Tata Power slips after Moody's downgrade

Meanwhile, the S&P BSE Sensex was down 25.79 points, or 0.13%, to 19,551.60.

On BSE, 22,000 shares were traded in the counter as against an average daily volume of 2.84 lakh shares in the past one quarter.

The stock hit a high of Rs 87.90 and a low of Rs 86.90 so far during the day. The stock had hit a 52-week high of Rs 113.20 on 5 December 2012. The stock had hit a 52-week low of Rs 77.25 on 13 June 2013.

The stock had underperformed the market over the past one month till 1 July 2013, sliding 0.95% compared with the Sensex's 0.93% fall. The scrip had also underperformed the market in past one quarter, falling 7.72% as against Sensex's 3.78% rise.

The large-cap company has an equity capital of Rs 237.31 crore. Face value per share is Re 1.

The negative outlook reflects renewed uncertainties related to the material covenant breaches on bank debt associated with Tata Power Company's (TPC) Gujarat-based Mundra Ultra Mega Power Project which is being executed under its fully-owned subsidiary, Coastal Gujarat Power (CGPL), said Ray Tay, a Moody's Associate Vice President and Analyst.

Although CGPL has secured waivers from the banking group for the covenant breaches, they expired on 30 June 2013, bringing the liquidity risk associated with the project back to the fore, added, Tay, also the Lead Analyst for TPC.

In addition, the negative outlook reflects continued delay in the resolution of CGPL's tariffs, which are ultimately expected to be approved, but absent timely approval will exert pressure on CGPL's finances, while the low coal prices and stoppage of work at one of TPC's co-owned mines adds uncertainty over the extent to which its coal investments will be able to offset the losses, the statement said.

TPC's previous stable rating outlook was based on Moody's expectation that CGPL will obtain the necessary waivers on terms that will not be severely detrimental to the Mundra project or to TPC.

Tariffs under CGPL's Power Purchase Agreements combine both fixed and variable elements, including fuel costs, and CGPL can pass through only 45% of its fuel costs to its customers.

Although CGPL's foreign currency debt is hedged till 2015 and thus insulated from the recent adverse movements in forex rates, if the Indian rupee continues to be weak against the dollar, debt servicing beyond 2015 would be affected, Moody's said.

Tata Power reported consolidated net profit of Rs 181.36 crore in Q4 March 2013, as against net loss of Rs 628.75 crore in Q4 March 2012. Net sales rose 25.5% to Rs 8997.31 crore in Q4 March 2013 over Q4 March 2012.

Tata Power Company is India's largest integrated power company with a significant international presence. The company has an installed generation capacity of 8,521 MW in India and a presence in all the segments of the power sector viz generation (thermal, hydro, solar and wind), transmission, distribution and trading.

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