Technical & Fundamental Analysis Of Power Sector Firms (equity)

‐BY  Richard Rinu Viral Soni

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Infrastructure Infrastr ct re typically t picall refers to the technical structures that support a society, such as roads, water supply, wastewater, power grids, flood management systems, t communications i ti (internet, (i t t phone h lines, li broadcasting), and so forth.

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IIn th the past, t these th systems t have h typically t i ll been b ownedd and managed by local or central governments.

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These various Th i elements l t may collectively ll ti l be b termed t d civil infrastructure, municipal infrastructure, or simply public works, although they may be developed and operated t d as private-sector i t t or governmentt enterprises. t i

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Social infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment and social welfare. The economy cannot be looked at in isolation without considering the basic needs of the people, and a significant level of investment is needed in this sector

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The term `Social Sector' refers to the factors, which contribute to human capital formation and human development. development Some of the important subsub sectors of social sector are education, health and medical care, housing and water supply. Social development is recognised not only as a means to development, but also an end in itself, in terms of expanded individual opportunities capabilities and freedom. opportunities, freedom Improvements in the social sector pave the way for equity and in turn for economic development. The Governments, both at the Centre and State, have been increasingly providing public goods in crucial areas such as education, health, sanitation housing, sanitation, housing etc etc.

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They are large networks constructed over generations which are not often replaced as a whole system

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The system or network has a long life because its service capacity is maintained by continual refurbishment or replacement of components as they wear out.

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The system components are interdependent and not usually capable of subdivision or separate disposal, and consequently q y are not readilyy disposable p within the commercial marketplace.

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The assets have a high initial cost and a value which is diffi lt to difficult t determine. d t i

These have included promotion of Development Finance Institutions (DFIs) such as the ƒ

Ind strial Development Industrial De elopment Bank of India (IDBI) (IDBI),

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Industrial Finance Corporation of India (IFCI) and

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The Industrial Credit and Investment Corporation of India (ICICI)

and specialised entities such as the ƒ ƒ

Power Finance Corporation (PFC), Infrastructure Development and Finance Corporation (IDFC),

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Urban Infrastructure Development Fund (UIDF) and

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Tamil Nadu Urban Infrastructure Development Fund (TNUDF).

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The -Partnership h concept off Public-Private bli i hi is i generally seen as one of these models: ƒ Build-Operate-Transfer (BOT) ƒ Build-Operate-Own-Transfer (BOOT) ƒ Build-Operate-Lease-Transfer (BOLT) ƒ Design-Build-Finance-Operate-Transfer (DBFOT)

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In INDIA full blown Private Sector Participation models have not been put into place, so far.

POWER SECTOR

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First Hydro Power Plant in Asia installed in India at Darjeeling on 10th Nov 1897. Capacity 65 kW

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First Thermal Power Plant in India commissioned in India at Calcutta in 1899 by CESC. CESC Capacity 1000 kW. kW

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First High Voltage transmission line in India commissioned in 1902 of 78 kV in Mysore state for evacuating power to Kolar Gold Mines.

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The Transmission and Distribution network was about 30000circuit km in 1947, which by 2002 had grown to about 5000 million- circuit km.

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Power Generating capacity in 1947 in India was 1345 MW.

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Power Generating Capacity in Gujarat in 1960 was 315 MW i l di 110 MW off A.E.Co. including AEC

CEA Regional Electricity Boards State Electricity Boards

Own P Power Stations

Private Power Plants and Captive power Plants with parallel operating

Transmissi on Network N t k of SEB

Load D Despatch t h

Power Grid Corporation of India Transmission Network

Regional Load Despatch Centers

Distribution D Department

Commerci Departmen

NTPC , NHPC and NPC Power Plants

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Electricity El t i it Act A t 2003 : was brought b ht in i to t enable bl the process of privatisation of the Transmission and Distribution of electricityy in the country. y

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The effect of this act repealed the earlier Indian El t i it Act Electricity A t 1910 andd Electricity El t i it Supply S l Act A t 1948.

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The Act provides to replace the Indian Electricity Rules 1956 which were formulated under section 36 off Indian I di Electricity El i i Act A 1910. 1910

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Thus a uniform Act is applicable now in the country to regulate the power industry to ensure an integrated and disciplined grid.

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The State Regulatory Commissions are vested with the responsibility to ensure the operational discipline and to ensure quality of service and quality power being delivered to consumers.

