Edelweiss: ‘Maintain ‘buy’ on NTPC with TP of Rs 150
NTPC’s acquisition of the Government of India’s stake in Tehri Hydro Development Corporation (THDC) and North Eastern Electric Power Corporation (NEEPCO) is a right strategic step in our view. The acquisitions provide a toehold in renewables with 5GW of capacity (3GW operational); NTPC, hence, avoids low-RoE solar/wind capex.
Taking a cue from NTPC’s superior returns in Koldam, there is ample potential to soup up operational and financial efficiency (e.g. 150bps reduction in Kd).
The project would add 15% to NTPC’s regulated equity base. In our view, the deal is likely to be value-accretive in a base case scenario of INR100bn; watch out for the final valuation though. Maintain ‘BUY’ with a TP of INR150.
