‘N’ot ‘T’hat ‘P’SU ‘C’o. any more...

Breaking the negative image around the incapabilities of being a typical ‘PSU’, NTPC has proved its mettle in the Indian power sector. Established in 1975, with an aim to accelerate production of power in the country, NTPC has grown up to become sectorally the number one company in the B&E Power 100 list; and of course, the company also has the Navaratna designation.

NTPC’s profits, and even its return on capital employed, are the highest in the power industry. The corporation earned a profit of Rs.58 billion in 2005-06, recording a yoy growth of 18%. Considering returns to share holders, NTPC’s share price has climbed up 25% since the markets started recovering on June 15, 2006. And one critical factor behind NTPC’s successful performance – of course apart from legacy government protectionist systems – has been its full fl edged focus on organic growth strategies, at the same time not compromising on consolidating forward and backward linkages.

Currently NTPC generates 28% of the total electricity produced in India using just 20% of its gross installed capacity. Vindicating these facts, Datamonitor has ranked NTPC as being the sixth largest globally in terms of thermal power generation, and much more credibly, as having the second ranked capacity utilisation efficiency amongst all the thermal utilities of the world. But this doesn’t stop here. NTPC now has the vision of becoming a company with capacities towering up to 11 GW by 2017.

A trite fact, but NTPC has ensured enough coal for its thermal power plants through its captive coal mines. As T. Shankaralingam, Chairman and Managing Director, NTPC, shares, “We are operating in a regulated environment and there are risks attached to it. Our strategy is to increase are market share from the existing 20%, through well conceived plans for quantum growth, expansion and diversifi cation.” Shankaralingam’s interests are now diversifying to nuclear and hydro power plants. NTPC is planning to increase its capacities in various ongoing hydro plants by 2012. The capacity of these plants currently aggregates to 2028 MW.

But clearly, NTPC still has a long way to go; at least given the fact that after opening up of the power sector, for the first time NTPC will face tough challenges from private as well as global players. Will this old-age, yet noveau-strategy monolith be able to face up to these new threats and opportunities? Whether they do so or not, at least for us, they are thumping away at #1 in the power sector!

Does money grow on trees?
Yes it does, for Indian agriculture sector has proved the old saying...

Since independence, Indian fertilizer industry has grown manifold – much of the credit for which goes to initiatives like Green Revolution and Operation Flood. Not only have the imports of fertilizers witnessed a decline with India moving towards achieving self-sufficiency, but the manufacturers also have succeeded in making available quality fertilizers and other chemicals to farmers at competitive prices.

India has emerged as a major global player in this sector, helping the country earn the much important foreign exchange. As per FICCI figures, the volume of the Indian market in the chemical sector is approximately $30 billion. No doubt that most of the top companies in the agriculture sector in B&E Power 100 are the ones, which are into the business of manufacturing and marketing fertilizers, namely Rashtriya Chemical & Fertilizer Ltd, Chambal Fertilizers & Chemicals Ltd, etc. The other companies that have made it to the list include Monsanto India and Syngenta – leading bio-tech solution providers in the area of seeds. However, India still lags behind in food processing, one of the key global sectors.

Interestingly, none of the companies in food processing featured in B&E Power 100. Quite sadly, only around 2% of agrifood is processed in India currently. But with a projected growth rate of 11% per annum, the sector is expected to reach a huge Rs.1,350 billion by 2014-15. Hemendra Mathur, Associate Director, Rabo India Finance, concurs, “When we say the food processing industry is going to reach a boom in 2015, it’s on the basis of abundant raw material that we have from agriculture.” Dr. Camille Miranda Gonsalves, Director, Public Affairs, Monsanto India (ranked sectoral #2 in B&E Power 100), further enunciates, “The key driving force for growth in the agriculture sector is the focus towards increasing the individual farmer’s yield. Technology, as an improved farming technique, will contribute towards profitability per acre, and in turn, growth across the sector.”

The sector is all set to get spiced up with ‘corporatisation’ (if one could use that word) of the industry as the who's who of India Inc. plans to pour in billions of dollars in the agri-food sector. P. L. Kaul, President, All India Food Processors' Association, points out, “How growth in agriculture is helping the food industry is very well represented in Reliance, Bharti, ITC, Mahindra & Mahindra, who all have invested in agriculture to make their food business stronger.” While Reliance Industries is gearing up to invest Rs.40 billion in West Bengal to set up an agro-retail chain, Mahindra Shulabh Services, the agri-business arm of Mahindra & Mahindra, has tied up with South Africa-based Capespan for exports of branded fruits to the South African market. And one hasn't even started talking about the FDI fl owing in into the country due to innumerable outlets being opened by food retailing brands like McDonald's, Pizza Hut, Subway, Papa John's, KFC, etc. Clearly, the coming years would see Indian agricultural sector scaling newer heights and that too, with a speed like never before. At least for this sector, money does grow on...

Cultivating Profits

Rashtriya Chemicals & Fertilizers Ltd (RCF), a leading PSU with an ISO14001 certification, is not only amongst the top producers of fertilizers in India (with brands like Ujjwala Urea, Microla and Biola), but is also known for pioneering the manufacturing of basic industrial chemicals. RCF churns out 2.4 million tonnes of fertilizers annually (at a capacity utilisation of 88%) at its Trombay and Thal facilities in Maharashtra.

The company reported a net profit of Rs.1.48 billion in FY06, a rise of 4.96% over the previous fiscal. The company’s net sales also climbed to Rs.30.47 billion during the same period. U. S. Jha, Chairman & MD of RCF acknowledges, “We believe that there are adequate triggers for growth. Though there may be some volatility in near term... in the long run, the company will be able to improve its margins signify cantly.” The company has draft ed a Rs.34.6 billion expansion plan spread over the next three years. In August this year, RCF also unveiled its plans to set up an integrated fertiliser plant in Australia for Rs.24.6 billion. The next time you hear about them, remember, they're our sectoral #1!