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It is also their responsibility to define grid codes, codes regulations and standards for electric supply in their jurisdictional areas and rationalise price of electricity in the state.

Central Electricity Regulatory Authority

State Electricity Regulatory Authority

Power Trading Companies

State Gencos, Private Generating Companies, Captive Power Plants

Central Power Generating Companies ( NTPC,, NPC,, NHPC))

Transmission Companies

Distribution Companies

National Load Despatch Company

Regional Load Despatch Companies

State Load Despatch Companie s

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According to the government, the country was facing a power shortage of 70,000 MW in 2006-07 and assured that several measures, including a change in policy, were being considered to fulfill the requirement.

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Policy & Incentive ƒ

FDI up to 100% is permitted on the automatic route in all segments except atomic power ƒ Ten-year tax holiday for generation and distribution or transmission and distribution of power ƒ

Institutional Reforms ƒ

The Electricity Act 2003 allows trading in power and provides for further deregulation; ƒ Independent Regulator in most states ƒ

Share of Installed Capacity

Nuclear 2%

Investment Opportunities

Hydro+W ind 22%

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Additional capacity required 100,000 MW till 2012 ƒ Investment US$120 billion needed ƒ Financial closure of over 6000 MW capacity achieved in last one year

Thermal 76%

14

1.

Longer maturity

2.

Larger amounts

3.

Higher risks

4.

Fixed and low (but positive) real returns

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NTPC, the largest power Company in India, was setup in 1975 to accelerate power development in the country. It is among the world’s largest and most efficient power generation companies. In Forbes list of World’s 2000 Largest Companies for the year 2007, 2007 NTPC occupies 411th place. place

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NTPC has installed capacity of 29,394 MW. It has 15 coal based power stations (23,395 MW), 7 gas based power stations (3,955 MW) and 4 power ( , MW). ) The company p y has ppower ggenerating g stations in Joint Ventures(1,794 facilities in all major regions of the country. It plans to be a 75,000 MW company by 2017.

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NTPC has gone beyond the thermal power generation. It has diversified into h d power, coall mining, hydro i i power equipment i manufacturing, f i oil il & gas exploration, power trading & distribution. NTPC is now in the entire power value chain and is poised to become an Integrated Power Major.

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NTPC NTPC'ss share on 31 Mar 2008 in the total installed capacity of the country was 19.1% 19 1% and it contributed 28.50% of the total power generation of the country during 2007-08. NTPC has set new benchmarks for the power industry both in the area of power plant construction and operations.

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With its experience and expertise in the power sector, sector NTPC is extending consultancy services to various organisations in the power business. It provides consultancy in the area of power plant constructions and power generation to companies in India and abroad.

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In November 2004, NTPC came out with its Initial Public Offering (IPO) consisting of 5 25% as fresh issue and 5.25% 5.25% 5 25% as offer for sale by Government of India. India NTPC thus became a listed company with Government holding 89.5% of the equity share capital and rest held by Institutional Investors and Public. The issue was a resounding success. NTPC is among the largest five companies in India in terms of market capitalization.

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Recognising its excellent performance and vast potential, potential Government of the India has identified NTPC as one of the jewels of Public Sector 'Navratnas'- a potential global giant. Inspired by its glorious past and vibrant present, NTPC is well on its way to realise its vision of being "A world class integrated power major, powering India's growth, with increasing global presence".

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Recognised as India’s largest private sector power utility, utility with a reputation for trustworthiness, built up over nearly nine decades, Tata Power surges ahead into yet another year with plans of sustained growth growth, greater value to consumer and reliable power supply.

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Led by a powerful vision, Tata Power pioneered the generation of electricity in India. It has now successfully served the Mumbai consumers for over ninety years and has spread p its footprints p across the nation. Today, y it is the country’s largest private player in the sector. Apart from Mumbai and Delhi, the company has generation capacities in Jojobera, Jharkhand and Karnataka.

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Tata Power has an installed power generation capacity of above 2300 Mega Watts, with the Mumbai power business, which has a unique mix of Thermal and Hydro Power, generated at the Thermal Power Station, Trombay and the Hydro Electric Power Stations at Bhira, Trombay, Bhira Bhivpuri and Khopoli, accounting for 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money.

