NTPC Shares Gain By Close To 2%As Value Unlocking In Renewable Space Started Off

NTPC shares in the pre-opening trade in session on July 11, 2022 are soft. Nevertheless its shares soon entered the positive territory and climbed higher by up to 1.64% to day's high price of Rs. 146.15 per share.

This is as the power sector entity is set to transfer ownership of 15 renewable energy assets to NTPC Renewable energy Ltd (NREL) and transfer 100% equity to NTPC Green Energy Ltd. The networth of the 15 projects to be transferred is at Rs. 1364 crore while revenues of the same for FY22 were at Rs. 917 crore. The consideration to be received is pegged at Rs. 10067 crore either in cash /equity / debt liability and the deal is expected to be closed from 120th day of sale.

The development is viewed as positive by the brokerage firm ICICI Direct which goes on to say that, "The move is a precursor to the value unlocking process in the renewable subsidiary given the management intends to transfer the assets to the subsidiary will be followed by a fund raise for further expansion in the renewables space.The fund raise can be either through a) stake sale to strategic investor or b) float an IPO for the renewable subsidiary. This overall excercise is the right move as company want to reach 60,000 MW of renewable capacity by 2032.

The power sector has been witnessing a huge traction and it is owing to the fillip the economy is witnessing. The month returns of the sector are close to over 2%.

Lately, Emkay Global betted on the stock for a target price of Rs. 188 and iterated that "We maintain Buy on NTPC as the strong power demand should keep the utilization of coal assets high in the medium term. This, along with growth in the RE space, bodes well for the company. After including DPS as part of the calculations, our SoTP value stands at Rs188/share (Rs180 earlier). NTPC is trading at 0.94x FY24E PB with an RoE of ~12".