Ways2Capital Reviews : Q4 results: NTPC Tripped By Fuel Availability Curbs

NTPC Ltd’s double-digit growth in revenue and profit for the March quarter (Q4) may have been impressive but investors were not enthused. Its shares gained after the Q4 results announcement on Monday but declined on Tuesday.

The core of the company’s woes lies in fuel supply constraints. Limited availability of coal at some of its plants is crimping plant availability, thereby leading to an under-recovery of fixed costs. Under-recovery of fixed costs during fiscal year 2018 (FY18) stood at Rs1,433 crore, of which Rs800 crore was due to non-availability of coal. Other contributors include lack of clearance to operate a plant and closure of a plant due to an accident.

The company is working with Coal India Ltd and Indian Railways to find a resolution, but it can be a time-consuming process. According to the management, fuel situation at two plants has improved but not entirely resolved.

The cost under-recovery and the subsequent financial impact on NTPC’s performance are weighing on its stock. Consolidated profit for FY18 is down 2%.

Even the March quarter profits would have risen in single digits, if one adjusts for one-time items, points out Motilal Oswal Securities Ltd. “Profit after tax is adjusted for Rs430 crore under-recovery of fixed charge and many prior-period items,” the brokerage firm said in a note. “Calculated core adj. profit grew ~6% YoY.”
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About Bhoomi Desai