The Tata Electric Companies (TEC) has drawn up plans to spend over one billion dollars on expanding its current generating capacity, and also entering new markets like West Bengal, Bihar, Karnataka and Gujarat.
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).
The TEC have been looking for growth opportunities in generation and distribution. While their distribution plans received a setback with the Grid Corporation of Orissa withdrawing the approval given to TEC for power distribution in Orissa, the generation plans got off ground by the purchase of the captive power plants of various Tata Group companies. The TECs now plan to increase their generation capacity by 20 - 25% of their current capacity of 1900 MW within the next three years.
The power generation and distribution industry have tremendous growth potential. However, due to the lack of political will, the reforms have at best been sporadic. However, with increasing public awareness, and demands to improve services, the likelihood of reforms in the power sector is fast improving. Companies such as TEC could capitalise on the growth opportunities as and when they are thrown up. However, these companies would have to ensure a steady supply of funds as these businesses are capital intensive.
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. Also TEC have not been awarded any fresh licences for power distribution in the last few years, thus suppressing revenue growth.
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