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Among its many achievements that Tata Power can proudly boast of are the installation and commissioning of India’s first 500 MW unit (at its Thermal Power Generating Station, Trombay) the 150 MW Pumped Storage Unit at its Hydro Generating Station, Station Bhira, Bhira and environmental control systems like the Flue Gas Desulphurisation plant.

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Tata Power has a first of its kind joint venture with Power Grid Corporation of India for the 1200 km Tala Transmission Project Project.

(Rs in Cr.)

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

8 245 50 8,245.50

8 245 50 8,245.50

8 245 50 8,245.50

8 245 50 8,245.50

7 812 50 7,812.50

Share Application Money

0.00

0.00

0.00

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

44 393 1 44,393.1

40 351 3 40,351.3

36 713 2 36,713.2

33 530 8 33,530.8

28 116 0 28,116.0

Secured Loans

8,688.10

7,479.60

6,173.50

4,778.10

4,743.50

U Unsecured d Loans L

19 875 9 19,875.9

17 661 50 17,661.50

14 464 60 14,464.60

12 647 10 12,647.10

10 868 40 10,868.40

81,202.60

73,737.90

65,596.80

59,201.50

51,540.40

SOURCES OF FUNDS Owner's Fund Equity Share Capital

Reserves & Surplus Loan Funds

Total

USES OF FUNDS Mar ' 08

Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04

53,368.00

50,604.20 45,917.60 42,996.10 39,933.70

Fixed Assets Gross Block Less : Revaluation Reserve

0.00

0.00

0.00

0.00

0.00

Less : Accumulated Depreciation

27,274.30

25,079.20 22,950.10 20,791.40 18,773.60

N Bl Net Blockk

26 093 70 26,093.70

25 525 00 22,967.50 25,525.00 22 967 50 22,204.70 22 204 70 21,160.10 21 160 10

Capital Work-in-progress

22,478.30

16,962.30 13,756.00 10,038.60

Investments

15,267.20

16,094.30 19,289.10 20,797.70 17,338.00

7,589.70

Net Current Assets Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Current Assets, Loans & Advances

30,527.80 25,858.80 18,234.80 14,721.80 14,642.40

Less : Current Liabilities & Provisions

13,164.40 10,702.50

8,650.60

8,561.30

9,189.80

Total Net Current Assets

17,363.40 15,156.30

9,584.20

6,160.50

5,452.60

0 00 0.00

0 00 0.00

0 00 0.00

Mi ll Miscellaneous expenses nott written itt Total

0 00 0.00

0 00 0.00

81,202.60 73,737.90 65,596.80 59,201.50 51,540.40

Note : Book Value of Unquoted Investments Market Value of Quoted Investments Contingent liabilities Number of Equity shares outstanding (Lakhs)

15,453.10 18,008.20 18,409.60 17,684.90 17,318.80 304.30

316.40

951.60

3,524.90

19.20

29 361 80 25,218.80 29,361.80 25 218 80 16,429.80 16 429 80 16,680.00 16 680 00

8 746 50 8,746.50

82,454.64 82,454.64 82,454.64 82,454.64 78,125.49

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

SOURCES OF FUNDS Owner's Fund E i Share Equity Sh Capital C i l

220 72 220.72

197 92 197.92

197 92 197.92

197 92 197.92

197 92 197.92

Share Application Money

60.99

0.00

0.00

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

7,771.12

5,793.03

5,315.91

4,896.74

4,810.61

2,331.09

1,354.30

946.00

1,059.07

721.73

752.26

2,321.22

1,850.81

1,842.75

1,041.50

11,136.18

9,666.47

8,310.64

7,996.48

6,771.76

Reserves & Surplus Loan Funds Secured Loans Unsecured Loans Total

USES OF FUNDS Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

6,481.99

6,229.71

5,924.74

5,465.84

5,534.70

0.00

0.00

0.00

0.00

0.00

Less : Accumulated Depreciation

3,476.50

3,199.40

2,921.72

2,657.37

2,364.36

Net Block

3,005.49

3,030.31

3,003.02

2,808.47

3,170.34

Capital Work-in-progress

1,681.74

781.05

211.81

438.19

306.39

Investments

4,430.00

3,570.15

3,412.17

3,502.92

2,728.83

Gross Block

Less : Revaluation Reserve

Net Current Assets Current Assets, Loans & Advances Less : Current Liabilities & Provisions Total Net Current Assets Miscellaneous expenses not written Total Note : Book Value of Unquoted Investments Market Value of Quoted Investments Contingent liabilities Number of Equity shares outstanding (Lakhs)

