NTPC Q2 FY25 results

NTPC Q2 FY25 Results: Profit Growth Amid Revenue and Margin Challenges

The government-run power company, NTPC, has reported a 13.8% increase in consolidated profits for the July-September quarter, amounting to ₹5,380 crore, compared to ₹4,726 crore during the same period last year. This figure surpassed analyst expectations, as estimates from Bloomberg anticipated a net profit of ₹5,035.43 crore. However, the company faced challenges as its revenues and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell on an annual basis, missing analyst forecasts.

Key Highlights from NTPC Q2 FY25 Results (Consolidated, YoY)

Revenue: Decreased by 0.6% to ₹44,696 crore (Bloomberg estimate: ₹47,007.3 crore)
EBITDA: Decreased by 8% to ₹11,655 crore (Bloomberg estimate: ₹13,237.3 crore)
Margin: Contracted to 26.1% from 28.2% (Bloomberg estimate: 28.2%)
Net Profit: Increased by 13.8% to ₹5,380 crore (Bloomberg estimate: ₹5,035.43 crore)

Revenue Decline and Margin Contraction

The decline in revenue is attributed to lower gross power generation and only a marginal uptick in average tariffs. In Q2 FY25, NTPC’s gross and commercial generation saw year-on-year downticks of 2.04% and 1.57%, respectively. Both gross and commercial generation from solar and hydro stations stood at 88.463 billion units during this quarter.

NTPC’s EBITDA fell by 10% year on year, resulting in a 210 basis point contraction in margins. A key driver for this margin pressure was a 57% increase in the company’s “other expenses,” highlighting the impact of rising operational costs.

Factors Behind Profit Increase

Despite the challenges in revenue and margins, NTPC reported an uptick in profits, primarily due to a ₹2,336 crore net movement in regulatory deferral accounts balances. This term refers to the adjustment in the balance of accounts tracking the difference between a utility’s allowed revenue and its actual revenue.

In regulated industries like utilities, these accounts monitor the effects of rate-making lags, regulatory adjustments, and deferred taxes. An increase in these accounts suggests that NTPC has collected more revenue than allowed, ultimately boosting profits.

Plant Load Factor Analysis

The Plant Load Factor (PLF) for NTPC also saw decreases across almost all segments. The gas and small hydroelectric segments recorded declines of 11.48% and 21.91% year on year, respectively. Notably, the hydro segment experienced a slight increase of 4.21% in its PLF.

A decrease in PLF indicates that power plants are not being utilized to their full capacity, which can suggest operational issues or unplanned downtime.

Installed Capacity Growth

NTPC’s capacity has seen an uptick, with the NTPC Group’s total capacity reaching 76,443 MW as of September 2024, compared to 73,824 MW a year earlier. The standalone installed capacity for NTPC has increased by 2.3% year on year, reaching 59,168 MW.

Conclusion

In summary, NTPC’s Q2 FY25 results reflect a complex landscape of profit growth juxtaposed with declining revenues and margins. While the increase in profits is commendable, driven largely by regulatory adjustments, the company faces challenges related to operational efficiency and rising costs. Stakeholders should closely monitor NTPC’s strategies to enhance power generation, optimize expenses, and manage regulatory dynamics as they navigate the upcoming quarters.