5 Best Power Sector Penny Stocks in India

The Indian economy has bounced back strongly from the recession of 2020 due to Covid-19 pandemic.

With rapid economic growth came a rapid increase in electricity consumption.

In fact, the recovery was so strong that coal plants were struggling to keep up with the demand.

That apart, government schemes like UDAY (Ujwal DISCOM Assurance Yojana) and revival package for distribution companies acted as a game changer for the power sector.

These few reforms have started to take shape and are giving a makeover to the entire sector. And a lot of factors make the future trajectory more promising for top power stocks.

Within the power sector, penny stocks have emerged as intriguing investment options.

Penny stocks are low-priced shares, typically trading below Rs 100 per share or even Rs 50 per share.

While they may appear tempting due to their affordable nature, potential investors should exercise caution, as these stocks can be highly volatile and speculative.

While penny stocks in power sector may not promise the stability of blue-chip companies, they offer an entry point into a sector on the cusp of transformation.

So, without further ado, let's look at some of the power sector penny stocks in India that are fuelling India's ambitious power dreams.

#1 India Power Corporation

The first penny stock on this list is India Power Corporation.

The company is an integrated power utility, operating extensively throughout India.

Its current generation capacity stands at 38.8 MW, comprising a 12 MW thermal power plant located in Asansol, West Bengal (31% share), 24.8 MW of wind assets situated in Gujarat (64%) and 2 MW (5%) of solar assets in West Bengal.

India Power serves the expansive region of West Bengal, with a distribution license spanning 798 square kilometres.

The company boasts an array of operations, harnessing renewable and traditional approaches for power production and distribution alongside advancements in smart metering and grid technologies.

In the past 5 years, the company's revenue and net profit have been rangebound. The 5-Yr average RoE and RoCE stand at 1.4% and 5%, respectively.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	6,053	4,811	5,254	5,825	6,231
Growth (%)	-40%	-21%	9%	11%	7%
Operating Profit	1,369	765	1,020	332	206
OPM (%)	23%	16%	19%	6%	3%
Net Profit	162	132	262	154	158
Net Margin (%)	3%	3%	5%	3%	3%
ROE (%)	0.6	1.0	2.0	1.5	2.3
ROCE (%)	2.3	4.0	3.4	4.0	5.5
Dividend (Rs)	0.1	0.1	0.1	0.1	0.1
Debt to Equity (x)	0.4	0.2	0.3	0.4	0.5

Data Source: Ace Equity

India Power Corp. manages wind farms through fixed lease payments, with all projects having secured long-term PPAs.

At present, it provides around 40% of its electricity from renewable sources. Going forward it aims to supply around 70% of power from renewable sources.

This endeavour will entail several initiatives, such as procuring 100 MW of dependable solar power from the Solar Energy Corporation of India.

Additionally, the company is planning to implement rooftop solar systems for industrial and commercial consumers within its licensed area, fostering distributed energy generation.

Furthermore, the company is deeply interested in the electric vehicle (EV) segment and is bidding for the ACC Battery Storage PLI Scheme under the Ministry of Heavy Industries.

In the past 1 year, shares of the company have rallied 70%.

#2 Jaiprakash Power Ventures

Next on the list is Jaiprakash Power Ventures.

Jaiprakash Power Ventures is part of India's leading infrastructure conglomerate - Jaypee Group.

The company is engaged in the business of generation of thermal and hydropower, cement grinding, and captive coal mining.

JPVL has a total installed capacity of 5,815 MW, making it one of the largest independent power producers in India.

It owns and operates the largest hydroelectric power plant in the private sector in India, the Jaypee Vishnuprayag Hydro Electric Plant, with an installed capacity of 1,000 MW.

Shares of the company currently trade at Rs 20 per share, having rallied over 250% in the past 1 year.

Multiple factors have aided the rally in the stock, including several order wins, the company taking serious initiatives to improve operational efficiency to reduce costs, strong results, among other reasons.

Last week, the company approved the sale of its Bina Thermal Power Plant to JSW Energy for an estimated cost of Rs 27 billion (bn).

This move will help Jaiprakash pare down its debt and reduce interest outgo. It has a debt of Rs 224 bn as of March 2024.

While the company may face some challenges till the time debt comes down, it's well-positioned to capitalize on this growth due to its impressive track record in power generation and a diversified portfolio of assets.

Sale of power makes up almost 90% of the company's revenue, and the rest is contributed by other segments.

Here's a table showing the company's financial track record.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	38,916	32,837	33,017	46,246	57,867
Growth (%)	-20%	-16%	1%	40%	25%
Operating Profit	14,422	9,502	12,847	13,479	12,560
OPM (%)	37%	29%	39%	29%	22%
Net Profit	-3,812	-21,621	2,671	1,075	554
Net Margin (%)	-10%	-66%	8%	2%	1%
ROE (%)	-4.9	-32.5	3.6	1.7	0.8
ROCE (%)	3.1	-3.1	5.8	5.6	5.1
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	3.1	0.6	0.5	0.5	0.5

Data Source: Ace Equity

#3 Orient Green Power Company

The third penny stock on this list is Orient Green Power.

