ET NowIn a chat with ET Now, Harshvardhan Dole, Power Analyst-Institutional Equities, IIFL, talks about the SC verdict on coal block allocations and its impact on some stocks. Excerpts:
ET Now: Some power stocks have done reasonably well; why? Is this because there was some adverse order expected and now none of the power companies have been penalised as a result of which we are seeing this uptick?
Harshvardhan Dole: For most of the other stocks such as NTPC, that is a costless model and frankly, none of the coal blocks are operational for NTPC. So their operations remain unaffected.
As of JSW Energy, we have seen that lignite blocks as of now are out of the purview of the Supreme Court order, and therefore the operational block of JSW Energy remains intact. That is what my prima facie understanding is. I need to go through the order in detail, but it appears that the block has been spared. So if that were the case, that is one company that should emerge pretty strong despite this particular Supreme Court order.
Most of the other companies that we cover, such as Tata Power, do not have any operational coal blocks. Neither do companies like GIPCL. So except for JSPL where part of the power operations is under pressure, most of the other companies are under a different model.
ET Now: Does NTPC being spared and their block not being cancelled work in favour? For NTPC, life does not change. Or do you think on a relative basis, there could be an improvement in the visibility for the stock as also the company?
Harshvardhan Dole: NTPC operates on a costless model. So, all the operational costs, including the fuel, are a complete pass-through. So, life does not change for NTPC even after the order.
ET Now: The stock is however up about 1.5% at 139. What is your view, what is your target on this one?
Harshvardhan Dole: We have a favourable rating on NTPC. We like it based on the cash flow that it generates. Importantly at CMP, it offers close to about 4% dividend yield. Large cap stocks offering 4% dividend yield is pretty attractive to us.
ET Now: Reliance Power has seen that substantial move, was up by 7%. It was flat for most part of the trading day and then moved up after this verdict. What gives here?
Harshvardhan Dole: For Reliance Power, the operational coal blocks were never under dispute. The Supreme Court in its earlier judgement had mentioned that the UMPPs will be spared. So, the stock is merely reacting out of sentiments rather than anything new coming out of the order.
ET Now: Some power stocks have done reasonably well; why? Is this because there was some adverse order expected and now none of the power companies have been penalised as a result of which we are seeing this uptick?
Harshvardhan Dole: For most of the other stocks such as NTPC, that is a costless model and frankly, none of the coal blocks are operational for NTPC. So their operations remain unaffected.
As of JSW Energy, we have seen that lignite blocks as of now are out of the purview of the Supreme Court order, and therefore the operational block of JSW Energy remains intact. That is what my prima facie understanding is. I need to go through the order in detail, but it appears that the block has been spared. So if that were the case, that is one company that should emerge pretty strong despite this particular Supreme Court order.
Most of the other companies that we cover, such as Tata Power, do not have any operational coal blocks. Neither do companies like GIPCL. So except for JSPL where part of the power operations is under pressure, most of the other companies are under a different model.
ET Now: Does NTPC being spared and their block not being cancelled work in favour? For NTPC, life does not change. Or do you think on a relative basis, there could be an improvement in the visibility for the stock as also the company?
Harshvardhan Dole: NTPC operates on a costless model. So, all the operational costs, including the fuel, are a complete pass-through. So, life does not change for NTPC even after the order.
ET Now: The stock is however up about 1.5% at 139. What is your view, what is your target on this one?
Harshvardhan Dole: We have a favourable rating on NTPC. We like it based on the cash flow that it generates. Importantly at CMP, it offers close to about 4% dividend yield. Large cap stocks offering 4% dividend yield is pretty attractive to us.
ET Now: Reliance Power has seen that substantial move, was up by 7%. It was flat for most part of the trading day and then moved up after this verdict. What gives here?
Harshvardhan Dole: For Reliance Power, the operational coal blocks were never under dispute. The Supreme Court in its earlier judgement had mentioned that the UMPPs will be spared. So, the stock is merely reacting out of sentiments rather than anything new coming out of the order.
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