Power sector is highly relay on coal as thermal sector accounts 70% overall power production. Bringing transparency in coal auction has improved the coal production. Global coal price contracted by (-) 19% in FY16, which was growing at an average of 24%. Lower coal price, a feedstock for power sector, has dropped the raw-material costs. With the launch of DISCOM scheme, debt of the power distribution companies will be taken over gradually by the state governments. The power companies will be gradually relief from the burden of interest cost. Similarly, cost efficiency of solar sector will assist in meeting the power requirement in the country.
Category | Weight | Score | Rating |
Industry Risk Score | 100% | 2.88 | BB+ |
Business Risk | 85.0% | 2.80 | BB+ |
Demand-Supply | 20% | 5.00 | |
Nature and Extent of competition | 20% | 3.00 | |
Input related risk | 25% | 2.00 | |
Government regulation | 35% | 2.00 | |
Financial Risk | 15.0% | 3.33 | BBB |
EBIT (5 year) | 33% | 6.0 | |
EBIT Std. Dev. | 0% | 5.0 | |
ROCE (5 year) | 33% | 2.0 | |
D/E% (5 year) | 33% | 2.0 |
Source: Acuité Research; Ace Equity
Key Risks & Attributes