Analyst Corner: Maintain ‘buy’ on NHPC with target price of Rs 34

There have been four important developments in the past week for NHPC, Rs 7.34 billion received from PFC for the pending dues from J&K — this and other receivables helping reduce receivables by 35% from Rs 50 billion at Q2FY21-end; Supreme Court allowed processing of tenders for completion of balance works of Teesta-VI HEP; NCLT, Hyderabad bench, approved NHPC’s Rs 1.65 billion resolution plan for the 120MW Jal Power Rangit stage-IV project in Sikkim; and MoU has been signed with J&K government to develop more than 4.1GW of hydro capacity in the UT. All these developments are positive for NHPC and will help boost growth and earnings. Maintain ‘buy’.

Receipt through PFC/REC scheme reduces receivables. NHPC received Rs 7.34 billion from PFC on account of dues pending from J&K UT through the PFC/REC scheme, under UDAY limit relaxation. The payment comprised of Rs 6.73 billion as energy dues and Rs 0.61 billion as power trading dues. During Q3FY21, receivables on account of PFC/REC scheme (~Rs 12-13 billion, primarily for J&K and UP) and others helped reduce overall receivables by ~35% from Q2FY21-end levels of Rs 50 billion.

Supreme Court allows bid for processing tenders for Teesta-VI. As per media reports (link), the Supreme Court has allowed NHPC to process the tenders for completion of balance works of 500 MWTeesta-VI HEP in Sikkim. The project, which was acquired through NCLT (from Lanco) in October 2019, is currently a 100% subsidiary of NHPC, but is expected to be merged with NHPC’s standalone entity, enabling cheaper debt funding