Power Finance Corp. To NTPC: Share Prices Of These Four Stocks Rise After Macquarie Initiates Coverage

Share prices of Power Finance Corp., REC Ltd., Power Grid Corp., and NTPC Ltd. opened higher on Wednesday after Macquarie initiated coverage on the four power stocks with an 'overweight' rating.

Macquarie's outlook on the Indian power sector is more optimistic compared to a decade ago, with several factors now working in favour of both electric utilities and power lenders, it said.

The brokerage highlighted a rebound in capital expenditure within power generation and transmission networks, following a period of sluggish growth.

At market open, shares of Power Finance Corp. were up 1.04%, trading at Rs 472, while NTPC stock was almost 2% higher, trading at Rs 387.30 per share. REC Ltd. shares were up 0.52% and Power Grid Corp.'s share price was up 0.59%.

Improved financial health among power distribution utilities has removed a significant overhang for the sector, and the power supply-demand balance is now shifting in favour of suppliers, Macquarie said. Rising demand for data centers, increasing electric vehicle penetration, and favourable weather patterns are key growth drivers, according to the brokerage.

NTPC and Power Grid are set to benefit from the ongoing power capex cycle, with Power Grid being preferred due to its higher exposure to the renewable energy growth segment, Macquarie said. This gives Power Grid better visibility for long-term capex, in contrast to NTPC, despite both stocks trading at relatively lower valuations compared to their private-sector counterparts.

Regulatory and structural changes have reduced credit risk of power financiers. The current growth momentum for companies like Power Finance Corp. and REC looks much better than the previous cycle, Macquarie said. Improving loan growth, sustainable return ratios and diversification of power book towards renewables are key positives, implying lower credit risk, the brokerage said.