Power struggle in Delhi intensifies as the Supreme Court orders the Anil Ambani-led BSES to pay Rs 700 crore to NTPC by the end of this month . It allows NTPC to cut power supply if BSES refuses to oblige.
Rahul Modi, Power Analyst, Antique Broking sees Supreme Court ruling on NTPC and BSES as a positive for the power sector except for Reliance Infra as they may have to make upfront payments.
He does not see any change in the EPS estimate of NTPC if recovery of dues takes place.
It is very critical for the power sector to come out of the crisis it is currently stuck in as most of the discoms have their financials stretched, he said in an interview with CNBC-TV18.
Below is the edited transcript of the interview:
Q: Your first thoughts on what the impact could be on Reliance Infrastructure?
A: Specific to Reliance Infra , we are told that they have more than around Rs 20000 crore outstanding that they need to collect from the Delhi customers. That will stretch the balance sheet if such kind of payments have to be made upfront; even for Rs 700 crore. So, that will definitely impact them but overall it is a positive impact for the sector we believe and NTPC especially. Such kind of rulings will be a good precedent for the discoms to pay up to the generators on time.
Q: What would it mean in terms of the two stocks; this particular set of news for NTPC as well Reliance Infra in terms of an earnings per share (EPS) estimate?
A: To take with NTPC, it will not affect the EPS because such dues sit in the debtors which will now be received and will be a part of the cash. However, it will have a positive impact that the debtor days' position, the balance sheet will improve. It is a very small amount considering the size of NTPC. We do not have coverage on Reliance Infra so I would not be able to comment on that.
Q: Will business become tougher for Reliance Infra going forward according to you because now we do have news from the banking space as well where they are quite reluctant to lend further to Reliance Infra?
A: This problem is not only with Reliance Infra. This is particularly a problem with most of the discoms currently because their financials are already stretched. Under that, we had seen the FRP being mooted by the government that is underway now to restructure the loans of these SEBs and the discoms. Private discoms are not yet a part of it but you never know if there is a change. So, overall we need to see how the regulator takes a call in terms of tariff hikes and that will happen mostly post elections. Therefore, that is very critical for the sector to come out of the crisis it is stuck in currently.
Q: What is your view in terms of earnings at least for the power space; it is still to come out such as Tata Power ?
A: We are not negative at all. The generators we are still positive. We are seeing tariff hikes coming in. Adani 's recently received tariff hike of around Re 1 for the Tiroda plant and many such are following. Therefore, we believe that if in case we see flattening profitability this quarter, still going ahead we could see good numbers to come.
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