Has anyone looked @ NTPC lately? Sure there are issues related to the power sector in our country, but a company like NTPC can certainly whether the storm. Did some work on its historical multiples (P/B), and at this level it is close to its lowest multiple.

10th Percentile
10yr 1.5
7yr 1.5
5yr 1.4
3yr 1.3
Current 1.08 (Annualized based on 9MFY14)
Min 1.06 (Nov 2004-Apr 2014)

Net net â my thesis here is that a company like NTPC is being sold at its historical lows, and Mr market is factoring maybe too much of negative news. Thoughts invited!

PS: Admin- reposting this from another group titled cyclicals. Not sure if this is allowed.


Hi Rohit,

I have similar question regarding GIPCL. I guess NTPC is trading on P/BV of 1+. it deserves that only because as per Govt norms, generation companies are allowed ROE of 15-16% max and companies which generate ROEs in that range get multiple of 1-1.3 types only

Hi Ashish,

You are absolutely right here. It’s actually a great point that I realized much later, thanks to a discussion with a very learned investor. The cost of capital for markets is around 15% and hence it should trade at book only… I had made a mistake on this one. I had looked at it from a historical multiples view. Ignored the fact that the ROEs will deteriorate owing to the new CCEA regulations… Once I realized this, I had exited my position. Thanks for bringing this point though. I think its a very powerful point.

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If ROEs are still capped, whats causing NTPC to quote at P/B of 2 now?? Is it the new CERC Tariff Regulations for 2025-29 anticipated to be more beneficial to power producers?