3,956.73

4,105.04

3,035.72

2,587.88

2,005.23

1 939 47 1,939.47

1 826 25 1,826.25

1 367 54 1,367.54

1 363 69 1,363.69

1 454 64 1,454.64

2,017.26

2,278.79

1,668.18

1,224.19

550.59

1.69

6.17

15.46

22.71

15.61

11,136.18

9,666.47

8,310.64

7,996.48

6,771.76

3,736.23

2,810.80

2,579.70

2,794.29

2,065.59

910.02 1,231.08

995.10 1,314.86

1,284.68 313.09

972.97 434.04

803.12 471.53

2,207.00

1,978.98

1,978.98

1,978.98

1,978.98

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

37,091.00

32,631.70

26,142.90

22,565.00

18,868.40

26.80

23.70

25.00

17.90

15.10

23,080.70

20,790.50

17,202.20

14,390.80

12,826.50

2,229.30

1,362.60

1,137.50

997.10

961.00

45.00

57.70

40.40

46.40

43.20

682.60

656.00

569.60

-101.30

77.40

-544 70 -544.70

-418 40 -418.40

-256 40 -256.40

-74 80 -74.80

-256 20 -256.20

Cost of Sales

25,519.70

22,472.10

18,718.30

15,276.10

13,667.00

Operating Profit

11,571.30

10,159.60

7,424.60

7,288.90

5,201.40

Income : Operating Income Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Adminstrative Expenses Expenses Capitalised

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

11,571.30

10,159.60

7,424.60

7,288.90

5,201.40

2,957.60

2,760.90

2,669.40

2,459.70

6,132.80

14,528.90

12,920.50

10,094.00

9,748.60

11,334.20

Financial Expenses

2 026 40 2,026.40

2 055 70 2,055.70

2 004 60 2,004.60

1 701 60 1,701.60

3 372 70 3,372.70

Depreciation

2,138.50

2,075.40

2,047.70

1,958.40

2,023.20

3.10

9.90

1.30

0.40

9.50

Adjusted PBT

10,360.90

8,779.50

6,040.40

6,088.20

5,928.80

Tax Charges

2,994.20

2,163.70

1,082.40

834.80

1,658.30

Adjusted PAT

7,366.70

6,615.80

4,958.00

5,253.40

4,270.50

Operating Profit Other Recurring Income Adjusted PBDIT

Other Write offs

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

7,366.70

6,615.80

4,958.00

5,253.40

4,270.50

162 10 162.10

114 70 114.70

228 50 228.50

-21 21.10 10

-23 23.20 20

-114.00

134.20

633.70

574.70

1,013.50

po d Net Profit o Reported

7,414.80 , 80

6,864.70 6,86 0

5,820.20 5,8 0 0

5,807.00 5,80 00

5,260.80 5, 60 80

Earnigs Before Appropriation

7,504.70

6,939.90

5,901.40

5,863.60

5,328.90

Equity Dividend

2,885.90

2,638.50

2,308.70

1,979.00

1,082.30

0.00

0.00

0.00

0.00

0.00

490.50

389.60

323.80

268.00

138.70

4,128.30

3,911.80

3,268.90

3,616.60

4,107.90

Adjusted PAT Non Recurring Items Other Non Cash adjustments

Preference Dividend Dividend Tax Retained Earnings

Mar ' 08

Mar ' 07

Mar ' 06

Mar ' 05

Mar ' 04

5,909.60

4,918.53

4,553.23

3,918.85

4,197.73

4,300.69

3,456.54

3,198.23

2,474.83

2,389.04

Manufacturing Expenses

241.47

187.92

167.45

171.66

122.50

P Personnel l Expenses E

249 69 249.69

196 35 196.35

173 68 173.68

155 40 155.40

191 61 191.61

35.18

255.39

54.48

61.27

127.61

179.04

125.95

124.13

171.50

101.95

-2.22

-5.36

-5.38

-20.30

-4.14

5,003.85

4,216.79

3,712.59

3,014.36

2,928.57

905.75

701.74

840.64

904.49

1,269.16

Income : Operating Income Expenses Material Consumed

Selling Expenses Adminstrative Expenses Expenses p Capitalised p Cost of Sales Operating Profit

