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Tata Power: Strong operational performance

Jul 25, 2002

Tata Power has recorded a 3% dip in 1QFY03 net profit despite reporting a healthy 12% growth in topline. This was largely as a result of the extraordinary income which Tata Power had earned in June quarter last year. The company had earned profit from sale of its shares in Tata BP Lubricants Limited and had also sold US 64 units, which meant an extraordinary income of Rs 222 m in 1QFY02. Excluding this, net profit is up 30% YoY.

(Rs m) 1QFY02 1QFY03 Change
Sales 9,328 10,404 11.5%
Other Income 306 297 -2.9%
Expenditure 7,237 7,923 9.5%
Operating Profit (EBDIT) 2,091 2,481 18.7%
Operating Profit Margin (%) 22.4% 23.8%  
Interest 602 718 19.2%
Depreciation 701 824 17.5%
Profit before Tax 1,094 1,237 13.1%
Extraordinary income 222 0 -
Tax 450 400 -11.1%
Profit after Tax/(Loss) 866 837 -3.3%
Net profit margin (%) 9.3% 8.0%  
Diluted no. of Shares (eoy) (m) 197.9 197.9  
Diluted Earnings per share* 17.5 16.9  
*(annualised)      
Current P/e ratio   6.4  

On an operational level, Tata Power's performance has been pretty strong. The company has managed to keep its costs under control, thereby expanding operating margins to nearly 24%. The commisioning of the 120 MW capacity at Jojobera (second phase ) in December 2001 is largely responsible for this surge in topline. Another 37.5 MW plant at Wadi was scheduled to come up by June 2002. Considering the fixed return on capital on which the power business in India operates, this should add to its bottomline progressively.

The commisioning of the 120 MW capacity at Jojobera (second phase ) in December 2001 is largely responsible for this surge in topline. Another 37.5 MW plant at Wadi was scheduled to come up by June 2002. Considering the fixed return on capital on which the power business in India operates, this should add to its bottomline progressively.

Cost break-up
(Rs m) 1QFY02 1QFY03 Change
Cost of power purchased 1,000 997 -0.4%
Cost of fuel 4,609 5,256 14.0%
Staff cost 344 351 1.9%
Other expenses 1,283 1,319 2.8%
Total 7,237 7,923 9.5%

Tata Power has recently invested Rs 1,803 m in North North West Delhi Distribution Company Ltd. for a 49% stake. With effect from July 01, 2002, the company has management control of the aforesaid distribution company.

At the current market price of Rs 109 the stock is trading at 6.4x annualised 1QFY03 earnings. The stock has been depressed owing to concerns regarding the company's investments in distribution circle of Delhi, where returns are expected to come in the long term. Even rival BSES's experience in Orrisa has not been good. Also, there are concerns over the company's increasing exposure to the Tata Group's telecom ventures (Tata Teleservices and VSNL).


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