Orient Green is an independent producer of renewable power, engaged in developing, owning, and operating a diversified portfolio of wind energy power plants.

The company generates a major part of its income from sales of power and a small part from trading of REC.

Shares of the company currently trade at Rs 21.

In the past 1 year, Orient Green Power has rallied over 160%.

Two key factors behind the positive sentiment include the company's massive expansion for its power generation capacity to expand it to 1000 MW and Inox Green working on reducing interest cost through refinancing.

For this, it has planned a rights issue of up to Rs 2.5 bn.

Under the rights issue, a company invites its shareholders to buy additional shares at a discount. Shareholders get rights to purchase shares at lower than the market rate, helping the company raise funds without bringing in new investors.

The company is slated to announce its Q4 earnings on 24 May.

Although sectoral prospects look good, investors should note that the company has executed a pledge of equity shares. As of March 2024, 99.9% of promoters stake is pledged.

The financials have been improving though and this year could be the best ever for Orient Green in terms of revenue and profit.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	3,233	3,272	2,548	3,106	2,583
Growth (%)	-16%	1%	-22%	22%	-17%
Operating Profit	2,649	2,727	1,700	2,285	2,030
OPM (%)	82%	83%	67%	74%	79%
Net Profit	-489	231	-576	350	326
Net Margin (%)	-15%	7%	-23%	11%	13%
ROE (%)	-9.5	3.9	-10.5	9.8	6.9
ROCE (%)	7.3	9.4	4.8	9.7	8.7
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	3.0	2.6	2.9	2.5	2.1

Data Source: Ace Equity

#4 Surana Telecom and Power

Fourth on this list is Surana Telecom and Power.

The company manufactures and does trading of solar related products, generation of solar power and wind power. It's a part of the Surana Group.

In FY23, sale of solar power accounted for majority of its revenues followed by wind power and infrastructure leasing.

At present, shares of the company trade at Rs 17 per share.

In the year gone by, shares of the company have rallied over 85%.

Interestingly, the company holds a significant stake in one of its group companies which is into solar segment - Surana Solar.

Surana Telecom has been selling some of its holding from the solar company in recent quarters, bringing down its shareholding to 39.15%.

In the past three quarters, promoters have also sold their shares in the open market, taking their holding down to 73% from 75% in September 2023.

Going forward, the company's long term PPAs with state distribution companies are expected to aid to revenue and profit.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	344	287	293	294	279
Growth (%)	3%	-16%	2%	1%	-5%
Operating Profit	249	259	207	239	176
OPM (%)	72%	90%	71%	81%	63%
Net Profit	35	73	38	68	42
Net Margin (%)	10%	26%	13%	23%	15%
ROE (%)	6.1	7.0	3.3	7.0	3.6
ROCE (%)	8.1	8.9	5.7	8.8	5.4
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	0.5	0.4	0.4	0.2	0.1

Data Source: Ace Equity

#5 NHPC

The last power sector penny stock on this list is NHPC.

Trading at Rs 97 per share, NHPC is India's leading hydroelectric generation firm.

The company supply's substantial power to utilities across eastern, northern and north-eastern regions through long-term Power Purchase Agreements (PPAs).

It boasts a total capacity of 7,000 MW, filling the gap during peak demand periods when solar power falls short.

Recently, the company announced a joint venture (JV) agreement between NHPC and Andhra Pradesh Power Generation Corporation.

The JV is for the implementation of pumped storage hydropower projects and renewable energy projects in Andhra Pradesh.

In the past 5 years, the company has reported a CAGR of 5.9% and 11.4% in its revenue and net profit, respectively.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	89,829	100,078	96,479	91,442	106,074
Growth (%)	16%	11%	-4%	-5%	16%
Operating Profit	59,065	63,452	64,421	62,054	69,946
OPM (%)	66%	63%	67%	68%	66%
Net Profit	25,956	28,849	32,718	35,236	38,900
Net Margin (%)	29%	29%	34%	39%	37%
ROE (%)	9.3	10.8	11.2	11.1	11.8
ROCE (%)	10.4	7.9	9.1	6.5	9.0
Dividend (Rs)	1.5	1.5	1.6	1.8	1.9
Debt to Equity (x)	0.6	0.7	0.7	0.8	0.8

Data Source: Ace Equity

Looking ahead, the company has outlined a massive capex outlay for doubling the installed 7,000 MW capacity by financial year 2027.

The company has guided for a capex of Rs 90-100 bn for the next 10 years.

In the past one year, shares of the company have rallied 124%.

In Conclusion

The market's love for all things green has fuelled a sharp rally in power stocks involved across solar, wind energy, among other renewable segments.

While the power sector's past track record of disappointing performance has been a cause for caution, the current scenario seems different.

Power stocks, with a history of generous dividend payments, are looking appealing to long-term investors. And there is no doubt the sector is undergoing a massive transformation.

But before jumping in, investors must stay up to date with the ever-changing market dynamics, government policies, and financial health companies, to make well-informed investment decisions.

That's it for today.

If you're looking for more such under the radar power sector stocks, watch the below video.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...