Industry Risk Score: Energy - Power Generation

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

  • Regulations
  • State ownership
  • Availability of fuel
  • Environmental impact
  • Execution risk