Kotak Institutional Equities highlights a growing disconnect in market valuation for NTPC and BHEL, signalling divergent investor outlooks on India’s coal-based power future as renewables gain ground and sector dynamics shift.
Kotak Institutional Equities has flagged a sharp disconnect between the market’s treatment of NTPC and BHEL, saying investors appear to be applying two very different valuation frameworks to businesses tied to the same long-term debate: how much coal-based power India will still need.
Over the past six months, BHEL has surged while NTPC has fallen, even though both sit in the Nifty Energy index. The brokerage said that split reflects more than short-term sentiment. In its view, BHEL is benefiting from a mix of power-supply anxiety, data-centre demand and momentum buying, while NTPC is being marked down on doubts about near-term thermal expansion and the longer-term impact of India’s fast-growing renewable capacity.
Kotak’s analysis suggests the market is effectively pricing NTPC as if it will add about 40GW of incremental thermal capacity indefinitely, while BHEL’s market value assumes a much larger and more enduring build-out of coal-fired equipment orders than official projections imply. The brokerage argued that NTPC’s weaker share performance is tied to subdued earnings expectations, as thermal capacity additions have slowed and the medium-term outlook for the business has been clouded by renewables and storage investments.
The report also said BHEL’s valuation assumes a future in which utilities keep ordering coal plants at scale and continue paying on time, preserving margins. Yet Kotak noted that the company’s implied market capitalisation would require an enormous lifetime order run-rate to be justified. The brokerage said BHEL’s thermal equipment business still dominates its earnings profile, leaving it especially exposed if the shift towards cleaner generation curbs new coal projects.
That concern is sharpened by the economics of power generation. Kotak said NTPC’s thermal tariff is around ₹4.80 a unit, compared with roughly ₹5.40 for solar paired with storage and ₹2.30-3 for plain solar. As that gap narrows, fewer coal projects may be sanctioned. The Central Electricity Authority projects 86GW of cumulative thermal additions in FY27-FY36, while Kotak’s reverse valuation points to only 42GW for NTPC, underscoring how differently the market and policymakers appear to be reading the sector’s future.
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