1
SYNOPSIS
• Tata Power Company Ltd. erstwhile
known as Tata Electric is India's
largest private sector power utility
pioneered the generation of electricity
nine decades ago.
• During the quarter ended, the robust
growth of Net Profit is increased by
31.76% Rs. 4185.70 million.
• Net Sales and PAT of the company
are expected to grow at a CAGR of 7%
and 6% over 2010 to 2013E
respectively.
• Tata Power Company Ltd has
proposed and approved of Sub-
division of the Equity Shares of Rs.
10/- each into Equity Shares of
Rs.1/- each.
• Tata Power Company Ltd has
successfully completed its offering
of Perpetual Debentures of Rs.
1,500 crores.
Years Net sales EBITDA Net Profit EPS P/E
FY 11 194507.60 49479.20 20881.20 88.00 11.51
FY 12E 213958.36 55874.21 22493.90 9.48 106.80
FY 13E 235354.20 61140.08 24406.28 10.29 98.44
Stock Data:
Sector: Power
Face Value Rs. 10.00
52 wk. High/Low (Rs.) 1465.00/1007.00
Volume (2 wk. Avg.) 27000
BSE Code 500400
Market Cap (Rs in mn) 2402442.60
Share Holding Pattern
1 Year Comparative Graph
TATA Power BSE SENSEX
C.M.P: Rs. 1012.00 Target Price: Rs. 1144.00 Date: Aug. 27th, 2011 BUY
Tata Power Co. Ltd Result Update: Q1 FY 12
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Tata Power Co. Ltd 1012.00 2402442.60 88.00 11.51 1.83 125.00
NTPC Ltd 166.20 137039.62 11.32 14.68 2.00 38.00
Torrent Power Ltd 212.75 10051.34 23.50 9.05 2.10 55.00
Neyveli Lignite Corp. 80.05 13430.07 7.74 10.34 1.20 20.00
Investment Highlights
Q1 FY12 Results Update
Tata Power Co. Ltd disclosed results for the quarter ended June 2011. A net sale
for the quarter is raised 12.34% to Rs. 58245.10 million as compared to
Rs.51848.40 million during the corresponding quarter last year. During the
quarter, the company has reported Net Profit decreased to Rs.4185.70 million
from Rs.3176.70 million in previous year same quarter. Total income is increased
to Rs. 59488.40 million for the quarter ended June 30, 2011. The Basic EPS of
the company stood at Rs.17.64 for the quarter ended June 2011.
Quarterly Results - Consolidated (Rs in mn)
As At June-11 June-10 %change
Net sales 58245.10 51848.40 12.34%
PAT 4185.70 3176.70 31.76%
Basic EPS 17.64 13.39 31.76%
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• Net Sales & PAT
During the quarter, net sales increase by 12.34% to Rs. 58245.10 million from
Rs.51848.40 million in the previous quarter and Total Profit for the quarter ended
June 2011 was Rs. 4185.70 million grew by 31.76% from Rs.3176.70 million
compared to previous quarter.
• EPS Growth
The Basic EPS of the company is stood at Rs. 17.64 for the quarter ended June
2011 from Rs. 13.39 for the quarter ended June 2010.
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Fixes Record Date for Stock Split
Tata Power Company Ltd has fixed September 27, 2011 as the Record Date for the
purpose of Sub-division of the Equity Shares of Rs. 10/- each into Equity Shares of
Rs. 1/- each.
Tata Power Completes its Perpetual Debenture Issue of Rs. 1,500 Crores
Tata Power Company Ltd has successfully completed its offering of Perpetual
Debentures of Rs. 1,500 crores. The Mandated Joint Lead Arrangers for the
issuance are Standard Chartered Bank and Yes Bank Limited.
The unique features of these Debentures are that they are perpetual in nature with
no maturity or redemption and are callable only at the option of the Company.
Face value of each Debenture is Rs. 10,00,000. These Debentures will be listed on
National Stock Exchange of India Limited.
CARE Assigns 'CARE AA' Rating To the Perpetual Debenture Issue of Tata
Power
Tata Power Company Ltd has stated that Rating agency, CARE (Credit Analysis &
Research Limited) has assigned 'CARE AA' Rating to the Company's Perpetual
Debenture issue.
The Company's Perpetual Debenture Issue of Rs. 1500 crores have a call option
after 10 years from the issue date and every year thereafter. There is a step up of
100 bps after 10 years. The coupon (payable semi-annually) has an optional
deferral clause which is linked to non payment of dividend, with a look back period
of six months. There is a dividend stopper clause that restricts dividend payment
on shares in case the coupon payment on the perpetual debentures is deferred.
5
Company Profile
Tata Power was incorporated on 18th September at Mumbai in 1919. The Company
generates and supplies Electricity. The Tata Hydro-Electric Power System comprises
the Tata Hydro-Electric Power Supply Co., Ltd., the Andhra Valley Power Supply Co.
