Invest in Power Sector - Use the Ministry Initiated Reform for Better Return


In the last 6 months, Indian power sector witnessed merger and acquisition happening across Power sector. It is an indication that consolidation is underway and stretched power companies are trying to sell their jewel assets at throw away price to meet their debt servicing obligation. Thanks to stretched public sector bank who generously offered loans to power sector is now reeling under major NPA issue in the power sector.

The recent acquisition of AdaniPower of Lanco Infratech Udipi plant, Tata Power acquisition of Welspun group renewal power plant, JSW Energy acquisition of JP associate Bina plant as well Jindal Steel & Power' s Chhattisgarh thermal plant constitute of total M&A of around $4Bn. It will help Indian Bank to recover much needed cash which they can repump into the system as well as open the opportunity for the acquirer to stabilize the tariff in the market place. 

At the same time ReliancePower and Adani agreed to venture out to Bangladesh to set up the power plant over there. At the same time Power ministry of UDAY program offered the comfort zone to state dis comm. The power ministry close collaboration with Power sector firms and firm policy help government to auction coal blocks which many power company to run their plant efficiently and effectively.

Investor should remember that Indian economy on the verge major growth path and in case GST comes into forcethen GDP will have another 2% point growth. In the economic growth environment the first sector which gets benefited is power and metal. Reliance Power, Adani Power, JSW Energy should be in investor radar and investor must take market correction in order to accumulate shares in order to keep the price point lower.

Disclaimer - Please consult your financial adviser

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