All eyes that track movements on the Street will be trained on the response that NTPC?s follow-on public offer gets. Even the policy makers in New Delhi would be looking at the outcome of the issue as, to a great extent, the fortune of the disinvestment policy would depend on it. With the floor price fixed at Rs 201, the government may end up raising around Rs 8,280 crore. As of September 30, 2009, NTPC?s owned installed power generating capacity was approximately 18.6% of the country?s total installed capacity and its power generating efficiency contributed 28.6% of the total power generation. Its plant load factor stood at 91.1% as against the Indian average of 77.2% for coal-based plants. And since its profitability is protected under the power purchase agreements, its returns are steady. The return on equity has been around 14% for the past three financial years.
However, as is the characteristic with independent power projects (IPP), returns seem to plateau when the capacity is static and fall in the initial years when expansion starts and grows when expansion plans come on stream. For NTPC, margins fell by around 16.8% to touch 23% in 2008-2009. However, with capacities coming on stream, the earnings are expected to be sport a more buoyant face. It currently has around 30,000mw of installed capacity, set to expand to 75,000mw by 2006-17. With a debt to equity ratio of 0.6:1, it has enough space to fund its plans, which would require around Rs 200,000 crore. Moreover, the company would be implementing around 2,120mw of projects, as the merchant power plant, for selling power in the open access markets where the rates are expected to remain robust as the supply shortage continues to exist. Analysts, however, are not overtly concerned about the outcome of the FPO from the company perspective as the money generated would go to the government and not to the company. At the moment, it remains a power generating company with a high level of execution. Moreover, valued at around Rs 4.7 crore per mega watt on financial year 2011-12 estimates, it is in line with the replacement cost of around Rs 4.5 crore per mega watt.
