Sector Thematic Power Reforms essential for rennaissance While the demand for power had been impacted by the pandemic in 1HFY21, its revival has been far exceeded everyone’s expectation. H2FY21 saw 7.5% yoy growth in both demand and generation, which curbed the FY21 decline in power demand to only 1%. We expect FY22 to witness 12% yoy growth in demand and generation, led by recovery across the economic activities and low FY21 base. However, the pandemic has further aggravated the ailing financial status of the discoms, resulting in a steep rise in discom dues towards the gencos (scaling a new peak of INR1.4tn in Jan’21) and eventually a sharp rise in its borrowings. While the proposed reform measures like the Draft Electricity Amendment Bill will act as a silver lining towards reviving the sector, its successful implementation remains a key trigger to watch out for. We initiate coverage on the sector with the hope that a revival would take place, given these reforms could improve the discoms efficiencies and financials. We initiate our positive stance on NTPC, PGCIL, CESC, Tata Power, Torrent Power and NHPC, based on their risk averse regulatory business models, growth opportunities, healthy balance sheets and attractive valuations (~0.7x FY23 BV). Anuj Upadhyay Power
[email protected] +91-22-6171-7330 19 April 2021 Sector Thematic Indian Power Sector Reforms essential for rennaissance While the demand for power had been impacted by the pandemic in 1HFY21, its Upside Company Reco TP revival has been far exceeded everyone’s expectation. H2FY21 saw 7.5% yoy growth (%) in both demand and generation, which curbed the FY21 decline in power demand NTPC Buy 143 40% to only 1%.