Navratna status powers NHPC, but project delays cast a shadow

Being a Navratna will give the public sector undertaking greater financial autonomy helping faster capex and other investment decisions. This also allows the company to form overseas subsidiaries, helping it build global alliances and tap overseas opportunities.

With no new capacity coming online before December, NHPC’s near-term outlook is dull. Within hydel, it has nearly 9,300MW of projects under construction, including those undertaken through its subsidiary. However, two key projects are facing delays. Against the earlier schedule of March, the 800MW project in Himachal Pradesh is now expected to be commissioned by December. Further, against the earlier schedule of June, the commissioning of the 2,000MW project (8*250MW) in Arunachal Pradesh is now expected to start in March 2025.

These projects would increase NHPC’s total generation capacity by about 40%. Yet, the delays have hurt the growth outlook. For instance, Antique Stock Broking has modelled flattish earnings per share (EPS) growth for FY25. “For FY26 and FY27, we see an EPS increase of 19% year-on-year and 24% year-on-year," said an Antique report. In the June quarter (Q1FY25), NHPC’s Ebitda was marginally down year-on-year.

To mitigate the impact of hydel power projects’ long gestation periods, NHPC has ventured into solar power projects with shorter gestation. It is undertaking solar projects totalling 1,380MW, including two small floating solar power plants of 138MW capacity. Floating solar plants are installed on water bodies and reduce costs and time associated with land acquisition. It has signed an agreement with a Norway-based company specializing in floating solar technology to develop these plants. It is also venturing into power storage through pumped storage hydropower (PSH) projects, but it is still in the early days, with work expected to start in only about two years. PSH is receiving significant government incentives since these help in providing round-the-clock renewable power.

NHPC has guided for a capex of ₹11,800 crore in FY25 versus ₹8,700 crore in FY24. With many projects under execution, its capital work-in-progress stood at ₹30,800 crore at Q1FY25-end, almost double the existing stock of property, plant & equipment at ₹16,400 crore.

While NHPC’s shares have increased about 97% in the past one year, gains over the last six months stand at less than 10%. The delay in project commissioning seems to have affected investor sentiments lately. Yet, the thrust on renewables and timely commissioning of upcoming projects could act as a trigger ahead.

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