Tata Electric 2QFY01 turnover zooms 45% - Views on News from Equitymaster

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Tata Electric 2QFY01 turnover zooms 45%

Oct 19, 2000

Tata Electric Companies' (comprising Tata Power, Andhra Valley and Tata Hydro) combined turnover surged 37% in the first half of FY01, as compared to the corresponding half year in in FY00. But a 44% surge in its expenditure resulted in the company declaring a staid 7% growth in the bottomline.

(Rs m) 1HFY00 1HFY01 Change
Sales 13,129 17,990 37.0%
Other Income 1,709 1,651 -3.4%
Expenditure 9,923 14,261 43.7%
Operating Profit (EBDIT) 3,206 3,729 16.3%
Operating Profit Margin (%) 24.4% 20.7%
Interest 987 960 -2.7%
Depreciation 1,011 1,024 1.3%
Profit before Tax 2,917 3,396 16.4%
Tax 847 1,187 40.1%
Profit after Tax/(Loss) 2,070 2,209 6.7%
Net profit margin (%) 15.8% 12.3%
No. of Shares (eoy) (m) 225.3 225.3
Earnings per share* 18.4 19.6

The surge in expenditure was largely on account of a whopping 77% jump in its fuel costs to Rs 9,448 m in 1HFY01. Considering the jump in the fuel costs, the company has done well to declare a 7% growth in bottomline.

TEC's 2QFY01 performance was also similar. In 2QFY01, TEC's turnover has surged a whopping 45% over the previous year's corresponding quarter. But a huge jump in fuel costs saw the expenditure surge by 52%. This, and an 82% jump in taxes saw TEC reporting a marginal 8% jump in net profits. But the growth in turnover is encouraging. In 1QFY01, TEC saw a turnover growth of 29%.

(Rs m) 2QFY00 2QFY01 Change
Sales 6,436 9,326 44.9%
Other Income 1,151 1,163 1.0%
Expenditure 4,931 7,476 51.6%
Operating Profit (EBDIT) 1,504 1,851 23.0%
Operating Profit Margin (%) 23.4% 19.8%
Interest 465 380 -18.4%
Depreciation 505 512 1.2%
Profit before Tax 1,685 2,123 26.0%
Tax 406 741 82.5%
Profit after Tax/(Loss) 1,279 1,383 8.1%
Net profit margin (%) 19.9% 14.8%

To control its fuel costs, Tata Electric (TEC) has recently decided to invest a sizeable Rs 5.5 bn in setting up an LNG Terminal and jetty. This move should improve margins when the terminal come up. Till then, the company's profitability will continue to be adversely affected by rising fuel prices.

TEC has been in the news lately. The company is about to buy out Gujarat PowerGen for a consideration of Rs 20 bn. The addition of the new plant is expected to push TEC's total generating capacity to over 3100 MW. TEC's current generating capacity is of 2225 MW, including new captive power projects. The deal is likely to make TEC India's largest private power company.

About a month ago TEC hiked its stake by 20% to 50% in Mangalore Power Company, which is setting up a 1000 MW plant in south India. All this activity is part of the company's Rs 38 bn investment plan for the power sector. Until a couple of years ago, TEC was active only in Mumbai. But when BSES one of its largest customers set up its own power plant (Dhanau) and reduced offtake from TEC, it forced TEC to broaden its horizons and look beyond Mumbai.

All this means, that TEC will raise debt to invest or acquire in future, thereby increasing interest costs, which will put pressure on its margins.

At a price of Rs 70, Tata Power (TEC's flagship) trades at a P/e multiple of 3.8 times its FY01 annualised earnings.

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