Tata Power down 2.6% after Credit Suisse downgrade

The compnay expects Mundra UMPP to be fully operational in 2013-14

 

Shares of Tata Power were down 2.6% at Rs98.45 at 2:25 PM on Tuesday after Credit Suisse downgraded its rating on the stock to underperform from neutral.

“We expect losses of Mundra UMPP (ultra mega power plant) to eat into the profits of its regulated businesses. This should disappoint investors,” said Credit Suisse’s analysts Amish Shah and Abhishek Bansal in a client note.

It expects Mundra UMPP to be fully operational in 2013-14 and post a loss of Rs 15-16 billion a year.

The investment bank said Tata Power outperformed its peers in the last two years led by its regulated businesses providing high earnings visibility, while IPPs were facing high earnings risk because of fuel challenges.

“On the back of potential reforms announcements relating to SEB debt restructuring, clearances for captive coal blocks and coal pooling, we advice investors to switch into NHPC and KSK,” it said.

Credit Suisse has cut its target price on Tata Power shares to Rs83 from Rs 104.