Power Grid vs NTPC: Comparing the titans of Indian power

India’s power sector is about to undergo massive development. At present, India holds the position of the world’s third-largest electricity producer and consumer. The country has set ambitious targets to amplify its power generation capacity to 900 GW by 2030, effectively doubling its current capacity.

India can achieve this goal by focusing on renewable energy like wind or solar power with investment at every stage – from generation to transmission. Further, to achieve this goal, India will have to make significant investments in transmission infrastructure and power generation. 

Based on these projections, let’s take a closer look at two major companies in this sector – NTPC and Power Grid Corporation of India.

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Power Grid Corporation of India Ltd

Power Grid Corporation of India, a government-owned company formed in 1989, reigns supreme as India’s top electricity transmitter with a 45% market share. Their core business involves transporting bulk power across the country via a vast transmission network.   

Beyond that, they have expanded into telecom services, capitalising on their nationwide infrastructure. Power Grid even tackles critical government projects and offers consultancy services, showcasing its well-rounded expertise in the power sector.

Earnings 

As per Power Grid Corporation results, the company reported a 6.53% QoQ increase in its consolidated net profit, amounting to ₹4,028.25 crores, for the quarter ending in December (Q3FY24). 

Let’s see its Q3FY24 performance:

Future outlook 

According to Power Grid Corporation of India news, the company has a strong pipeline of projects. With ₹77,770 crores worth of work currently underway, including ongoing and new regulated tariff mechanism (RTM) projects, the company is well-positioned for the next few years. 

Power Grid is also committed to a sustainable future. The company aims to source 50% of its electricity from renewable sources by 2025 and achieve net water positivity and zero waste to landfill status by 2030. 

NTPC Ltd 

NTPC Limited, a leading Indian power generation company, is a significant player in the country’s energy sector. Their core function is generating and selling bulk electricity to State Power Utilities throughout India.  

NTPC also offers a wide range of other services through a separate business segment. These include consulting, energy trading, project management and inspection, oil and gas exploration, and coal mining. 

Earnings

Let’s see NTPC quarterly results:

If we compare the financial performance of Power Grid and NTPC, Power Grid’s QoQ growth is positive for all metrics, yet its net profit QoQ growth is lower than that of NTPC. 

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Future outlook 

As per NTPC news, the company is committed to advancing renewable energy in India, with 3364 MW of renewable projects operational and a strong pipeline of 22747 MW in various stages of development. 

This includes projects under construction (7808 MW), tendering process (8225 MW), and land bank (3350 MW equivalent). NTPC is also committed to ensuring energy security through awarding thermal capacity (16.8 GW) and enhancing coal mining capacity (target: 50 million tonnes annually in 3 years).

Share price trend 

In the past one year, both Power Grid and NTPC have offered positive results. NTPC gave a 106.44% return, whereas Power Grid offered a 72.66% return as of May 3, 2024.  

If we check the share price history, Power Grid Corporation of India’s share price and NTPC’s share price have increased significantly in the 5-years. NTPC offered a 168.77% return in a 5-year period, and Power Grid offered an 189.15% return. 

Financials 

While Power Grid appears to be more profitable and efficient based on ROE and ROCE metrics, it also trades at a premium valuation (higher P/E and P/B ratios). NTPC, on the other hand, offers a lower valuation, potentially indicating better value for investors seeking growth.

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Bottomline 

To summarise, the future of India’s power sector looks promising, with key players like Power Grid and NTPC poised to drive growth. 

However, while investing in these companies, one must carefully evaluate their financial performance and future prospects. Comparing ROCE and ROE, it can be seen that Power Grid seems more profitable and efficient too, but trades at a premium valuation. On the other hand, NTPC has comparatively low valuations, indicating potential undervaluation for investors.

Therefore, make sure you do your research before making any decisions.