Mar M ' 08 905.75

Mar M ' 07 701.74

Mar M ' 06 840.64

Mar M ' 05 904.49

Mar M ' 04 1,269.16

151.40

335.89

170.49

143.17

143.61

1,057.15

1,037.63

1,011.13

1,047.66

1,412.77

p Financial Expenses Depreciation Other Write offs

171.82 290.50 5.01

187.11 291.92 9.82

152.62 278.34 9.82

179.75 359.62 18.20

279.94 333.95 108.52

Adjusted PBT

589 82 589.82

548 78 548.78

570 35 570.35

490 09 490.09

690 36 690.36

Tax Charges

132.35

70.03

130.68

170.11

209.67

Adjusted PAT

457 47 457.47

478 75 478.75

439 67 439.67

319 98 319.98

480 69 480.69

Operating Profit Other Recurring Income Adjusted PBDIT

Mar M ' 08

Mar M ' 07

Mar M ' 06

Mar M ' 05

Mar M ' 04

Adjusted PAT

457.47

478.75

439.67

319.98

480.69

Non Recurring Items Other Ot e Non o Cas Cash adjustments

380.30

39.88

175.18

265.30

42.09

32.13

178.17

-4.41

-33.92

4.07

Reported Net Profit

869.90

696.80

610.54

551.36

509.08

Earnigs Before Appropriation

869.90

696.80

610.44

551.36

526.85

Equity Dividend

241.38

188.22

168.41

148.60

138.69

0.00

0.00

0.00

0.00

0.00

26.95

31.99

23.42

21.30

17.77

601.57

476.59

418.61

381.46

370.39

Preference Dividend Dividend Tax Retained Earnings

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Per share Ratios Profitability Ratios (%) Leverage Ratios 

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 PER SHARE RATIOS(Rs.) Reported EPS

8.99

8.33

7.06

7.04

6.73

Dividend Per Share

3.50

3.20

2.80

2.40

1.39

14.03

12.32

9.00

8.84

6.66

Operating Profit Per Share

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 PER SHARE RATIOS(Rs.)

Reported EPS

39.42

35.21

30.85

27.86

25.72

Dividend Per Share

10.50

9.50

8.50

7.50

7.00

Operating Profit Per Share

41.04

35.46

42.48

45.70

64.13

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Operating Margin

31.19

31.13

28.40

32.30

27.56

Gross Profit Margin

25.43

24.77

20.56

23.62

16.84

Nett P N Profit fit M Margin i Reported Return On Net Worth

18 51 18.51

19 39 19.39

20 20 20.20

23 20 23.20

21 04 21.04

14.08

14.12

12.94

13.90

14.64

Return On long Term Funds

15.25

14.69

12.26

13.15

18.04

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Operating Margin

15.32

14.26

18.46

23.08

30.23

Gross Profit Margin

10.41

8.33

12.34

13.90

22.27

Net Profit Margin Reported Return On Net Worth

14.35

13.26

12.92

13.57

11.72

10 88 10.88

11 64 11.64

11 10 11.10

10 87 10.87

10 19 10.19

7.05

7.62

8.72

8.40

14.38

Return On long Term Funds

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Long Term Debt / Equity

0.54

0.51

0.45

0.41

0.43

Total Debt/Equity Owners fund as % of total Source Fixed Assets Turnover Ratio

0.54

0.51

0.45

0.41

0.43

64.82

65.90

68.53

70.56

69.70

0.69

0.64

0.56

0.52

0.47

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 g Term Debt / Equity q y Long

0.34

0.60

0.49

0.55

0.33

Total Debt/Equity Owners fund as % of total Source Fixed Assets Turnover Ratio

0.38

0.61

0.50

0.56

0.35

72.15

61.97

66.34

63.71

73.96

0.91

0.78

0.76

0.71

0.75

ƒ ƒ ƒ

Trend Analysis Simple Moving Average Support – Resistance Levell

18‐112‐2007 01‐0 04‐2008 21‐0 01‐2008 02‐0 05‐2008 20‐0 02‐2008 03‐0 07‐2008 26‐0 03‐2008 04‐110‐2008 29‐0 04‐2008 15‐0 05‐2008 06‐0 02‐2008 17‐0 06‐2008 07‐0 02‐2008 17‐0 07‐2008 08‐0 01‐2008 19‐0 08‐2008 09‐0 04‐2008 19‐0 09‐2008 10‐0 07‐2008 23‐110‐2008 11‐110‐2008 26‐111‐2008

