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Tata Power: Depreciation blues - Views on News from Equitymaster
 
 
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  • Jul 30, 2001

    Tata Power: Depreciation blues

    Tata Power has declared a 5% net profit growth YoY in 1QFY02. A 37% rise in depreciation provisioning has led to this rather sluggish bottomline growth. The company's topline grew by 6% during the quarter. The company sold 2,713 MUs (million units) of power this quarter, which is up around 10% YoY.

    (Rs m) 1QFY01 1QFY02 Change
    Sales 8,663 9,208 6.3%
    Other Income 488 648 32.8%
    Expenditure 6,786 7,237 6.7%
    Operating Profit (EBDIT) 1,878 1,971 4.9%
    Operating Profit Margin (%) 21.7% 21.4%  
    Interest 581 602 3.7%
    Depreciation 512 701 36.9%
    Profit before Tax 1,273 1,316 3.3%
    Tax 446 450 0.9%
    Profit after Tax/(Loss) 827 866 4.7%
    Net profit margin (%) 9.5% 9.4%  
    Diluted no. of Shares (eoy) (m) 197.9 197.9  
    Diluted Earnings per share* 16.7 17.5  
    *(annualised)      
    Current P/e ratio   7.5  

    The higher tax provisioning also includes Rs 135 m as estimated provisions for deferred tax in accordance with the accounting standard 22. Tata Power earned higher other income on account of profit from sale of its shares in Tata BP Lubricants Limited. The other income also includes sale of US 64 units made by the company. However, neither the number of units sold, nor the price at which these units were sold has been specified in the company's press release.

    Cost break-up
    (Rs m) 1QFY01 1QFY02 Change
    Cost of power purchased 1,005 1,000 -0.4%
    Cost of fuel 4,469 4,609 3.1%
    Staff cost 316 344 9.0%
    Other expenses 996 1,283 28.8%
    Total 6,786 7,237 6.7%

    The turnover growth of 6% in 1QFY02 is better than its 4QFY01 performance, which saw topline decline 6% YoY. This time the company's fuel costs have increased marginally, which has helped companies like BSES, which source electricity from Tata Power, heave a sigh of relief.

    At the current price of Rs 132 Tata Power trades at P/e multiple of 7.5 times its annualised 1QFY02 earnings. The company's IPP (independent power producer) capacity would nearly double in the next couple of years. This should directly add to its bottomline. However, its telecom and broadband business continues to be a drain on resources and is likely to counter profit growth.

     

     

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