Shares of Tata Power hit an over 13-year low of Rs 45.35, down 3 per cent, on the BSE in an otherwise firm market on Monday. Thr stock has fallen 13 per cent in the past week on the back of heavy volumes after concerns emerged that the electric utilities firm may snap power lines to five states beginning March if they don't agree to tariff increases. The stock of the Tata Group Company was trading at its lowest level since July 28, 2006.
Since January 29, 2020, when it declared its October-December quarter (Q3FY20) earning, Tata Power has underperformed the market by falling 26 per cent, as compared to a 7 per cent decline in the S&P BSE Sensex.
Tata Power, which runs one of the country’s largest power plants at Mundra in Gujarat, has threatened to stop supply from the plant to five states beginning March if they don't agree to tariff increases, The Economic Times reported.
The Mumbai-based company, which may incur a loss of Rs 1,000 crore from this one unit alone this year, has issued notices over the past few weeks to distribution companies owned by the state governments of Gujarat, Haryana, Rajasthan, Punjab and Maharashtra on the possible disruption, the report added.
“Operationally, December quarter was a slight miss of around 3 per cent driven by regulated business. Aided by lower Indo coal prices and blending initiatives, Mundra ultra mega power project (UMPP) saw the lowest fuel under-recovery in the last 14 quarters and cash loss funding for the project has been just Rs 50 crore in April-December 2019 (9MFY20),” analysts at JP Morgan said in results update.
Favorable tariff relief for Mundra UMPP is the primary upside catalyst, though the timing/extent of relief is contingent on legal outcomes. If PPA relief materializes as per the Empowered Committee Recommendations, we see around Rs15/share potential upside to our September 2020 price target of Rs 64 per share, it added.
“The resolution on Mundra UMPP was discussed with all the stakeholders in December 2019 post which the beneficiary discoms are in discussion with the respective state governments. Once a consensus is arrived at, the Cabinet has to approve it, post which Central Electricity Regulatory Commission (CERC) will take it up to adopt the changes in supplementary power purchase agreement (PPA). On a very optimistic note, this may still take more than 2-3 months,” analysts at SBICAP Securities said in result review.
At 10:49 am, Tata Power was trading 2.4 per cent lower at Rs 45.55 on the BSE, as against a 1.3 per cent rise in the S&P BSE Sensex. The trading volumes on the counter rose 1.6 times with a combined 8.88 million shares changing hands on the NSE and BSE so far.