Shares of NHPC, the state-owned hydropower company, saw a sharp decline of 4.95% on Friday, dropping to ₹80.34 on the BSE after the company posted disappointing results for the second quarter of the financial year 2024-25 (Q2FY25). The company's performance, particularly in terms of net profit, failed to meet market expectations, leading to a significant drop in its stock price.
Q2FY25 results reflect decline in profits
For the quarter ended September 30, NHPC reported a notable 37% decrease in consolidated net profit, falling to ₹1,069.28 crore, compared to ₹1,693.26 crore during the same period last year. This decline was mainly attributed to exceptional expenses that were incurred during the quarter. Despite this setback, the company reported a positive growth in its total income, which rose by 9.25% to ₹3,402.09 crore, up from ₹3,113.82 crore in Q2FY24.
Increase in expenses amid rising costs
While NHPC experienced growth in its income, its expenses also surged, increasing by 16.37% to ₹1,831.08 crore, up from ₹1,573.54 crore in the corresponding period last year. The increase in costs is one of the factors contributing to the lower profit margins observed in the latest quarter. Additionally, the company made significant payments under the government's "Vivad se Vishwas II" scheme, settling contractor claims amounting to ₹203.12 crore during the quarter, which added to the overall financial pressure.
Stock performance and market outlook
Despite the recent drop in share price, NHPC has shown strong performance over the past year. The stock has gained 60.8% in the last 12 months, and 24.5% year-to-date, outpacing the broader market indices. At the time of writing, the company's market capitalisation stands at ₹82,409.47 crore, and it continues to trade at a price-to-earnings (P/E) multiple of 22.86, with an earnings per share (EPS) of ₹3.70. These figures highlight NHPC's continued growth potential, despite the short-term challenges faced in Q2FY25.
Opportunities for investors in the share market
For those looking to invest in stocks, NHPC presents a mixed opportunity. On one hand, the company's performance in the last quarter reflects some challenges, particularly with rising expenses and exceptional costs. On the other hand, its long-term growth prospects, particularly in the hydropower sector, remain strong. Investors considering NHPC should evaluate their investment strategy carefully, keeping an eye on the company's efforts to manage expenses and capitalise on its substantial market share in the energy sector.
Looking ahead
NHPC's results for Q2FY25 may have been disappointing, but the company's diversified portfolio and involvement in critical energy infrastructure projects across India place it in a strong position for future growth. For those looking to invest in stocks, NHPC remains a viable option, although it's important to stay updated on its financial performance and market dynamics. As the company works to strengthen its financial position and expand its reach, its stock could become an attractive option for long-term investors.
With robust plans in place, NHPC could still offer promising returns for those with a strategic view of the energy sector and the future of renewable power.
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