Power stocks rally on restructuring of loans for SEBs; BHEL up 6%

NEW DELHI: Power sector stocks such as BHEL, Tata Power, Power Finance Corp and REC registered smart gains in a choppy market on Monday on the hopes of restructuring of loans for state electricity boards.

The market will be closely watching any update on debt restructuring in state electricity boards (SEBs), easier overseas borrowing and fate of reform proposals like higher foreign direct investment in the insurance sector this week.

“Concrete announcements on the restructuring of SEB debt would boost power sector stocks. We could see some movement especially in many beaten-down shares, including those of utilities,” said Sandip Sabharwal, CEO - PMS at Mumbai-based broker Prabhudas Lilladher, in an ET report.

“The market looks directionally positive. But with the lack of further news flow, it could consolidate before eventually moving to new highs,” he said.

At 11:00 am, BHEL was trading 6 per cent higher at Rs 246.45 and is the top Sensex gainer in a weak market. It has hit a high of Rs 249.20 and a low of Rs 234.90 today.

Tata Power Ltd was trading 3.7 per cent higher at Rs 442.55. It has hit a low of Rs 104 and a high of Rs 107.25 today. Rural Electrification was trading 5.5 per cent higher at Rs 231.45 and Power Finance Corporation advanced 3.6per cent to Rs 201.80.

BSE Power Index surged nearly 3 per cent in early trade, led by gains in Adani Power which was trading 6.2 per cent higher at Rs 49.80, Lanco Infratech advanced by 10 per cent to Rs 15.20 and Suzlon Energy was up 6 per cent higher at Rs 18.30.

With the government in an overdrive mode on reforms, it is expected that the SEB bailout/restructuring would be the next on the agenda.

Chaturvedi panel’s recommendations are likely to be adopted which will entail 50 per cent of the short term debt to be taken over by the respective states and the balance 50 per cent to be restructured by the banks. “The recommendations would be a long term positive for the sector if the discipline of tariff revisions is maintained,” CLSA said in a note.

According to the research firm, the biggest relief would be to the lenders while it is also positive for the generators and equipment suppliers. “Power Grid, NTPC and BHEL are our preferred picks as of now, but we would keep a watch of fuel related reforms which would be incrementally more positive for the IPPs,” CLSA added.