Tata Power surges 10% in 3 days on positive outlook; stock nears 52-wk high

Shares of Tata Power Company hit a 10-month high at Rs 243.20, gaining 3 per cent on the BSE in Tuesday’s intra-day trade on the back of heavy volume on positive outlook. The stock of Tata group integrated power utilities company was quoting higher for the third straight day, surging 10 per cent during the period. The stock now traded close to its 52-week high of Rs 251 touched on September 7, 2022.

At 10:12 AM; Tata Power  was up 2.4 per cent at Rs 242.35, as compared to 0.16 per cent rise in the S&P BSE Sensex. A combined 10.4 million equity shares changed hands on the NSE and BSE.
 

Tata Power  is involved in the generation, distribution and transmission of power. Tata Power currently has a total installed power generation capacity of 14,230 MW (thermal: 8,860 MW, hydro: 880 MW, wind: 941 MW, solar: 3,106 MW and waste heat recovery-based capacity of 443 MW) on its own books as well as its subsidiaries.

Last month, rating agencies, ICRA and CARE Ratings upgraded its outlook on Tata Power  to Positive from Stable.

CARE Ratings said it has revised the outlook on account of continued improvement in its profitability with continued operations of the Mundra plant under Section 11 of Electricity Act and continued reduction in AT&C losses in the Odisha power distribution business. Furthermore, commercialization and ramp-up of production of the module/ cell manufacturing capacity providing deeper integration and reduced supply risk for the renewable business is envisaged, the rating agency said in its rationale.

The revision in the outlook on the long-term rating assigned to Tata Power  factors in the improvement in its operating and financial performance across the generation and distribution businesses. The recovery in electricity demand growth and improved operating efficiencies, mainly in the Odisha distribution business, led to a growth in revenues and profitability from the distribution business. The growth in the generation business was supported by the addition of new renewable energy (RE) capacity and a stable generation performance of the existing thermal and RE assets, ICRA said.

Meanwhile, the base and peak demand is expected to maintain growth at above long-term trajectory during FY24 driven by higher industrial and commercial activities, digitalization and electric transportation. Share of thermal power generation is likely to remain strong during FY24 with all-India plant load factor (PLF) peaking beyond 64 per cent.

The elevated peak deficits caused by sharp seasonal charges, lag in coal production/transportation and volatility in coal cost is expected to keep merchant rates firm, which augurs well for plants with untied capacity. The sector is expected to witness FGD capex of around Rs 1 trillion in the medium term where the progress in terms of financial closure and project implementation have been slow.

While the power generation companies (gencos) have remained exposed to the vagaries of payment from the discoms, the receivables have reduced for the first time in the last five years. Till the time structural changes are successfully implemented for the discoms, the power gencos are expected to have high working capital requirement, CARE Ratings said.

Meanwhile, the board of directors of Tata Power  is scheduled to meet on August 9, 2023 to consider the financial results for the quarter ended June 30, 2023 (Q1FY24).