Tata Power Company Ltd – Lighting Up Lives

“Clean, cheap and abundant power is one of the basic ingredients for the economic progress of a city, state or country” – rightly said by Sri Jamsetji Tata, Founder of Tata Group, and brilliantly followed by one of his own pioneers of his group – Tata Power Company Ltd. 

Today we are talking about India’s largest Integrated Private Power Company and the 7th largest company of the Tata Group and the fifth largest in the sector in terms of market capitalization with 100+ years of experience in contributing towards India’s growth in the domain with significant international presence in Indonesia, Singapore,Bhutan, Georgia, Zombie. As of today’s date, this is Tata Power share price.

The company has an  installed generation capacity of  12,808 MW (as on March 31, 2020) of which 30% comes from clean energy resources along with a presence in all the segments of power sector, viz Fuel & Logistics, Generation (thermal, hydro, solar and wind), Transmission, Distribution and Trading. It has successful public-private partnerships in Generation, Transmission and Distribution in India namely “Tata Power Delhi Distribution Limited” with Delhi Government for distribution in North Delhi, ‘Powerlinks Transmission Ltd.’ with Power Grid Corporation of India Ltd. for evacuation of Power from Tala hydro plant in Bhutan to Delhi and ‘Maithon Power Ltd.’with Damodar Valley Corporation for a 1050 MW Mega Power Project at Jharkhand.

It is one of the largest renewable energy players in India and has developed the country’s first 4000 MW Ultra Mega Power Project at Mundra (Gujarat) based on supercritical technology. Tata Power has signed a Distribution Franchisee Agreement (DFA) with Ajmer Vidyut Vitran Nigam Limited (AVVNL) and formed a Special Purpose Vehicle (SPV) “TP Ajmer Distribution Limited” (TPADL), to cater to the facility requirements of consumers in Ajmer for a period of 20 years. Tata Power now distributes power to the whole state of Odisha.

It is also expanding its global footprint presence in South East Asia, SAARC, Middle East and Turkey, South Africa and Sub Sahara Africa.

One for All, All for One

                                                           Source : Company Website

Tata Power Company Ltd – Operational Highlights (Q4 FY21) :

• In Q4 FY21, the net sales was Rs. 10,127.39 crore, a growth of 52.96% YoY. This was on the back of higher income from the acquisition of Odisha Discom and higher execution of solar projects.
• Segment wise performance:

(I) Generation – Rs. 3238.24 crore, a decline of 9.65% YoY.

(II) Renewables – Rs. 2,692.03 crore, a growth of 178.12% YoY.

(III) Transmission and Distribution – Rs. 5,021.62 crore, a growth 56.55% YoY.

• EBITDA was Rs. 1,573.08 crore, a  decline of 14.49% YoY. EBITDA margin was 15.53%, a contraction of  1225 bps YoY. Higher losses due to increase in coal prices at Coastal Gujarat Power and the loss-making ultra mega power project, impacted the operating profitability.
• PAT was Rs. 222.19 crore, a  decline of 58.23% YoY. This was on the back of savings in interest cost and exceptional expenses incurred in the corresponding period last year.

FY21 Performance:

• Net sales was Rs.32,468.10 crore, a growth of 17.69% YoY. This was mainly due to Odisha DISCOMs acquisition and higher execution of solar EPC Projects
• EBITDA was Rs. 7,538.72 crore, a growth of 34.44% YoY. EBITDA margin was 23.22%, an expansion of 289 bps YoY.
• PAT was Rs. 611.46 crore, as compared to a loss of Rs. 129.20 crore in the corresponding period last year.
• The customer base stands at ~12 million with the acquisition of all the four Odisha discoms.
• Its board of directors has approved raising up to Rs 5,500 crore via private placement of secured non-convertible debentures (NCDs) to corporates, banks or financial institutions.

Key Fundamental Takeaways : 

• Tata Power Ltd gave a whopping 241% return from making its 52W low of 29.75(15th May,2020) to closing at 101.50(14th May,2020).
• Around 14% and 26% growth in the Receivables on a QoQ and YoY basis, respectively.
• Promoter Holding Pledge was decreased from 4.34 to 1.40 in 2 years as per March,2021.
• Decrease in the Net External Debt by around 17.5% on a YoY basis. 
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• Major Public Shareholding :

•  Peer Comparison:

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Future Outlook:

