Tata Power pours cold data on Street

Company's performance was marred by forex loss and higher costs

The Street was surprised with the consolidated loss of Rs 114.7 crore reported by Tata Power in the June quarter as they were expecting a profit of Rs 220 crore. The surprise was largely due to the higher loss at the Mundra project and weak performance of coal business. This saw Tata Power's stock fall sharply by 14.8 per cent to Rs 71.35 on Tuesday. The outlook, too, remains subdued.

On a consolidated basis, though, the company reported a 29 per cent jump in revenues to Rs 9,340 crore led by higher generation at the Mundra and Maithon power projects. The 4,000-Mw Mundra ultra mega power project (UMPP) recorded generation of 6,148 million units (MUs) compared to 1,288 MUs in the year ago quarter, as all five units of 800 Mw are now operational. Maithon plant, too, generated 1,719 MUs compared to 463 MUs in the year ago quarter. Last year, its 1,000 mw Maithon had suffered as one of its customers cancelled the PPA (power purchase agreement), rendering about 300 Mw of power capacity idle. This capacity is now operational, and helped Maithon project report net profit of Rs 33.9 crore compared with loss of Rs 17.8 crore in the year ago quarter. Both the key projects have seen improvement in plant utilisations, which in turn not only helped in higher revenues but also helped the company to report better than expected operating profit. Thus, consolidated operating profits jumped almost 56 per cent year-on-year to Rs 1,416 crore.

However, even as coal prices have declined, depreciation of rupee against the dollar to 57 in Q1FY14 compared to 54 in Q1FY13 led to higher cost of imported coal and also increased the foreign loan liability leading to currency-related loss (net) of Rs 293 crore. Thus, the Mundra project incurred a loss of Rs 549 crore compared to a loss of Rs 165 crore in the corresponding quarter last year.

The coal business (23 per cent of consolidated revenues) also added to the woes. While its revenues fell four per cent to Rs 2,184 crore, earnings before interest and tax fell 62.7 per cent to Rs 96 crore (higher dividends from this subsidiary though helped), thanks to lower coal realisation and higher cost.

Going ahead, even as most of the company's power related businesses are expected to do well, concerns remain on Mundra UMPP and coal businesses. For coal business, estimates suggest average per tonne realisation was down by 12-14 per cent year-on-year to $86 in June 2013 quarter. In August, coal prices are down further to $77 levels, which would reflect in the current quarter. For Mundra, it is crucial that the committee set up to determine the pass-through of cost escalation gives a favourable verdict, which will help cut losses.

Until then, the stock is likely to remain an underperformer.