Tata Power Company Limited

Summary

The Tata Power Company Limited is an India-based incorporated power business enterprise. The Company is engaged in electric powered electricity generation, transmission and distribution, electronic products, and provider agencies. The Company's segments are Transmission,Generation, Renewables and Distribution, and Others. The Generation section contains of generation of energy from hydroelectric assets and thermal sources (coal, gas, and oil) from plant owned and operated underneath rent arrangements and related ancillary offerings. The Renewables section incorporates generation of power from renewable energy resources i.e. wind and solar and related ancillary services. The Transmission and Distribution segment contains of transmission and distribution network, sale of power to retail customers through distribution community and related ancillary services. The Others section comprises of task control contracts/infrastructure control offerings,property improvement and lease rent of oil tanks.

ABOUT:

Tata Power Company Limited, the largest integrated power firm in India, operates across the entire power value chain, encompassing the generation of both renewable and conventional energy, transmission and distribution, and trading. Aligning with its commitment to sustainable energy, Tata Power is leading the shift from traditional utilities to integrated solution providers, introducing novel business models in areas such as electric vehicle (EV) charging, solar pumps, rooftops, microgrids, home automation, and smart meters. The company's consolidated operations are organized into four key segments:

1. Transmission and Distribution: Encompassing the transmission and distribution network, power sales to retail customers, and power trading.

2. Generation: Involving power generation from hydroelectric and thermal sources (coal, gas, and oil).

3. Renewables: Encompassing power generation from renewable sources, specifically wind and solar, including Engineering, Procurement, and Construction (EPC) and maintenance services related to solar.

4. Others: Include project management contracts, infrastructure management services, property development, lease rent of oil tanks, satellite communication, and investment business.

As of March 31, 2023, Tata Power had 75 subsidiaries (8 wholly-owned), 33 joint ventures (JVs), and 5 associates.

Segmental & Regional Installed Capacity: As of March 31, 2023, the Tata Power group boasts a generation capacity of 14,110 MW (Domestic – 13,623 MW and International – 487 MW) from various fuel sources. Thermal generation sources contribute to 63% of the total installed capacity, while clean and green sources (hydro, wind, solar, and waste heat recovery) make up 37%. The company aims to increase its clean energy percentage to 80% by 2030.

Management:

The management's strategy involves minimizing exposure to coal-based projects and refraining from expanding the existing portfolio. Plans include expanding the distribution network across India, leveraging technology for rooftop solar initiatives, and developing innovative, low-carbon solutions like home automation and EV charging. The company is consistently implementing initiatives to reduce greenhouse gas emissions and enhance operational efficiency, targeting carbon neutrality before 2050.

Shareholding Pattern:

As of December 31, 2023, promoter shareholding is at 46.86%, Tata Sons holds 45.21%, FII holding has decreased from 10% in Q2 FY24 to 9.85% in Q3 FY24, and DII holding has increased from 16.02% in Q2 FY24 to 16.43% in Q3 FY24.

Conference Call Highlights - February 2024

Financial Performance:

• In the latest quarter, Profit After Tax (PAT) reached Rs. 1,076 crores, marking a modest 2% uptick from the preceding quarter.
• Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) witnessed a robust 15% increase, reaching Rs. 3,250 crores for the quarter and a substantial 34% growth to Rs. 9,342 crores for the cumulative nine months.
• Tata Power demonstrated resilient business fundamentals, achieving PAT growth for the 17th consecutive quarter.

Renewable Energy Projects:

• Aligning with sustainability goals, Tata Power aims for net zero emissions by 2045 and anticipates crossing the significant milestone of 10,000 MW in renewable projects in the upcoming quarter.
• The company successfully commissioned 72 MW of renewable capacity, boasting an impressive project pipeline of 4,752 MW.
• The manufacturing plant has successfully commissioned 3 GW of solar modules, with the initiation of the fourth GW on the imminent horizon.

Electric Vehicle Charging Infrastructure:

• The company has activated 412 public Electric Vehicle (EV) chargers, contributing to a total of 5,300 operational chargers, encompassing home and bus charging facilities.

Business Expansion and Projects:

• Secured victories in two transmission bids valued at Rs. 2,300 crores, while the performance of Odisha discom exhibited significant improvement.
• Future growth is anticipated through new investments in renewables, transmission, and pump hydro projects, with a focus on enhancing overall performance.
• Engineering, Procurement, and Construction (EPC) margins are targeted at 5%, with expectations of improvement upon the commissioning of new projects.

