BW Communities

The Real Powerhouse

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Power. That's what the National Thermal Power Corporation (NTPC) generates, literally. The country's biggest power producer, which lights up 30 per cent of India, has been undeterred by the entry of private players, and it plans to become a 75,000 MW company by 2017 and a 128,000 MW company by the year 2032. Even with its current installed capacity of 33,194 MW, NTPC is the biggest power generating company in the country. Its closest competitor from the private sector, Tata Power, has an installed capacity of just 2,977 MW. Small wonder then, that NTPC has emerged the winner in the power category in BW's Most Respected Companies (MRC) survey for 2011. It is worth noting that in this year's survey, power has been separated from infrastructure because of its growing significance. However, the company is not only about size. In fact, NTPC emerged numero uno on all parameters except one. It topped in innovativeness, depth and quality of top management, ethics and transparency, quality of products and services, people practices/talent management and global competitiveness. For financial performance and return to shareholders, both Tata Power and NTPC are tied in the first position. NTPC's size translates into numbers as well. In FY 2009-10, its sales of Rs 48,221.32 crore looms large over the likes of Tata Power (Rs 7,098.27 crore) and Power Grid Corp. (Rs 7,127.45 crore). That is to be expected, but NTPC's profitability is also impressive. Its operating profit margin (OPM) of 32 per cent in the previous fiscal is better than Tata Power's 30.2 per cent, though it pales in the face of Power Grid's OPM of 86.3 per cent. And though net profits grew by 6.42 per cent — from Rs 8,201 crore in 2008-09 to Rs 8,728 crore in 2009-10 — net profit margins grew by 18 per cent. And if the results of the first three quarters of FY 2010-11 are anything to go by, its growth story will continue in the coming year, too. In the first nine months (April-December), NTPC's total income has risen by 18.75 per cent to Rs 43,062.76 crore compared with the same period a year before. <table style="width: 300px;" align="right" border="0" cellpadding="9" cellspacing="9"> <tbody> <tr> <td><img src="/businessworld/system/files/images/tatapower-powergrid300x150.jpg" style="float: right;" width="300" height="150"></td> </tr> <tr> <td>No 2: Tata Power Managing director Anil Sardana will have to work on strengthening the power generation business of the company No 3: PowerGrid Corporation Expanding the company's business to West Asia and North Africa is what CMD S.K. Chaturvedi is aiming for</td> </tr> </tbody> </table> So, what makes it such a success story? Former chairman and managing director of the company, R.S. Sharma, who spent almost his entire career with NTPC, attributes the company's success to its new growth strategy. "Earlier, NTPC had 100 per cent ownership of all its power stations, now it is venturing more into joint ventures," says Sharma, who retired in August last year. "For example, we will acquire the Patratu thermal plant on a 74:26 ownership." The coal import cell (NTPC has plans to buy stakes in two of Indonesia's coal mines) and the initiation of a world-class integrated project monitoring system have also contributed to NTPC's success, according to Sharma. Apart from being aggressive in increasing its installed capacity — it currently has 15,740 MW under construction, including 1,320 MW hydro-based capacity — NTPC is diversifying its portfolio and also expanding its global footprint. The company is foraying into solar power projects and is eyeing Maldives for establishing them, a move that would enhance NTPC's green footprint. It is currently conducting a feasibility study in Maldives, and the final report is expected in the next few months. However, some of NTPC's projects have been plagued by environmental issues. Though the company claims that it is doing its bit to minimise pollutants from its coal-based projects by assigning new environmental measures such as launching environment services programmes, going for 100 per cent water recycling, installing back filters, etc., how far these would help is to be seen. It faced a major setback when its Loharinag Pala hydel project on the Bhagirathi river in Uttarakhand was scrapped by a group of ministers citing environmental concerns. NTPC has already pumped in Rs 700 crore in the project, and has approached the Centre for its revival. The company's current chairman and managing director, also the first non-NTPC person to hold this position, Arup Roy Choudhury, says, "These issues are a matter of interpretation. Development does have an impact on the environment and those who are in a decision-making position will agree that development is vital to a country like India. So, how we mitigate the effect of the environment in these projects is most important." Timely delivery of projects has been an issue with NTPC. Roy Choudhury agrees that in the past few months they have fallen behind schedule. But he feels it has more to do with them having optimistic targets rather than any serious problems. "We added 3,500 MW in the last plan and we'll add about 13,000 MW in this plan. We might be slow in our deliveries, but it is not that our targets are being missed." Analyst Jal Irani of Macquire-India, however, points out the glitches. "NTPC's biggest advantage is its cash balance, but it has to really pull its strings up with the private players such as Tata Power, Reliance Power and Adani Power getting very aggressive." Irani feels that with the new competitive bidding norms for tariffs, private players will make the most of it. Moreover, the capacity addition plans of NTPC are all long-term, and private players are catching up. For instance, Reliance Power aims to increase its installed capacity to 25,000 MW by 2017. Roy Choudhury, though, seems undeterred by the growing presence of private players. "Private players are no competition to us. They'll be a threat only when they can match up to NTPC's calibre and size. We encourage them because they are adding power for the country." Diversification seems to be the main focus of NTPC apart from capacity addition. From power distribution, to merchant power, to acquiring coal mines, the power major is making itself stronger. For many years, NTPC, a Maharatna company, has enjoyed near monopoly in the sector. Whether it continues to stay ahead will depend on its ability to implement its plans, and the aggressiveness of the private players. As of now, this story has a happy ending. (This story was published in Businessworld Issue Dated 14-02-2011)