NTPC

300

250

200

150

100

50

0 Close  Price

18‐12‐2 2007 01‐04‐2 2008 21‐01‐2 2008 02‐05‐2 2008 20‐02‐2 2008 03‐07‐2 2008 26‐03‐2 2008 04‐10‐2 2008 29‐04‐2 2008 15‐05‐2 2008 06‐02‐2 2008 17‐06‐2 2008 02‐07‐2 2008 17‐07‐2 2008 01‐08‐2 2008 19‐08‐2 2008 04‐09‐2 2008 19‐09‐2 2008 07‐10‐2 2008 23‐10‐2 2008 10‐11‐2 2008 26‐11‐2 2008

TATA POWER

1800

1600

1400 4

1200

1000

800

600 Close Price

400

200

0

12‐11‐20077 19‐12‐20077 31‐12‐20077 01‐08‐2008 8 16‐01‐2008 8 24‐01‐2008 8 02‐01‐2008 8 02‐11‐2008 8 19‐02‐2008 8 27‐02‐2008 8 03‐07‐2008 8 17‐03‐2008 8 27‐03‐2008 8 04‐04‐2008 8 15‐04‐2008 8 24‐04‐2008 8 05‐05‐2008 8 13‐05‐2008 8 22‐05‐2008 8 30‐05‐2008 8 06‐09‐2008 8 17‐06‐2008 8 25‐06‐2008 8 07‐03‐2008 8 07‐11‐2008 8 21‐07‐2008 8 29‐07‐2008 8 08‐06‐2008 8 14‐08‐2008 8 25‐08‐2008 8 09‐02‐2008 8 09‐11‐2008 8 19‐09‐2008 8 29‐09‐2008 8 10‐08‐2008 8 17‐10‐2008 8 27‐10‐2008 8 11‐05‐2008 8 14‐11‐2008 8 24‐11‐2008 8

300

250

200

150 Closing Price

10 Days avg

100 30 days avg

50

0

12‐11‐2007 19‐12‐2007 31‐12‐2007 01‐08‐2008 16‐01‐2008 24‐01‐2008 02‐01‐2008 02‐11‐2008 19‐02‐2008 27‐02‐2008 03‐07‐2008 17‐03‐2008 27‐03‐2008 04‐04‐2008 15‐04‐2008 24‐04‐2008 05‐05‐2008 13‐05‐2008 22‐05‐2008 30‐05‐2008 06‐09‐2008 17‐06‐2008 25‐06‐2008 03‐07‐2008 11‐07‐2008 21‐07‐2008 29‐07‐2008 06‐08‐2008 14‐08‐2008 25‐08‐2008 02‐09‐2008 11‐09‐2008 19‐09‐2008 29‐09‐2008 08‐10‐2008 17‐10‐2008 27‐10‐2008 05‐11‐2008 14‐11‐2008 24‐11‐2008

