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Tata Power: Other income saves day - Views on News from Equitymaster
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  • Jan 24, 2002

    Tata Power: Other income saves day

    Tata Power Company has declared lacklustre results in the December quarter (3QFY02). Its topline has shown a YoY growth of 5% during the quarter, as compared to an 18% jump in topline during the September quarter. Its bottomline growth during 3QFY02 is 6%.

    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Sales 8,870 9,300 4.8% 26,910 29,510 9.7%
    Other Income 360 640 77.8% 1,750 2,100 20.0%
    Expenditure 6,992 7,230 3.4% 21,254 22,567 6.2%
    Operating Profit (EBDIT) 1,878 2,070 10.2% 5,657 6,943 22.7%
    Operating Profit Margin (%) 21.2% 22.3%   21.0% 23.5%  
    Interest 580 720 24.1% 1,541 2,212 43.6%
    Depreciation 512 700 36.8% 1,535 2,101 36.8%
    Profit before Tax 1,147 1,290 12.5% 4,331 4,730 9.2%
    Extraordinary income 0 0   210 880 319.0%
    Tax 127 210 65.6% 1,314 1,230 -6.4%
    Profit after Tax/(Loss) 1,020 1,080 5.9% 3,227 4,380 35.7%
    Net profit margin (%) 11.5% 11.6%   12.0% 14.8%  
    Diluted no. of Shares (eoy) (m) 197.9 197.9   197.9 197.9  
    Diluted Earnings per share* 20.6 21.8   21.7 29.5  
    Current P/e ratio   5.6     8.3  

    Though the company managed to improve operating margins as a result of an 8% fall in fuel cost, higher depreciation and interest expenses was responsible for the staid growth in bottomline. Had it not been for higher other income, the company would have shown a degrowth of atleast 22% in bottomline during the quarter. Profits from Tata Petrodyne's oil exploration business aided the bottomline growth. However, it is not clear whether the numbers include the transmission business of Tata International, which the company acquired during the September quarter.

    Cost break-up
    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Cost of power purchased 1,000 1,000 0.0% 3,000 2,990 -0.3%
    Cost of fuel 4,670 4,260 -8.8% 14,120 14,170 0.4%
    Staff cost 320 360 12.5% 1,000 1,040 4.0%
    Other expenses 1,000 1,610 61.0% 3,140 4,360 38.9%
    Total 6,990 7,230 3.4% 21,260 22,560 6.1%

    On a nine month basis, Tata Power's turnover was up by 10% and the bottomline recorded a 17% growth (excl. extraordinary income). The extraordinary income this year reflects the profit on sale of investments including sale of US 64 units as well as sale of its stake in Tata BP Lubricants.

    Tata Power commissioned a 120 MW brownfield unit at Jojobera in February 2001 and an 81.3 MW plant was on stream in March 2001. As a result, the company generated and sold 17% more electricity this quarter as compared to December quarter last year. On a nine month basis, the company has generated 15% more electricity YoY. But despite this, a corresponding growth is not reflected in the topline. This is because the realisation per MU sold has gone down this quarter. On a nine month basis, the realisation per unit sold stands at Rs 3.5. However, for the December quarter, the realisation is marginally lower at Rs 3.4 per unit.

    Power growth…
    (MUs) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Generation 2470 2895 17.2% 7820 9035 15.5%
    Sale of electricity 2316 2723 17.6% 7362 8498 15.4%

    Tata Power commissioned another 120 MW capacity at Jojobera in December 2001 and a 37.5 MW plant at Wadi is likely to come up by June 2002. Its captive power generation (CPP) capacity is slated to zoom from 800 MU (million units) in FY01 to around 2,000 MU by FY03. Considering the fixed return on capital, on which the power business in India operates, this should add to its bottomline progressively. However, higher interest and depreciation burden is taking a toll on the company's profitability. Also, tax liability this quarter (Rs 210 m) is a deferred tax liability. Had the AS-22 norm not come into effect, Tata Power would have had a zero tax liability this quarter.

    At the current price of Rs 123 the stock trades on a P/E of 8.3x annualised 9m FY02 earnings.



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