Excerpt from an interview with Devem Choksi from K R Choksey.
Q: How would you approach Reliance Power now?
Deven Choksi: I think if you look at the comparable space, then you find a probable answer to that.
Reliance Power with about 5500 mw of capacity in 2012 would be comparatively lower to Tata Power’s 10,000-mw capacity and NTPC’s 15,000 mw capacity in 2012.
If you extrapolate these numbers and further calculate the enterprise value, if per mw issue is calculated, then in case of Tata Power, the enterprise value comes out somewhere around Rs 2.75 crore per mw and in case of NTPC, it is at around Rs 3.4 crore per mw. In case of Reliance Power, it is around Rs 50.5 crore per mw. So from these numbers, it’s clearly established that Reliance Power is an expensive stock even from that point of view and even in 2012.
If one has to look at the near term and then look at the long-term - in the near term, NTPC offers a better opportunity if one has to invest in power space because at FY09 earnings estimate of Rs 11.5 per share, you would probably find NTPC available at close to Rs 16 versus Tata Power’s relative valuations of around Rs 22.
So in my viewpoint, NTPC would be a safer bet and Reliance Power would be far off as far as this calculation goes. So, clearly the choice would be NTPC if one has to go into power space or generation space, which is expected to grow around 15%-20% in next two to three years on a CAGR basis.