MOSL: TATA POWER (Sell)-Net Debt to Equity increases to ~3.5x-Lack of RoE accretive growth and high leverage
​TATA POWER: Net Debt to Equity increases to ~3.5x; Lack of RoE accretive growth and high leverage; Maintain Sell
(TPWR IN, Mkt Cap USD3.4b, CMP INR84, TP INR67, 20% Downside, Sell)
- ​Tata Power’s (TPWR) 4QFY17 PAT, adjusted for the write-off of INR6.5b relating to advance paid to DOCOMO for TTSL, was down 36% QoQ to INR3.9b (est. INR5.4b) on lower billing in Delhi distribution and higher interest cost. EBITDA (incl. JVs) was down 11% QoQ to INR19.6b. For FY17, EBITDA (inc. JVs) was up 2% YoY to INR78b, while adj. PAT was up 83% YoY to INR13.9b on lower tax. Net Debt at INR482b (incl. perpetual securities of INR15b), represented debt/equity ratio of 3.5x (excl. perpetual securities which is reported as part of net worth).
- Standalone: EBIT (incl. rate regulatory items), adj. for the provision of INR0.3b for Trombay U-6 plant, was flat YoY due to stricter regulatory norms and lower regulatory assets. The management highlighted the risk of Trombay generation PPAs expiring in March 2018; clarity is likely in the next couple of quarters.
- CGPL & Coal: Under-recovery increased from INR0.7/kWh in 3QFY17 to INR0.86/kWh in 4QFY17. PAT loss was however lower (INR1.4b vs. INR2.4b in 3Q) on FX reversal and lower interest cost (on waiver by parent). Coal mines EBITDA was up 29% QoQ to INR5.7b (ex-Arutmin) on higher coal prices.
- Sale of non-core investments: The management assured progress on sale of non-core investments in FY18. Stake in Tata Sons is not considered as non-core.Â
Tata Power is an integrated power utility based in India. Co. has an installed generation capacity of 8,584 MW in India and a presence in all the segments of the power sector viz. Fuel and Logistics, Generation (thermal, hydro, solar and wind), Transmission, Distribution and Trading. Co. maintains public-private partnerships in Generation, Transmission and Distribution in India. Co. is also active in renewable energy in India and has developed and fully commissioned a 4,000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology. Co.'s international presence includes strategic investments in Indonesia, Singapore, South Africa, Australia and Bhutan.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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