Jul 15, 1999|
TEC: Deteriorating margins
Tata Electric Company has posted a YoY growth of 11% in sales at Rs 6.7 bn and a 4% increase in profits at Rs 790 m for the quarter ended June 30th 1999.
TEC, India's largest private sector private supplier, comprises three companies - Tata Power, Tata Hydro-Electric, and Andhra Valley Power. The assets are jointly owned by these companies and revenues and expenditure are shared in the ratio of 50% (Tata Power), 30% (Andhra Valley) and 20% (Tata Hydro).
During the quarter ended 30th June 1999, while revenues grew by 11%, expenditure jumped 13%, adversely affecting margins. Moreover, the revenue growth is likely to come under increasing pressure as the company has failed to win any contract for power supply as yet. The company had been awarded a 51% stake in the Central Electricity Supply Corporation of Orissa, but due to the non-cooperation of the Grid Corporation, the company missed the deadline for paying a commitment fee, and as a result the bid fell through.
TEC plans to buy out the captive power plants of various Tata companies to stimulate its growth and profits in the future. Under this plan the company has already taken over the Tisco captive power plants.
Analysts expect the TECs to derive revenue growth from the captive / independent power projects. Though many analysts have rated the stock as a 'BUY', some still continue to rate it as a 'HOLD'. This mixed view has arisen partly due to the non-aggressive nature of the management.
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