Why Power Stocks are Falling ?
Power Stocks under pressure
The share prices of Indian power companies have been facing the heat in 2023. The share prices of top companies in the sector like Tata Power, NTPC, Power Grid, Adani Transmission and Adani Power among others have witnessed a notable decline in their share prices so far this year.
So, what is ailing the share prices of these companies? Let’s try and analyze
Power Companies Share Price: Reasons for fall
Huge Dues to the Coal Sector: Recently, the Coal Ministry announced that the power sector in India owed about Rs 20,342.56 crore to coal PSUs. Such a massive debt load hinders the ability of the companies in the sector to ensure their smooth operations as they are saddled with huge interest payments which leaves them little room for capacity building.
Moreover, due to the untimely payment of the dues, the ministry remarked that it is unable to ensure a steady supply of fuel to power plants which is hampering the prospects of the sector as a whole.
Demand-Supply Gap: The continuously rising demand for power in India should have been a boon for power companies.
Notably, India’s power demand increased by 8% to more than 149.7 terawatt-hours (TWh) from the previous year. Moreover, for the first couple of months of 2023, demand witnessed a leap of 10% from the previous year.
However, the production capacity presently is facing enormous pressure to cater to this demand.
Currently, India has the ability to increase its electricity generation capacity by only 20,000 MW per year. This installed capacity is inadequate to support an annual economic growth rate of 7-8%, and the existing capacity is also not fully utilized due to the inefficient operation of power plants.
Soaring Losses in the Sector: The aggregate losses of power distribution companies witnessed a significant rise of 66% from FY 20 to Rs 50,281 crores in FY 2021.
High subsidies as a percentage of the total revenues led to the rise in losses. This can be gauged from the fact that subsidies increased from 1,20,828 crore in 2019-20 to Rs 1,32,416 crore in 2020-21.
Although the situation improved in FY 22, when losses declined to 17% from about 22% in FY 21, more certainly needs to be done to stem the losses.
Now let’s have a look at how the top companies in the sector have performed recently
Power Companies: Recent Performance
NTPC: By commanding a market cap of about Rs 1,66,782 crores, PSU major NTPC has been one of the bright spots in the power sector in terms of share price performance. In 2023 so far, the NTPC share price has increased by 2%.
NTPC Analyst target price
| Name | Rating | Target Price |
| BNP Paribas | Buy | Rs 200 |
| Emkay Global | Buy | Rs 200 |
Power Grid: Another PSU power company whose share price performance has been relatively impressive compared to its sector is Power Grid. With a market cap of Rs 1,54,924 crores roughly, the Power Grid share price has increased by 3.2% in 2023 so far.
Power Grid Analyst target price
| Name | Rating | Target Price |
| BNP Paribas | Buy | Rs 265 |
| Emkay Global | Buy | Rs 250 |
Adani Transmission: With a market cap of Rs 1,13,222 crores, Adani Transmission is a part of the troubled Adani Group. Along with problems in the group, the share price of the company has also come under selling pressure because of the troubles of the power sector. The Adani Transmission share price has plunged by a whopping 60% in 2023 so far.
Adani Power: Another company from the Adani stable which is engaged in the power sector is Adani Power. With a market cap of Rs 67,052 crores, the company has been saddled with problems pertaining to the parent group along with an overall weakness in the power sector. This can be gauged from the fact that the Adani Power share price has dropped by 41.7% in 2023 so far.
Tata Power: Finally, with a market cap of Rs 58,778 crores, Tata Power has also witnessed a rough year so far in terms of share price performance. Notably, the Tata Power share price has fallen by 13.2% in 2023 so far.
Tata Power analyst target price
| Name | Rating | Target Price |
| Jefferies | Underperform | Rs 175 |
| BNP Paribas | Buy | Rs 245 |
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.
What are Indian power stocks?
Indian power stocks are stocks of companies that operate in the power generation, transmission, and distribution sectors in India. These companies are involved in the production and supply of electricity to various industries and households.
Why should I invest in Indian power stocks?
Investing in Indian power stocks can be a good option for long-term investors looking for stable returns. The Indian power sector is growing rapidly, driven by the increasing demand for electricity due to urbanization and industrialization. Moreover, the government has introduced various reforms and policies to boost the sector, making it an attractive investment option.
Which companies are the top players in the Indian power sector?
Some of the top players in the Indian power sector include NTPC Limited, Tata Power Company Limited, Adani Power Limited, Power Grid Corporation of India Limited, and NHPC Limited.
What are the risks associated with investing in Indian power stocks?
Like any other investment, investing in Indian power stocks involves risks. Some of the major risks include regulatory and policy changes, changes in global fuel prices, and operational risks such as breakdowns in power plants or transmission lines.
How can I stay updated on the latest developments in the Indian power sector?
You can stay updated on the latest developments in the Indian power sector by following industry news and analysis websites, subscribing to relevant newsletters and publications, and attending conferences and events related to the power sector. Additionally, you can follow the latest updates and announcements by the companies you are interested in investing in.