Power stocks rallied on Tuesday with Coal India, NTPC and Adani Power taking centre-stage. Power shortage is expected to grip as many as twelve states in India, with Maharashtra, Gujarat, Haryana being at the forefront of the crisis.
With the economy having opened up post the pandemic, demand has risen by 9 percent of pre-pandemic levels. The country’s coal crunch crisis is only making matters worse as the pan-India coal inventory slipped to that of 9 days as compared to 25 days' average of the last ten years.
To understand the power crisis amid coal crunch, and also the best stock bets in the current scenario, CNBC-TV18 spoke to Swarnim Maheshwari, VP-Institutional Equities, Edelweiss Securities, and Rajib K Mishra, Director-Marketing & Business Development & CMD-Incharge, PTC India.
Maheshwari highlighted that NTPC is still quite attractive and under-owned. Among other stocks in the sector, he mentioned that he remains structurally positive on Tata Power. In fact, he expects a positive ripple effect of the Tata Power renewable deal on the sector.
"NTPC is still quite attractive, you haven't seen that kind of rally and it is still significantly under-owned because of the ESG concerns and all, but given the fact that the next couple of quarters is going to be about energy security, so NTPCs of the world are going be in limelight," he explained.
"What happened with the Tata Power renewable deal, will have a positive ripple effect on the entire sector, including NTPC also, because that's again, one of the top players in the country. So we do believe that players like NTPC are still quite good, and can still fetch good returns from hereon. Companies like Tata Power, we remain very structurally positive on the company, because the way they have reoriented their businesses, there is a very strong perception change," he added.
On CESC, he pointed out that it is a play on the distribution sector. He also stressed that valuations are reasonable for the stock.
"CESC is essentially a play on the distribution franchises. Privatisation is likely to pick up and we are just waiting for the Electricity Amendment Act to get passed finally. CESC is a specialised player in the distribution space. In fact, they are just focusing on that space. So we believe that the next three to four years is going be good for the distribution companies (DISCOMs). So, we do expect a decent amount of growth of almost about 14-15 percent EPS CAGR and then at the same time, of course, the valuations are also reasonable," Maheshwari mentioned.
Mishra of PTC India, inferred that there is a gap of 1 percent between demand and supply, which is not as substantive. He is of the opinion that high coal prices is a temporary phenomenon.
He said, "The international coal prices because of the geopolitical reasons have crossed $250 and it is something which is affecting the imported coal plants but I understand this is a very temporary phenomenon and it should not impact too much of the buying capacity of the DISCOMs and it should not last for more than fortnight or maximum to a month."
"There is a gap of almost a percent, that is between what is being demanded by the states and what is being met, and it is not so substantive – it's only 54 million units a day, some states may be having a wider gap, but overall in the country, there is hardly any gap. And there are a couple of factors, which have caused this kind of a gap, which we are seeing right now. But there are proactive steps, both by the government and the regulator," he said.
Watch the video for the full interview.
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