NHPC Shares Surge on Navratna Status, But Hydel Project Delays Loom Large

NHPC Ltd’s shares surged by 4.6% during intraday trading on Tuesday after the government granted the company Navratna status. Although the stock gave up some gains, it still managed to increase by over 2% in the last two trading days.

What Navratna Status Means for NHPC

Gaining Navratna status provides NHPC, a public sector company, with greater financial autonomy. This allows the company to make faster decisions on capital expenditures and investments, and it can now create subsidiaries abroad, forming global partnerships and exploring international opportunities.

Project Delays Impact Short-Term Outlook

Despite the positive news, NHPC’s near-term outlook is less promising due to delays in key projects. The company is working on nearly 9,300MW of hydropower projects, but two major projects are facing delays. The 800MW project in Himachal Pradesh, initially set for completion in March, is now expected to be ready by December. Similarly, the 2,000MW project in Arunachal Pradesh, originally scheduled for June, is now delayed until March 2025.

Growth Prospects Affected by Delays

These delayed projects would have increased NHPC’s total generation capacity by about 40%. However, the setbacks have hurt the company’s growth outlook. Antique Stock Broking predicts that NHPC’s earnings per share (EPS) will remain flat in FY25, with a 19% year-on-year increase expected for FY26 and a 24% increase for FY27. Additionally, NHPC’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) saw a slight decline in the June quarter (Q1FY25) compared to the previous year.

Shifting Focus to Solar Power

To counterbalance the long timelines of its hydropower projects, NHPC is diversifying into solar power, which has shorter gestation periods. The company is currently undertaking solar projects with a total capacity of 1,380MW, including two floating solar power plants with a capacity of 138MW. These floating solar plants are installed on water bodies, reducing costs and time associated with land acquisition. NHPC has also partnered with a Norway-based company specialising in floating solar technology to develop these plants. Furthermore, the company is venturing into power storage through pumped storage hydropower (PSH) projects, although these are still in the early stages, with work expected to begin in about two years.

NHPC’s Capex and Future Prospects

NHPC has set a capital expenditure (capex) target of ₹11,800 crore for FY25, up from ₹8,700 crore in FY24. With several projects in progress, the company’s capital work-in-progress stood at ₹30,800 crore at the end of Q1FY25, nearly double the value of its existing property, plant, and equipment at ₹16,400 crore.

Investor Sentiment and Future Triggers

While NHPC’s shares have risen by about 95% over the past year, gains over the last six months have been more modest at 10%. The delays in project commissioning appear to have dampened investor sentiment recently. However, the emphasis on renewable energy and the timely completion of upcoming projects could serve as positive triggers moving forward.