• OCTOBER 21, 2000

Tata Electric 2QFY01 turnover zooms 45%

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 3,939 5,397 37.0%
Other Income 485 487 0.4%
Expenditure 2,977 4,278 43.7%
Operating Profit (EBDIT) 962 1,119 16.3%
Operating Profit Margin (%) 24.4% 20.7%  
Interest 291 286 -1.7%
Depreciation 301 306 1.7%
Profit before Tax 855 1,014 18.6%
Tax 250 358 42.8%
Profit after Tax/(Loss) 604 657 8.6%
Net profit margin (%) 15.3% 12.2%  
No. of Shares (eoy) (m) 65.9 65.9  
Earnings per share* 18.3 19.9  

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.

However, if we compare the quarterly results, the results are an eye opener. In 2QFY01, TEC's profits have surged a whopping 67% over the previous year's corresponding quarter. This is because the interest costs this quarter have come down by a siginficant 35%, thereby inflating the bottomline. But the worrying factor is a staid 8% growth in turnover. This means that the company's operations have slowed down if compared to the first quarter of FY01.

(Rs m) 2QFY00 2QFY01 Change
Sales 1,931 2,798 44.9%
Other Income 318 339 6.6%
Expenditure 1,480 2,247 51.8%
Operating Profit (EBDIT) 451 551 22.2%
Operating Profit Margin (%) 23.4% 19.7%  
Interest 137 113 -17.5%
Depreciation 150 153 1.9%
Profit before Tax 481 624 29.7%
Tax 119 221 86.3%
Profit after Tax/(Loss) 363 403 11.2%
Net profit margin (%) 18.8% 14.4%  
No. of Shares (eoy) (m) 65.9 65.9  
Earnings per share* 14.6 15.4  

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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