NHPC Share Fundamental Analysis & Future Plans

Introducing the Power Sector Giant: NHPC

With NHPC's trajectory pointing upward, it's no wonder investors are eyeing its potential. So if you are also confused about NHPC shares? No worries. We're here to break it down simply. Today, we'll explore their strengths, weaknesses, opportunities, and Threats to help you decide if they're a good fit for your investment journey. Let's see if NHPC has the power to fuel your financial future.

Before we start looking at the details, let's learn a bit about NHPC business.

Company Profile

NHPC, a prestigious mini-ratna public sector utility(PSU),as the flagship hydroelectric generation company of the Government of India. Specialising in generating power through renewable sources, particularly hydroelectricity, NHPC utilises dams to harness the potential of flowing water. Its business model is straightforward – generate power and distribute it to other utilities in bulk. Additionally, NHPC dabbles in project management, construction contracts, and consultancy services.

 

Projects and Power Capacity:

NHPC boasts a substantial total installed capacity of 7071 MW, with 5551 MW as its own and 1520 MW through its subsidiary NHDC. Breaking down the capacity, NHPC thrives on 6971 MW of hydroelectric power, supplemented by 50 MW each of solar and wind power. With a presence in 13 states across 24 stations, NHPC contributes a significant 15% to India's total hydro power installed capacity.

 

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Ongoing and Upcoming Projects

Actively involved in the construction of 8 Hydro Power Projects with a collective capacity of 6434 MW (including joint ventures & subsidiaries), NHPC anticipates commissioning the standalone 800 MW project in FY23 and the 2000 MW project in FY24.

NHPC has 6 projects under clearance as of March 2022, encompassing 4 standalone projects (5756 MW), 1 joint venture project (930 MW), and 1 subsidiary project (66 MW).

 

MOUs, PPAs, and LOIs

NHPC has inked significant Memorandums of Understanding (MOUs) with Bihar State Hydroelectric Power Corporation Limited, Green Energy Development Corporation of Odisha Ltd. (GEDCOL), and Jammu and Kashmir State Power Development Corporation Limited for the development and execution of hydroelectric and solar power plants.

Additionally, NHPC has signed a letter of intent with Rajasthan Renewable Energy Corporation Limited (RRECL) for the development of 10,000 MW Renewable Energy Projects/Parks in Rajasthan and obtained consent from the Government of Andhra Pradesh for the development of 7 pumped storage projects with a capacity of 6600 MW.

 

New Solar Power Projects

NHPC entered into a promoters agreement with Green Energy Development Corporation of Odisha Limited (GEDCOL) for the formation of a Joint Venture (JV) Company, aimed at developing 500 MW floating Solar Power Projects in various water reservoirs in Odisha. NHPC owns 74% of this venture, with an authorised capital of 500 crores.

Furthermore, NHPC secured a 1000 MW capacity Solar Power Project in the e-Reverse auction conducted by Indian Renewable Energy Development Agency Limited (IREDA).

 

Future Expansion Plans

Looking ahead, NHPC has ambitious plans to expand its total capacity to 16285 MW by 2032, marking a substantial 2.5x growth. Additionally, the company is eyeing a 1000 MW capacity expansion in solar power. However, NHPC emphasises a cautious approach towards solar and wind projects, targeting a minimum ROE of 12% for project viability.

NHPC's commitment to growth is evident through its ongoing and upcoming projects. From signing MOUs for hydroelectric projects in Gujarat to venturing into international collaborations in Nepal, NHPC is at the forefront of innovation and expansion.

 

Fundamentals of NHPC

Despite facing challenges such as a decline in sales on a Y-O-Y basis, NHPC demonstrates resilience and growth. With a positive cash flow from operating activities and a low Debt to Equity ratio of 0.77, NHPC remains a strong contender in the power sector.

SWOT Analysis

Strengths: NHPC's strengths lie in its robust project portfolio, profitability in core operations, and strong promoter holding. Moreover, its low debt indicates financial stability.

Weaknesses: NHPC grapples with increasing receivables and modest sales growth, signalling areas for improvement in operational efficiency.

Opportunities: NHPC stands to benefit from the government's aggressive push towards renewable energy. With a focus on hydroelectric power, NHPC aligns with India's renewable energy goals.

Threats: NHPC faces the threat of stake dilution through government disinvestment, highlighting the need for strategic risk management.

 

 

Conclusion

In conclusion, NHPC emerges as a formidable player in India's power sector, poised for growth amidst challenges and opportunities. As investors, analysing NHPC's trajectory and future prospects is crucial in making informed decisions. With its strategic positioning and ambitious expansion plans, NHPC holds the potential to power India's future while driving shareholder value.

What are your thoughts on NHPC's future? Share your insights in the comments below.

Disclaimer: This Stock Analysis is only for informational purposes and should not be considered as investment advice. Always do your research and consult with a financial advisor.