Timely project execution to decide SJVN’s trajectory
SJVN Ltd have had an impressive run lately. In the past six months, the stock has gained about 94% to ₹91 apiece. Apart from being a key hydro power generator, the government’s increased thrust on adopting renewable energy can help SJVN increase share from solar and wind power.
Plus, the recently notified electricity generation tariff norms by power regulator Central Electricity Regulatory Commission (CERC) has buoyed investor sentiment. For the existing hydroelectric power projects, the CERC has kept regulated return on equity unchanged at 16.5%, but raised it to 17% for projects commissioning after 1 January 2024. The new norms will be applicable for five years starting 1 April, 2024.
According to Elara Securities (India), for pumped storage projects this 50-basis point improvement is expected to stimulate investments in the sector and SJVN is poised to benefit from it. For now, SJVN’s earnings outlook depends on the progress of large projects. “The timely execution of four hydro units of 225 MW each on river Arun in Nepal, and two thermal units of 660 MW each at Buxar in Bihar could help SJVN nearly double its profit after tax by FY27," said Sudhanshu Bansal, an analyst at JM Financial Institutional Securities.
The management expects commissioning of all Arun-3 units by mid-FY25, with the first unit of the Buxar plant likely to be operational by June. Developments related to the Naitwar Mori hydro project, comprising two 30 MW units in Uttarakhand is also important. By FY26, SJVN aims to expand its capacity by 10 GW, through projects spanning across hydro, thermal, solar, and wind energy.
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