Tata Power: Good prospects - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Tata Power: Good prospects

Mar 16, 2001

When the bourses fell post budget Tata Power was amongst the worst hit. From a high of Rs 172 it fell to Rs 92, finally recovering to Rs 123 yesterday. So, is it evenly valued or not? In the past one year, Tata Power has been on a restructuring spree. The merging of the three Tata Electric Company into one single company as Tata Power, the announcement that Tata Power will be the Tata Group’s vehicle for foray into communications, the hiking of stake in the 1,000 MW Mangalore Power Company to 50%, the transfer of the oil exploration unit of Tata Petrodyne to Tata Power, all these moves had led to a re-rating of the Tata Power stock on the bourses.

The recent positives from the budget should also encourage Tata Power’s fortunes. There was a lot of stress by the finance minister on development of roads for rural sector. He gave out Rs 7.5 bn for rural electrification, which is very positive. There is a higher outlay for the power sector in this budget, indicating that the government wants to upgrade, renovate and spend on maintenance of government owned state electricity boards (SEBs). It will improve the plant load factor of government owned power stations. If the SEBs improve, the investments in the power sector will definitely rise.

The company also stands to benefit from the amendments u/s 80 IA, which deals with the depreciation norms for infrastructure companies. The budget extended the benefit of these norms for power transmission and distribution from 2003 to 2006. Another amendment u/s 80 IA is that now power companies can write off depreciation for new plants over an entire block of 10 years. Earlier the benefit was only available till the first five years of the project. This meant that companies wrote off depreciation in the first five years itself, and normally ended up in losses and then did not pay tax. The benefits of extension of 80 IA till 2006 will accrue to Tata Power, especially to the new power plants being set up in Belgaum, Jojobera and Wadi.

Another important positive for Tata Power was the extension of the 80 IA benefit for the telecommunications sector, which was not available earlier. It was stopped from the year 2000 onwards. But in this budget it has been given a retrospective effect upto 2003. This is very beneficial for new telecom companies, which have set up operations from 2001 onwards. The extension of section 80 IA benefits to telecommunications will help Tata Power, considering its bandwidth and telecommunication plans.

When we spoke to Tata Power’s Senior GM, Mr. R K Kanga post-budget, he stated that reduction in the corporate and the dividend taxes will not really benefit the shareholders directly but the benefits will be passed onto customers in the form of lower tariffs. He stated that Tata Power has worked out that the combined benefit of lower dividend and corporate tax will result in a reduction of tariff by almost 5 to 6 paise for the consumers.

The reduction of countervailing duty on LNG from 16% to 0 is also a positive for Tata Power considering its LNG foray.

At Rs 123, the Tata Power stock trades at 5.5 times its FY01E earnings. Given the government’s resolve to push through power sector reforms, Tata Power is sure to play a leading role in the power and telecom infrastructure development in the country, thus making it an good bet on the infrastructure development of the country.


Equitymaster requests your view! Post a comment on "Tata Power: Good prospects". Click here!

  

More Views on News

TATA POWER Announces Quarterly Results (4QFY20); Net Profit Up 193.1% (Quarterly Result Update)

May 21, 2020 | Updated on May 21, 2020

For the quarter ended March 2020, TATA POWER has posted a net profit of Rs 3 bn (up 193.1% YoY). Sales on the other hand came in at Rs 66 bn (down 8.4% YoY). Read on for a complete analysis of TATA POWER's quarterly results.

TATA POWER Announces Quarterly Results (2QFY20); Net Profit Up 20.2% (Quarterly Result Update)

Nov 12, 2019 | Updated on Nov 12, 2019

For the quarter ended September 2019, TATA POWER has posted a net profit of Rs 5 bn (up 20.2% YoY). Sales on the other hand came in at Rs 77 bn (up 4.7% YoY). Read on for a complete analysis of TATA POWER's quarterly results.

TATA POWER 2018-19 Annual Report Analysis (Annual Result Update)

Jun 4, 2019 | Updated on Jun 4, 2019

Here's an analysis of the annual report of TATA POWER for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of TATA POWER. Also includes updates on the valuation of TATA POWER.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

TATA POWER SHARE PRICE


Sep 24, 2020 09:47 AM

TRACK TATA POWER

  • Track your investment in TATA POWER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE TATA POWER WITH

MARKET STATS