Go through any Stock app and you will notice that the Adani power share price constantly fluctuates with every second. However, the reasons behind every second are not as apparent. In contrast to this, take a look at the journey of a unit of electricity from the powerhouse to your home socket. At each stage, something occurs that drives the investors’ interest. NTPC and Adani Power are excellent examples to compare because they represent the two extremely diverse sides of the sector.
Stage one: The Plant
The electricity generation business begins with the capacity of the plant. NTPC is India’s largest power company with a group capacity of 73,824 MW. The company generates over 25% of the nation’s electricity. On the other hand, Adani Power had a captive capacity of 15,250 MW as of March 2023. Additionally, the company is the largest private thermal generator in India. The more the megawatts in a company, the more electricity can be generated and sold by it. Therefore, MW is the first parameter that analysts look at while evaluating a power company.
Stage two: The Fuel
Power plants require fuel to generate electricity, and the availability of this fuel determines their performance. NTPC has ventured into Coal Mining and Washing Activities through subsidiaries. Some of the prominent ones are ICVL and NTPC Limited. For instance, ICVL, a joint venture of NTPC and other public sector undertakings, has a stake in the Benga Coal Mine in Mozambique. Moreover, the operating efficiency of a company is also necessary to consider. In FY 2023, for instance, NTPC’s coal-based plants recorded a plant load factor (PLF) of 75.90% as compared to the national average of 64.21%. The company’s better-than-average operating performance explains why many compare NTPC share price with others.
Stage three: The Contract
Simply put, the generated electricity has to be sold to buy goods from the market. Therefore, the contracts a company signs to sell its electricity are crucial to its success. NTPC sells electricity to the State Electricity Boards across the country. On the other hand, Adani Power focuses on long-term Power Purchase Agreements (PPAs). For instance, in Madhya Pradesh, the company has a 25-year agreement for 1,230 MW net electricity in a 2×800 MW ultra-supercritical plant. Additionally, about 1,600 MW is reserved for Bangladesh. Having said that, long-term contracts benefit the seller because their income is stable.
Stage four: The Owner
The ownership pattern of a company influences its valuations. For instance, the Government of India owns 51.1% of NTPC. Furthermore, the company has been a Maharatna PSU since May 2010. In contrast, the Adani Group owns Adani Power India Limited. Additionally, about 98% of the latter’s revenues stem from Power Sales. In short, while the former is a government-owned company, the latter is a private limited company owned by a single entity.
Stage five: The Growth Story
The growth story of a company has a significant impact on its share price. According to the company’s website, Adani Power aims to scale to 16.85 GW by June 2027. In April 2023, the Godda Plant of the company commenced commercial operations after being built as a 1,600 MW ultra-supercritical power plant. Additionally, in FY 2022, the company acquired Essar Power M.P. from the insolvency process. The company can also sell electricity directly to commercial and industrial consumers. On the other hand, NTPC’s group generation touched a record high of 399 billion units of electricity in FY 2023, registering a jump of approximately 11%.
The two in Comparison
| NTPC | Adani Power | |
|---|---|---|
| Established | 1975 | 1996 |
| IPO | February 2010 | July 2009 |
| Capacity | 73,824 MW (group) | 15,250 MW (March 2023) |
| Ownership | Government holds 51.1% | Adani Group |
Final Thoughts
While many factors influence the share price of a company, the electricity generation companies are primarily driven by the plants’ performances. Quarterly results and coal prices are some of the frequent reasons why the NTPC share price and Adani Power share price change every day. Therefore, analysts have to consider all five stages while comparing two electricity generation companies. However, the figures considered in this article are till FY 2023; therefore, readers should do their due diligence before investing in any company.
