Why India’s best-placed power utility NTPC is getting the cold shoulder

The 16% fall in the shares of NTPC Ltd over the past one year has been disappointing. Not just because valuations are undemanding—with the shares trading close to their book value. The company’s fixed return earning regulated equity base has been steadily growing and is projected to grow faster.

Capacity additions are projected to accelerate to 5 gigawatts (GW) per year from FY20 against the average annual addition of less than 3GW in the last two years. As a consequence, NTPC’s regulated equity is estimated to expand 15% annually from FY20 over the next three fiscal years.

The capacity ramp-up will boost the company’s finances. FY20 will mark the beginning of the reversal of the capital work in progress (CWIP) ratio.