Financial Outlook: 

• The balance sheet maintains a robust state, with net debt standing at Rs. 38,600 crores and stable leverage ratios.
• Substantial revenue growth is anticipated over the next three years, propelled by renewable projects, manufacturing initiatives, and opportunities in rooftop solar ventures.

Sector:

• Within the ambit of the Union Budget 2022-2023, the government introduced sovereign green bonds and bestowed infrastructure status upon energy storage systems, particularly grid-scale battery systems. Additionally, a substantial allocation of ₹19,500 crore (US$ 2.57 billion) was earmarked for a production-linked scheme (PLI) to spur the manufacturing of high-efficiency solar modules.

• The enforcement of the Late Payment Surcharge and Related Matters Rules, 2022 has instilled discipline in payment arrangements, empowering generation companies to regulate power supply to distribution entities in case of default on monthly payments.

• The government's proactive stance is evident in the imposition of a basic customs duty of 25% on imported solar cells and 40% on imported solar modules, aimed at safeguarding domestic manufacturing.

• Moving forward, the prevailing trajectory of growth in the renewable sector is anticipated to manifest in the form of hybrid/round-the-clock renewable energy solutions. These hybrid solutions will integrate wind and solar plants with battery electric storage solutions (BESS).

• In alignment with its dual focus on agriculture and renewable energy, the Government of India is vigorously promoting the distribution of solar water pumps. The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) scheme seeks to provide solar pumps to 3.5 million farmers with a substantial 60% subsidy. The emphasis is on renewable energy growth to align with sustainability and carbon emission reduction targets, with an ambitious plan to triple the renewable energy capacity to 500 GW by 2030.

• The Government of India is meticulously formulating a comprehensive set of policies to foster the adoption of electric vehicles (EVs) in the country. The establishment of a robust public charging infrastructure is deemed indispensable for the successful transition of mobility towards EVs in India.

FINANCIALS:

VALUATION:

• The trailing-twelve-month Price-to-Earnings (TTM PE) ratio of Tata Power Company Ltd stands at 36.47x. Positioned uniquely to capitalize on growth prospects emerging from Electric Vehicles (EVs), microgrids, and the solar sector, Tata Power is poised to augment its market share by leveraging its extensive experience. We expect TPCL to reach 450 levels.
• The company has consistently demonstrated its commitment to shareholders through regular dividend payments. For the fiscal year ending on March 31, 2023, a dividend of ₹2 per share was disbursed, implying a dividend payout ratio of 19%, a slight decrease from the 32% observed in FY22.
• With strategic aims to upscale its renewables, distribution, services, and energy solutions businesses, Tata Power envisions elevating the share of clean and green energy in its portfolio to 70% by 2030. As part of its ambitious plans, the management targets the installation of over 25,000 EV chargers across India by FY28, accompanied by an increase in capacity to more than 15 GW by the same fiscal year.
• Recent notable achievements include Tata Power Solar Systems Ltd securing a Letter of Award (LoA) from Solar Energy Corporation of India Ltd (SECI) for a 100 MW EPC solar project with a 120 MWh utility-scale Battery Energy Storage System (BESS) in Chhattisgarh, valued at approximately ₹945 crore. Furthermore, collaborations with TVS Motor Company and Apollo Tyres signify the company's commitment to building a robust electric two-wheeler charging eco-system and deploying EV charging stations nationwide.
• In a strategic move towards a healthier balance sheet, Tata Power plans to reduce debt through divestment of non-core assets, reinforcing financial stability. The company is also exploring debt-light models through innovative financial engineering and restructuring.
• Acknowledging the significant reduction in international thermal coal prices, the company anticipates a stabilizing effect, predicting a decrease in power prices, particularly for plants reliant on imported coal. Demonstrating their commitment to sustainability, Tata Power has established a 4 GW solar cell and module factory in Tamil Nadu, with commissioned module plants and an anticipated cell plant commissioning by year-end. The associated capital expenditure for this venture amounts to ₹3,400 crore, with approximately 3 GW earmarked for in-house consumption and the surplus available for international and domestic market sales based on demand.

SOURCE:

-SHARESCART

-COMPANY WEBSITE