Tata Power, the country's largest private power producer has declared a 19% decline in FY01 net profit as compared to FY00. However, the company's topline showed a 21% growth vis-a-vis the previous year.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted no. of shares outstanding (m)
Earnings per share
Current P/e ratio
The results of FY00 and FY01 have been comparable by adding the FY00 financial results of erstwhile Andhra Valley, Tata Hydro and Tata Power and guaging it against the results declared by the new merged entity in FY01.
Fuel costs hit profitability
Cost of power purchased
Cost of fuel
The decline in profitability can be largely blamed on the company's fuel costs that escalated by 44% to Rs 16,875 m during FY01. If we remove the effect of the fuel costs then the company's profit before tax shows a 20% growth YoY.
Profitability excluding fuel costs
Profit before tax
In addition to the high fuel costs, the company's lacklustre 4QFY01 performance also contributed to the dismal showing. In 4QFY01 Tata Power's turnover declined 6% YoY and its profits slumped 61%. This despite a 75% decline in its tax provisioning.
Notwithstanding the disappointing performance, FY01 was a landmark year fro Tata Power. This year all three Tata Electric Companies (Andhra Valley, Tata Hydro and Tata Power) got merged as one. The company acquired 100% stake in Tata Petrodyne Limited, which is engaged in oil and gas exploration and production. The company also initiated its presence in communication business by implementing the project for completing Mumbai fibre optic network. This project is slated to be commissioned by August 2001.
The first 120 MW unit at Jojobera started commercial operations in February 2001. The 81.3 MW diesel generator based plant at Belgaum went on stream in March 2001 and is supplying power to the Karnataka Power Transmission Corporation. The first 24 MW replacement unit at the Khopoll hydro power station was also commissioned in March, 2001.
During the year Chemical Terminal Trombay Limited (CTTL) also became a 72% subsidiary of the Tata Power company. CTTL is engaged in the business of storing and handling of oils and chemicals.
At the current price of Rs 137 the stock trades at a P/E multiple of 6.9 times its FY01 earnings. The perfromance is below our expectations. We were expecting a 29% jump in the company's turnover and a 6% jump in its FY01 bottomline. The high fuel costs of the company continue to be a concern. We will have revise our numbers post these results. Though the stock has been holding strong in the past few sessions, it may weaken in light of the above performance. However, in the long term Tata Power is likely to be a good play on India's power sector.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407