Salaam-E-Ishq versus NTPC

Last weekend, my wife and I watched Salaam-e-Ishq. Though we found the film too long and downright boring, the concept of interweaving different stories into a single plot, which I first noticed in a far better made film directed by Khalid Mohammed a couple of years back, again caught my attention.

I thought I would extend this concept to my column with the hope that the end result will be better than that of the above-mentioned film.

The National Thermal Power Corporation is the largest power generation company in India and also the cheapest producer of bulk power. NTPC has an installed capacity base of 23,749 megawatts (MW), of which 314 MW is through two 50:50 joint ventures with SAIL. The power giant is now working out plans that will give it a solid presence in different segments of the power sector.

With ambitious schemes of replicating its 30-year success story all over again in the next seven years, the company aims to double its capacity to around 47,000 MW by 2012. The future plans of this company include investment of around Rs 10,000 crore towards the production of 50 million tonnes of coal by 2013.

IDFC is a premier financial institution whose AMC (asset management company) business manages assets worth Rs.1734 Crore which is expected to grow to a corpus of Rs 7500 crore over three years. The value of its investment has grown phenomenally over the last couple of years and is expected to continue growing considering the robust rise of infrastructure based industries.

IDFC’s asset quality is amongst the best with zero non performing assets (NPA). Moreover its capital adequacy ratio at 25.6 per cent will enable it to expand its lending operations without any equity dilution in the near future. Thus, IDFC can in fact be a proxy play on the infrastructure stocks, whose valuations now border on the absurd.

After these two snapshots of a premier PSU power generation company and a prominent financial institution, we shall now zero in on Power Finance Corporation (PFC) whose IPO is ready to hit the market. As its name suggests, it is engaged in the financing of power projects. Primarily, it lends to state run power utilities which would have been a concern, were it not for the fact that more than 95 per cent of its exposures have been secured.

While there can be no doubting the potential of the power sector, given the huge demand-supply gap therein, the winds of regulatory changes could add some uncertainty ahead for PFC. So, while PFC is unlikely to be a multi-bagger, it offers retail investors the benevolent Government umbrella.

If however, I had to make a choice between NTPC, IDFC and PFC today, my vote would remain with NTPC, a stock I backed as a growth story at the time of its IPO, and still do. And unlike the Bollywood movie, it has not disappointed me.     

Email Ashok Kumar: ceolotus@hotmail.com

Ashok Kumar heads Lotus Knowlwealth