 "Tata")
Better-than-estimated September quarter (Q2) results declared after market hours on Tuesday helped Tata Power's stock rise over two per cent on Wednesday. While results were largely ahead of estimates, analysts point out many positives and negatives in the numbers. The sore was Mumbai operations, reflected in standalone revenues, which declined 15.5 per cent to Rs 1,720 crore in September quarter.
Helped by higher other income (Rs 492 crore of dividend from subsidiaries), net profit expanded 25 per cent to Rs 356 crore. September quarter tends to be seasonally weak for power companies and standalone numbers were impacted by lower power purchases in the period. Demand from Tata Steel was lower by Rs 45 crore.
Despite this, analysts believe Tata Power is on the verge of a convincing recovery. The faith largely stems from higher output in Mundra plant, which sold 6,629 million units (up 20 per cent year over year) of power in September quarter, while availability of plant to produce energy increased to 85 per cent from 77 per cent last year. The plant, however, continues to suffer under-recoveries on cost and in September quarter under-recoveries could largely be attributed to coal prices increasing in Indonesia.
That said, losses are also narrowing for Mundra, Rs 80 crore versus Rs 444 crore a year ago. Subsidiaries such as Maithon plant, Delhi power distribution, Tata Power Solar, and Tata Power Renewable are witnessing sustained improvement in profit. Foreign associate companies and joint ventures also contributed to net profit, Rs 180 crore in September quarter as against Rs 50 crore a year ago. The biggest positive was the conclusion of Tata Power's stake sale in PT Arutmin, Indonesia, along with a few associated businesses, for $510 million.
Tata Power
While this is at a significant discount to previous valuations, the Street is happy with the disposal of these assets. Therefore, as Sanjeev Zarbade of Kotak Securities puts it, "Tata Power results are like putting together many companies under one roof. So, while the results look depressed due to Mumbai operations, on the whole, September quarter was positive."
The only missing element is the verdict by Central Electricity Regulatory Commission (CERC) on compensatory rate. For now, the Street is hoping for recoveries of Rs 2,000-Rs 2,300 crore if CERC verdict goes in favour of Tata Power. Therefore, coming weeks will be crucial to decide if more re-rating is likely for Tata Power.