• The company aims to more than double its revenues in FY25, aided by a strong presence in  Rooftop Solar and Solar Pumps, new businesses (such as EV Charging and Home Automation) and  Transmission & Distribution. And aims to increase its market share by ~20%.
•  As per the management, it will continue to concentrate on key growth areas – renewables, distribution business and new businesses of rooftop solar panels, solar pumps and EV charging and push the bar on performance through its entire gamut of generation, transmission and distribution businesses.
• The company is focusing especially on the environmental pillar and has taken a few bold decisions in this regard: (i) No coal-based expansion/capex; (ii) expanding renewable footprint  (80% by 2030) through utility and distributed solar projects and through Evs.
• The government under its ADITYA Scheme where the states will be provided an opportunity to either go for PTP (publicly traded partnership) structure or go for multiple franchisee structures,  and it is expected that Tata Power will play a very, very meaningful role in this privatization.
• The company also expects DISCOM privatization opportunities to emerge in Uttar Pradesh,  Rajasthan, and Jharkhand. And, would be keen to take over projects through the license model instead of the franchise model.
• It has acquired 51% stake in TP Northern Odisha Distribution Limited (‘TPNODL’) for 191 crore to carry out the function of distribution and retail supply of electricity covering the distribution circles of Balasore, Bhadrak, Baripada, Jajpur and Keonjhar in the state of Odisha for a period of 25 years effective 1st April, 2021.
• The company has been working on an EV charging network in collaboration with Tata Motors, and plans to expand its smart EV charging points under the brand name Tata Power “EZ  Charge”. It targets to generate revenue of Rs 35 billion in FY25.
• Its solar epc order book of Rs. 8,742 crore, providing revenue visibility.
• Under its renewable development portfolio, the company won 110MW solar projects in Kerala, and is  awaiting a letter of award for additional projects of 370MW, which will translate to a total  portfolio of over 4.4GW.
• As part of the listing plans, Tata Power is likely to create an umbrella entity that will house its  operational and pipeline IPP (independent power producer) projects along with its microgrid,  rooftop solar panels and EV charging stations operations.

Industry SnapShot:

India being the 3rd largest producer of coal, producer and consumer of electricity in the world along with the 3rd largest number of nuclear reactors being installed, has jumped 115 positions to 22nd(2019) from 137th(2014) on World Bank’s simple Doing Business – ‘Getting Electricity’ ranking.

The private sector generates 46.9% (Tata Power being one of the major contributors) of India’s thermal power whereas States and Centre generate 27.9% and 25.3% respectively.

The electricity generation target of conventional sources for the year 2020-21 has been fixed as 1330 Billion Unit (BU). i.e. growth of around 6.33% over actual conventional generation of 1250.784 BU for the previous year (2019-20). This target comprises 1138.533 BU thermal; 140.357 BU hydro; 43.880 nuclear; and 7.230 BU import from Bhutan(benefitting Tata Power for its presence).

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic process continues to drive electricity demand in India. The Government of India’s specialise in attaining ‘Power for all’ has accelerated capacity addition within the country.

By 2026-27, all India power generation installed capacity are going to be nearly 620 GW, 38% of which can be from coal and 44% from renewable energy.

The government has electrified all unelectrified villages on April 28, 2018 before the deadline May Day , 2018. A total of 25 states have achieved 100% household electrification.

100% FDI is allowed in the Power sector for generation from all sources (except atomic energy), transmission and distribution of electric energy and Power Trading under the automatic route.

Source: www.investindia.gov.in

Key Highlights:

• Reached 11.7 Mln Customer Base With Acquisition Of 4 License Areas In Odisha.
• Aggregate Technical And Commercial Losses Reduced Despite Covid 19.
• 2.4x Revenue Jump In 1 Year Fuelled By All Segments Registering Growth.
• Uptick In Ev Passenger Vehicle Sales – Driven By Utility Vehicles With 5,905 4w Pv In Fy 21 From 2,814 4w Pv In Fy 20.
• Support For Ev Passenger Vehicle Sales And Growth – 540 Public Charging Points, 3000 Home Chargers.
• There Are Around 10 New Launches In The Ev Passenger Vehicle Segment That Will Drive The Demand.
• Central Railway Collaborates With Unep & Tata Power To Launch Electric Vehicle Charging Points At Mumbai’s Railway Stations . The Company Has Joined Hands With Mg Motor India To Deploy Superfast Chargers At Select Mg Dealerships.
• India’s #1 Solar Rooftop Epc Company For 4 Years In A Row (Bridge To India).
• Installed World’s Largest Solar Rooftop Installation Of 12 Mw For Rssb-ees, Amritsar .
• Installed World’s Largest Solar Rooftop Installation On A Cricket Stadium Of 820.8 Kwp At Cricket Club Of India, Mumbai.
• Established The First Public Electric Vehicle Charging Stations In Mumbai, Making Mumbai Ev Ready.

StockEdge Technical Views :

Tata Power Company Ltd is trading in between support and resistance zone whereas technical indicators are mildly bullish if price trades above the resistance level of 115, new up move is expected towards the next resistance of 130 and 146 levels with support being 89 on the weekly chart.

Bottom Line:

The operational efficiency, deleveraging of the balance sheet along with government  initiatives like the ADITYA scheme provides revenue visibility and margin improvement, in the  long run.

The company has done well to monetize non-core assets which helped in deleveraging of the balance sheet. Future prospects in renewables along with a healthy order book in Tata Solar  augurs well for the company shift from thermal assets.

Further debt reduction should lead to lower interest costs in coming quarters. Possible  benefits from the merger of CGPL and Tata Power Solar with itself.

However, the recently cancelled deal with Petronas had created a lot of pessimism in the  market as Petronas was supposed to come as anchor investors of Tata Power’s InvIT for  clean energy. Following which other institutional and financial investors were also to come  on board as part of a consortium in the future.

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