NTPC shares at Rs 240? CLSA sees stock as best play on energy transition

CLSA believes NTPC could see a notch upgrade in its ESG rating if the government does fulfil its obligation to appoint independent directors (IDs). The foreign brokerage sees NTPC stock as the best energy transition play in India, suggesting a share price target at Rs 240.

A lack of independent directors cost NTPC a deserved ESG rating upgrade in 2021/22, CLSA said. Independent directors head all of its key committees. NTPC has updated its biodiversity policy to achieve “no net loss of biodiversity” while committing to avoiding operating in areas with high biodiversity.

"We note an across-the-board reduction in emissions, successful carbon capture, strategic moves to cut Scope 1-3 emissions and action to reach its goal of having the world’s third largest renewables capacity of 60GW. NTPC has truly imbibed triple bottom-line principles, as it has helped the grid in times of crisis, while private peers with better ESG ratings have faltered," CLSA said.

It noted that the government has yet to appoint four independent directors, which would take its tally to 50 per cent from 33 per cent now, which is insufficient.

"If the government does fulfil its obligation to appoint IDs, we expect a notch upgrade in its ESG rating, as NTPC has done whatever it could for the E, S and G pillars," it said.

CLSA said NTPC has increased efficiency and the use of lower-emission super-critical plants and carbon sinks in FY23. NTPC, it said, is on course to become a zero-liquid-discharge company and is expanding its carbon sink with a rise in tree plantations.

CLSA said NTPC’s green capex has increased significantly in FY23 over FY19, validating its transition roadmap. It noted while EU utilities such as Enel, Iberdrola and EDF have set lofty targets of 120 GW, 95 GW and 60 GW of renewable capacity respectively by 2030, NTPC’s 60 GW renewable capacity target is the most ambitious at 8 times ramp-up.

"Use of NFE for decarbonisation of power and industry, as well as NTPC’s entry into all areas of NFE including civil nuclear power, should make it a leader in the transition," the foreign brokerage added.

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