Power is a multi-year theme, says IIFL's Harshvardhan Dole

Power is a multi-year theme and the industry is likely to experience sustained growth over a significant period, said Harshvardhan Dole, the Vice-President of Institutional Equities at IIFL.

“For us, power is not a one-two quarter theme, it's a multi-year theme, which is just at the start of playing off. Power demand is very strong and there is hardly any incremental capacity in the system," he said.

IIFL is positive on the Indian power sector, with a particular emphasis on companies such as NTPC, which it believes have strong growth potential. As the country continues to develop and expand its infrastructure, the demand for power is likely to increase, which will make this an interesting sector for investors to watch in the years to come.

According to Dole, specific companies in the sector will perform well in the coming years and one of them is NTPC, a state-owned power generation company, as its focus is on capacity-based earnings growth and its limited capacity addition, which means that the company is not aggressively expanding its operations, which can be a good thing for investors as it reduces the risk of overcapacity in the industry.

“Companies like NTPC, to an extent NHPC, Torrent Power is in a very sweet spot. Regardless of the runup in the stocks, we continue to like them,” Dole said.

JSW Energy is another player in the power sector. The company has a merchant portfolio, which means a portion of its power generation is sold on the spot market rather than through long-term contracts. While this can create some volatility in earnings, IIFL sees it as a positive feature as it provides optionality for the company.

On another note, the Power Minister said they have invoked Section 11 of the Electricity Act to meet the expected rise in power demand. Therefore, what the government is trying to do is, to ensure uninterrupted power during the seasonally very warm period of the year.