With the recent string of reforms in the Indian
power sector, the sector is expected to grow at a rapid rate going
forward. As per the commissioning programme, till March 2010, an
aggregate generation capacity of 43,865 MW is expected to come on
stream (see table below). The government has also indicated of a
projected capacity expansion of 67,000 MW in the 11th five-year
plan (2007-12). While not taking these numbers on face value and
giving due respect to the slow historical growth in generation
capacity in the country, we are still of the view that the progress in
the future will be more rapid than what we have witnessed in the
past. The robust addition to generation capacity will also increase the
scope of power trading in the country. Just to put things in
perspective, only around 3% of the power generated in the country is
being traded as compared to around 15% to 20% in developed
markets.

The growth in the power trading business in the past has been
impaired by lack of adequate transmission and distribution
infrastructure, restrictive regulations, and the government’s extensive
focus on SEB-led development of the sector (which has in fact
proved to be a bane of the sector’s growth). We believe that,
especially with the enactment of the Electricity Act of 2003, some of
these constraints have taken/shall take a back seat. Not only will this
benefit the power sector as a whole, the business of power trading,
considering its ability to remove demand-supply and pricing
inefficiencies, will also get a much-required fillip. PTC, being the
market leader and in the process of creating entry barriers (by
moving into the long-term version of trading), is expected to be a key
beneficiary of the same.

PTC has the first mover advantage in
power trading in India. As on date, the company has over 25
customers who are either trading power or have traded power
through the company. The company has entered into a number of
MOUs (memorandum of understanding) with mega power producers
for offtake of power. Consequently, the first mover advantage will
give it an edge over competitors who are likely to enter over a period
of time.

Apart from its focus on
power trading, PTC has also made small
beginnings in related segments of the electricity
business in an effort at becoming a total
solutions provider. The company has made a
modest beginning in coal intermediation where it
acts as an aggregator of coal (through imports)
for requirements by power generators in the
country. This is on the back of promise that
these generators, in return, will sell their power
through PTC, which will consequently perk up
the company’s traded volumes. The company
has also recently floated a special purpose
vehicle for making equity investments into power
generation. Though these initiatives are still to
bear fruit in a meaningful manner, we believe
these are steps in the right direction for the
company in its initiative towards diversifying its
business risks over the long term.

Its worth HOLD... i dont really recommed a BUY on this..

Target : 70