Watch out for stocks like Adani Power, Tata Power, PFC and REC as electricity consumption nears pre-COVID levels

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  • With economic actvities resuming gradually across the country, the power consumption data may come as a breather for stocks in the power sector.
  • The power consumption in July 2020 was just 2.6% short of the demand exactly a year earlier.
  • Check out the latest news and updates on Business Insider.
The slump in power consumption has narrowed to just 2.64% in July at 113.48 billion units (BU) indicating spurt in economic activity and raised hopes that it would touch normal level this month. Power consumption in July last year was at 116.48 BU, as per power ministry data.

The latest data of the power ministry shows that power consumption has improved after government started giving relaxations for economic activities and onset of summer. "The slump in power consumption has narrowed down considerably to 2.6 per cent. It is expected to be at normal level (what it was last year in same month) during August. There could be growth in power demand in coming days with expansion in economic activities," an industry expert told PTI.

This data may come as a breather for stocks in the power sector that have been reeling under the pessimism about their prospects in the near term.

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StockLast one month
NTPC-9.19%
Reliance Power-22.53%
Adani Power-1.67%
Tata Power8.58%
JSW Energy -2.65%
CESC-11.65%
Torrent Power 2.10%

The months of April, May and June this year witnessed low power consumption on account of lower commercial and industrial activities due to COVID-19-related restrictions.

However, as the economy slowly reopened, peak power demand met, the highest energy supply during the day across the country, was at 170.54 GW in July, down 2.61% compared to a year ago.

MonthPeak power demand metGrowth (YoY)
April132.77 GW-25%
May 166.42 GW-8.82%
June 164.94 GW-9.50%
July170.54 GW -2.61%

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The return of industrial demand will bode well for power distribution companies like Tata Power, Adani Power and Reliance Power, as well as the ones owned by state governments, because they make wider margin on supply to industries than to households. This will ease the stress on the financials and the need for additional loans from companies like Power Finance Corporation and Rural Electrification Corporation of India.

StockLast one month
Power Finance Corp-3.75%
Rural Electrification Corp-7.35%

An earlier estimate by ratings agency ICRA had projected a 5% to 6% decline in nationwide demand for power for the full year ending March 2021.

With inputs from PTI

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