Tata Power soars 6%; hits new high after 20 months on positive outlook

CRISIL Ratings expects Tata Power's consolidated adjusted Ebitda to be more than Rs 12,000 crore each in fiscals 2024 and 2025, against around Rs 11,500 crore in FY23 and around Rs 9,600 crore in FY24

Shares of Tata Power Company hit a record high of Rs 298.60 on the BSE in Wednesday’s intra-day trade amid heavy volumes owing to positive outlook.

The stock of Tata Group Company surpassed its previous high of Rs 298 touched on April 7, 2022. The average trading volumes at the counter more-than-doubled today. A combined 40.2 million equity shares representing 1.26 per cent of total equity of Tata Power had changed hands on the NSE and BSE till 02:03 PM.

CRISIL Ratings expects Tata Power’s consolidated adjusted earnings before interest, tax, depreciation and amortization (Ebitda) to be more than Rs 12,000 crore each in fiscals 2024 and 2025 (was around Rs 11,500 crore in fiscal 2023 and around Rs 9,600 crore in fiscal 2022). Adjusted Ebitda was reported at Rs 6,694 crore in the first half of fiscal 2024.

Last month, CRISIL Ratings revised its outlook on the long-term bank facilities and non convertible debentures of the Tata Power to ‘Positive’ from ‘Stable’ while reaffirming its rating at ‘CRISIL AA’.

The revision in outlook reflects the possibility of better-than-expected business risk profile if the improvement in operating profitability in fiscal 2024, across power generation and distribution business, sustains along with a continuing healthy financial performance with consolidated net leverage (ratio of net debt to adjusted Ebitda) remaining within rating threshold, the rating agency said in its rationale.

Going forward, increased scale of operations, improving operating efficiency and steady cash creation in thermal generation and regulated business is expected to support strong operating cash accrual. This would be despite an expected reduction in earnings from coal mining business, amid lower coal prices this fiscal. Furthermore, increasing the level of integration in the renewable energy (RE) business by setting up in-house module manufacturing and engineering, procurement and construction (EPC) business lends support.

Meanwhile, thus far in the month of December, in four trading days, the stock has rallied 11 per cent after the company won the bid to acquire Bikaner-III Neemrana-II Transmission Limited, a project special purpose vehicle (SPV) set up by PFC Consulting Limited, a subsidiary of Power Finance Corporation.

In an exchange filing, Tata Power said the transmission project, which will be developed on a Build-Own-Operate-Transfer (BOOT) basis, will enable the evacuation of 7.7 GW of renewable energy from the Bikaner Complex in Rajasthan. The project entails the establishment of a ~340 kms transmission corridor from Bikaner-III pooling station to Neemrana II substation.

The company will maintain the transmission project for a period of 35 years. The project is estimated to cost Rs 1,544 crore and is expected to be commissioned within 24 months from the date of transfer of the project SPV.

Upon successful commissioning, the project will become a vital link in the roadmap unveiled by the Ministry of Power in 2022 for integrating over 500 GW of RE capacity into the national grid by 2030.