NTPC - Discount to replacement cost.

NTPC has a capacity of 53,651 MW.

Recently, NTPC announced a Rs 9,300 Crores investment for creating a capacity of 1,320 MW. We can use this data to compute NTPC’s replacement cost value.



The cost of setting up a 1 MW capacity is ~ Rs 7 Crores. Thus, the replacement cost of NTPC is 3.7 Lakh Crores. The current marketcap of NTPC is 1.39 Lakh Crores.

To create a new NTPC it would cost Rs 7.05 Crores per MW but if NTPC itself was to replace old capacities for new capacities then the cost would come to Rs 4 Crores per MW.

Financial Snapshot

5 years financial data


NTPC’s revenues and profits have stagnated. Moreover, with no earnings growth in sight, the valuation multiples will remain low. Also, NTPC has a very low return on equity which is why we will see it trade close to it’s book value range.


Price to Book ratio has been between 1.2 and 1.6

Low multiple attract investors but we do not see much in terms of margin of safety at current price. The ideal range to buy NTPC is ~ Rs 120. However, if there is some trigger which can unleash earnings growth, then NTPC can become a strong cyclical addition to the portfolio.