1800

1600

1400

1200

1000

800 Close

10 Days Avg

600 30 Days Avg

400

200

0

NTPC

Buy/Sell

Date

TATA POWER

Price

Profit

Sell

23-01-2008

223.70

Buy

04-03-2008

194.25

Sell

04-09-2008

187.70

Buy

29-04-2008

194.65

Sell

20-05-2008

186.00

Buy

16-07-2008

162.30

Sell

27-08-2008

171.20

Buy

26-09-2008

174.10

Sell

10-07-2008

175.90

Buy

28-11-2008

159.60 Total=

29.45

‐6.95

23.70

‐2.90

16.30 59.60

Buy/Sell

Date

Price

Profit

Sell

23-01-2008

1,233.90

Buy

27-02-2008

1,376.10

Sell

03-07-2008

1,136.30

Buy

15-04-2008

1,277.85

Sell

06-04-2008

1,165.85

Buy

31-07-2008

1,160.10

Sell

19-08-2008

1,018.35

Buy

10-09-2008

1,049.10

Sell

17-09-2008

970.1

Buy

18-11-2008

682.7

287.40

Total=

‐21.35

‐142.20

‐141.55

5.75

‐30.75

13‐02‐2 2008 20‐02‐2 2008 27‐02‐2 2008 03‐05‐2 2008 13‐03‐2 2008 24‐03‐2 2008 31‐03‐2 2008 04‐07‐2 2008 15‐04‐2 2008 23‐04‐2 2008 30‐04‐2 2008 05‐08‐2 2008 15‐05‐2 2008 23‐05‐2 2008 30‐05‐2 2008 06‐06‐2 2008 13‐06‐2 2008 20‐06‐2 2008 27‐06‐2 2008 07‐04‐2 2008 07‐11‐2 2008 18‐07‐2 2008 25‐07‐2 2008 08‐01‐2 2008 08‐08‐2 2008 18‐08‐2 2008 25‐08‐2 2008 09‐01‐2 2008 09‐09‐2 2008 16‐09‐2 2008 23‐09‐2 2008 30‐09‐2 2008 10‐08‐2 2008 16‐10‐2 2008 23‐10‐2 2008 31‐10‐2 2008 11‐07‐2 2008 17‐11‐2 2008 24‐11‐2 2008

250.00

200.00

150.00

100.00

Close Price

50 Day SMA

50.00

0.00

13‐02‐2008 20‐02‐2008 27‐02‐2008 03‐05‐2008 13‐03‐2008 24‐03‐2008 31‐03‐2008 04‐07‐2008 15‐04‐2008 23‐04‐2008 30‐04‐2008 05‐08‐2008 15‐05‐2008 23‐05‐2008 30‐05‐2008 06‐06‐2008 13‐06‐2008 20‐06‐2008 27‐06‐2008 04‐07‐2008 11‐07‐2008 18‐07‐2008 25‐07‐2008 01‐08‐2008 08‐08‐2008 18‐08‐2008 25‐08‐2008 01‐09‐2008 09‐09‐2008 16‐09‐2008 23‐09‐2008 30‐09‐2008 08‐10‐2008 16‐10‐2008 23‐10‐2008 31‐10‐2008 07‐11‐2008 17‐11‐2008 24‐11‐2008

1,600.00

1,400.00

1,200.00

1,000.00

800.00 Cl  P i Close Price

600.00 50 Days Avg

400.00

200.00

0.00

ƒ

As per this model dividends given in the previous years is used to fix a  future price for the security. 

ƒ

Here we have taken the divedend values of both the companies and with  the help of dividend values of past five years and with the help of  dividend values the expected rate of return by the investors is calculated.

ƒ

The expected rate of return is calculated by the formula       Ke= D1/P0+ g

ƒ

P0 is taken as the market price on 30th march 2008.

ƒ

D1 is the expected dividend on 2009

ƒ

Growth rate is the average rate of growth rate of dividends for the past  five years.

Year

return t security

on return t market

on Rj‐Rj'

Rm‐Rm'

(Rj‐Rj')*(Rm‐ (Rj Rj')*(R Rm')

(Rm‐Rm')^2

2002 2003 2004 2005 2006

36.04

42.44

‐12.98 12.98

18.24

‐236.78 236.78

332.78

2007

10.5

13.71

0.42

‐10.49

‐4.40

109.99

2008

23.9

16.44

0.42

‐7.75

‐3.26

60.13

23.48

24.20

‐244.45 244.45

502.90

cov(Rj,Rm)

‐122.22

251.45

beta

0.49

return on security

year

return on market

Rj-Rj'

Rm-Rm'

(Rj-Rj')*(RmRm')

(Rm-Rm')^2

2002 2003 2004 2005 2006

38 32 38.32

42 44 42.44

11 29 11.29

18 24 18.24

205 91 205.91

332 82 332.82

2007

-13.74

13.71

-40.77

-10.49

427.58

109.97

2008

56.52

16.44

29.49

-7.76

-228.72

60.17

27.033

24.20

404.76

502.96

202.38

251.48

cov(Rj,Rm) beta- tata

0.80

NTPC risk free return Re

8% 15.87 price price on 31st march2009

-147.494 49.50567

price price on 31st march2009

122.0969 122 0969 1293.097

TATA POWER risk free return Re

8% 21 03 21.03

ƒ

Then the value of beta is calculated for both the companies Then the value of beta is calculated for both the companies.

ƒ

Using the beta values and assuming risk free return as 8% returns  from the company is calculatedby the formula x Re= Rf+ (Rm‐Rj)*beta

ƒ

Returns from market and the returns from the security is  calculated from 2004‐ 2008.

ƒ

From the Re values price of the stock on march 30 2009 is  estimated by the formula P= D1/Re‐g

ƒ ƒ

The price of NTPC share on 30th march 2009 is found to be 49rs  approximately

ƒ

Similarly the price of TATA power share is expected to be Rs. 1293.

THANK YOU