Shares of Tata Power advanced as much as 7 per cent to Rs 34.60 on the BSE on Wednesday, a day after the company reported strong numbers for the March quarter of fiscal 2019-20 (FY20). The consolidated net profit of the company jumped 177 per cent year-on-year (YoY) to Rs 475 crore as against around Rs 172 crore in the year-ago period.
At 09:47 am, the stock was trading 4.64 per cent higher at Rs 33.85 as compared to 0.73 per cent rise in the benchmark S&P BSE Sensex. Shares of Tata Power had hit a 52-week high of Rs 74.05 on July 3, 2019 and its 52-week low is Rs 27, touched on May 12 this year.
The company, in its earnings release, said that the jump in consolidated net profit was due to due to gain on sale of Cennergi investment offset by impairment provision in SEO & reversal of MAT Credit due to transition to new tax regime in the renewables business. CLICK TO READ PRESS RELEASE
The consolidated revenue for the quarter, however, slipped 9.4 per cent to Rs 6,881 crore, as compared to Rs 7,597 crore in the corresponding quarter last year mainly due to delay in project execution in solar EPC business on account Covid-19, lower power demand and lower coal price, the company said.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter was up 6 per cent at Rs 2,013 crore as compared to Rs 1,901 crore during the previous quarter, mainly due to lower losses in Mundra on account of lower FOB (free on board) price of coal.
"All our businesses and operations have performed exceptionally well. Our robust performance is supported by the excellent performance of renewable business & capacity addition," said Praveer Sinha, CEO & MD.
Adding, "Globally, India is following one of the most stringent lockdowns with all economic activities coming to a halt for nearly two months now. We are witnessing a drop in demand by almost 30% compared to 2019 in our distribution businesses. Though this impacts our topline, almost all Tata Power's assets are under either regulated businesses or through fixed price long term contracts on the take or pay basis. Thus in our business, the return profile covers our fixed costs and provides us assured returns."
In a results review note, analysts at Motilal Oswal Financial Services (MOFSL), note that net debt of Tata Power has reduced, but still remains elevated. The company’s divestment related measures could aid cash inflow and subsequent debt repayment. "However, with continued Capex in renewables and given the current environment, we await further steps on this front. Besides, upcoming new regulations for Indonesian coal mines (concerning tax and royalty) could be an overhang," they wrote.
The brokerage further says that the stock has slipped around 40 per cent over the past three months and hence, it looks attractive. However, it awaits further steps on the monetisation front, and the company to emerge out of the current situation without stretching debt. It has maintained a "Neutral" rating on Tata Power with the target price of Rs 38.