The general consensus among big bankers and fund managers is that NTPC is a good buy. I am not here to say whether it is a good buy or not. In fact personally I hold enough NTPC in the family portfolio to be happy about the consensus view.

However this article is about NTPC as a company. Typically like any PSU company surely it must be having to please its babu bosses and that must be tough. The government of India forgets that PSU units are supposed to make profits and the government is supposed to subsidize if at all. Look at this news item:

“The power ministry has ruled out any possibility of allowing state-owned power major NTPC to sell power in the open market as they feel they are already making profits and in case of any problem or a disaster-like situation that can occur in a state, and if they need power at that point of time, NTPC cannot expect them to buy it at market price. The government is of the view that NTPC should concentrate on other avenues in the power sector, such as wind and solar energy, rather than focusing on making profits through the selling of merchant power in open market. At present, NTPC sells 100% of its generation to the state power utilities, distribution companies through long-term power purchase agreements. This exchange takes place as per the allocation finalized by the Union power ministry and based on the tariff determined by the central power sector regulator, the CERC.”

Ntpc has to get people at market rates (ok the real good ones leave), they buy everything else at market rates, but they can sell their end product at a POLITICALLY DETERMINED price.

Happily or sadly most of the shares that I bought have been at prices ranging from 72 to Rs. 122. However this still does not insulate me from the rogue promoter damaging the company. Of course for people who may not know, NTPC will be allowed to sell @ commercial rates from April 2011 anyway. If N T P c were owned by the Tatas instead of the government of India, I guess it would be quoting at Rs. 500 already. Rs. 500 seems to be the 2013 price of NTPC. This is the price for having a rogue promoter.

It is surely a good buy – all the big players want mandates from the rogue promoter for future issues of power companies – fpo, ipo, …etc.