Stocks of most power companies have lost steam since the last Budget. Multiple headwinds within the sector have impacted the stock performance, and the overall market volatility has only made it worse. The stock prices of a few big players have halved over the past year, a disconcerting trend for investors in such stocks. Torrent Power, however, has been an exception and has gained 30 per cent in the past one year. Allocation of subsidised natural gas to the company’s fuel-strapped plants has helped Torrent Power ramp up generation and recover costs, thereby boosting its profit. This has buoyed the stock. Over 80 per cent of the company’s power generation capacity is gas-based.

While other power companies have benefited from declining imported coal prices and improving supply of domestic coal, they continue to be weighed down by muted electricity demand. Power generation companies have been at the receiving end of the poor finances of state electricity boards (SEB). Weak financial health has constrained power purchases by SEBs.

NTPC, the country’s largest power producer, posted 3 per cent year-on-year fall in income from operations and 2.4 per cent increase in net profit for nine-months ended December 2015. The company’s almost unchanged plant load factor, owing to weak power demand and lower tariffs, has impacted its revenue. A tax refund, however, bumped up profit. PTC India, which is the country’s largest power trader, too has seen its volumes adversely impacted by subdued demand from SEBs. The company posted 9 per cent fall in revenue for the nine-month period ended December 2015.

Regulatory overhang

For others such as Tata Power and Adani Power, regulatory uncertainty has played spoilsport. The companies’ petitions for higher tariffs for their respective imported coal-based Mundra power plants in Gujarat, have been long pending. These plants account for a chunk of the companies’ generation capacity. Tata Power, however, put up a good show in the first nine months of 2015-16, thanks to higher sales by Tata Power Trading Company and lower imported coal costs. For Adani Power, acquisition of the Udupi Power Plant helped. The company’s net loss more than halved in the nine-month period ended December 2015, compared with the same period last year. But, this was after the company accounted for the yet-to-be-granted compensatory tariff.

The stock of Power Grid Corporation of India too has not been spared and has fallen along with the broader market indices. This is despite the fact that the company earns assured returns on its completed transmission projects and is relatively immune to the broad concerns plaguing the power sector.