioration may provide insights as to additional non-performing loan (NPL) risk facing banks. As we have seen in the past with Jindal Steel &amp; Power (JSP IN) weakening corporate metrics are often clear, well before there is visibility as being a troubled loan within bank disclosure. This is one reason it is important in bank analysis to keep a watchful eye on corporate financial metrics, such as debt/ebitda and interest cover. A continued worsening of India credit metrics, can put banks with exceptionally low provisioning at higher risk of a surge in credit costs, including HDFC Bank (HDFCB IN),  Yes Bank Ltd (YES IN) and Kotak Mahindra Bank (KMB IN).

India – More IL&FS, Jindal Steel & Power, Puts Low Provisioning At HDFC Bank, Yes Bank, At Risk

India

RattanIndia Power Limited develops, constructs and operates power projects domestically and internationally. The Company is participating in various Coal based Thermal,Hydro and Renewable Energy projects as well as is actively pursuing various coal mining opportunities.

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Rattanindia Power (RTPOW IN)

NTPC Ltd (NTPC IN): It May Not Need More Power Plants but Can't Say "No" Under Govt Pressure

There are news reports that Govt of India wants to sell its 63.79% stake in Sjvn Ltd (SJVN IN) to NTPC Ltd (NTPC IN) which will cost approximately...

Pankaj Sharma

India – More IL&FS, Jindal Steel & Power, Puts Low Provisioning At HDFC Bank, Yes Bank, At Risk

It is a stark reminder that India is far from being out of its bad loan cycle, given events at Infrastructure Leasing and Financial Services...

Daniel Tabbush

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

NTPC Ltd (NTPC IN)​: It May Not Need More Power Plants but Can't Say "No" Under Govt Pressure

There are news reports that Govt of India wants to sell its 63.79% stake in Sjvn Ltd (SJVN IN) to NTPC Ltd (NTPC IN) which will cost approximately...

Pankaj Sharma

India – More IL&FS, Jindal Steel & Power, Puts Low Provisioning At HDFC Bank, Yes Bank, At Risk

It is a stark reminder that India is far from being out of its bad loan cycle, given events at Infrastructure Leasing and Financial Services...

Daniel Tabbush

NTPC Ltd (NTPC IN): It May Not Need More Power Plants but Can't Say "No" Under Govt Pressure