Ltd., and the Tata Power Co. Ltd.
Tata Power today, is India's largest private sector power utility with an installed
generating capacity of about 3120 MW and a presence across the entire value chain in
power generation (thermal, hydro, solar, wind and geothermal) transmission, trading
and distribution.
Tata Power is spreading their footprint nationwide, creating new benchmarks in
operational efficiencies, investing in global resources and redefining paradigms.
Company strength lies in fulfilling their commitments and their ability to manage well
in the changing environment. They take pride in building lasting and trusting
relationship with their customers along with a legacy of caring for their communities
in and around their areas of operations. As they strive to lead the reform process for
sustainable power, they are excited to redefine the contours of Indian ‘Power’ Sector.
Services Offered
� Design & Development- Strategic Electronics Division (SED)
SED (Mumbai) was established in 1967 and is today a leading development
organization, having pioneered indigenous design and development of many hi-tech
systems for Defence and Industry. The manufacturing facility was established in
1982 and is situated in Bangalore.
� Direct Marketing - Power Supply to Mumbai Consumers
The Company also supplies power directly to such bulk consumers as Central and
Western Railways, Mumbai Port, refineries, textile mills, fertilizer factories, BARC,
Municipal Corporation water pumping plants and other major continuous
processes industries requiring uninterrupted power supply. The latest addition to
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the list is the commercial district at the Bandra-Kurla Complex and major
commercial and residential complexes in the suburbs.
� Power Projects & Related Services
Tata Power also extends its expertise for: Setting up Independent Power Plants (IPP)
Setting up Captive Power Plants (CPP) Power Transmission and Distribution
Projects Operation and Maintenance Services (O&M Services)
� Transmission & Distribution
• Transmission Business
Tata Power owns and operates 1200 circuit kms of high voltage (220 kV & 110 kV)
Transmission Network.
The Company recently took a 51% stake in the Rs 1200 Cr, 1200 Km Tala
Transmission project, which is a joint venture with the Power Grid Corporation of
India. The JV Company named Power links Transmission Limited, has been formed
primarily to evacuate power from the Tala Hydro Project in Bhutan and to carry
surplus electricity from the North Eastern States to the Northern Indian belt. The
Company makes its presence felt in generation in Northern India by participating
in the 330 MW Hydro Generation Project in the state of Uttaranchal.
• Distribution Business
Tata Power has a 935 km HT and LT cable distribution network connecting 17
major receiving stations and over 85 sub-stations in its Mumbai License area.
With the privatization of Delhi Vidyut Board (DVB), Tata Power Company holds
managing control in the distribution company North Delhi Power Limited (NDPL).
NDPL today distributes and supplies power to the North-North West areas of Delhi.
With predominantly industrial load consumption, this region has a consumer base
of approximately 8 lakhs with an annual power consumption of around 6000 MUs.
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Financial Results
12 Months Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) FY10 FY11 FY12E FY13E
Description 12m 12m 12m 12m
Net Sales 189858.40 194507.60 213958.36 235354.20
Other Income 5888.80 4105.00 4310.25 4655.07
Total Income 195747.20 198612.60 218268.61 240009.27
Expenditure -151658.70 -149133.40 -162394.40 -178869.19
Operating Profit 44088.50 49479.20 55874.21 61140.08
Interest -7638.70 -8102.10 -9155.37 -10070.91
Gross profit 36449.80 41377.10 46718.84 51069.17
Depreciation -8776.80 -9802.40 -10586.59 -11433.52
Profit Before Tax 27673.00 31574.70 36132.25 39635.65
Tax -6286.60 -9755.60 -12465.63 -13872.48
Profit After Tax 21386.40 21819.10 23666.62 25763.17
Extraordinary Items 88.90 285.20 270.94 284.49
Minority Interest -2334.60 -1965.00 -2259.75 -2530.92
Share of Profit & Loss of Asso 616.60 741.90 816.09 889.54
Net Profit 19757.30 20881.20 22493.90 24406.28
Equity capital 2372.90 2372.90 2372.90 2372.90
Reserves 111631.40 128663.00 152329.62 178092.79
Face value 10.00 10.00 1.00 1.00
EPS 83.26 88.00 9.48 10.29
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Quarterly Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) 31-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11E
Description 3m 3m 3m 3m
Net sales 44409.30 50154.80 58245.10 54750.39
Other income 782.50 1055.80 1243.30 1367.63
Total Income 45191.80 51210.60 59488.40 56118.02
Expenditure -33863.50 -38088.50 -44011.20 -41665.05
Operating profit 11328.30 13122.10 15477.20 14452.97
Interest -2109.20 -2193.70 -2629.60 -2866.26
Gross profit 9219.10 10928.40 12847.60 11586.71
Depreciation -2489.50 -2492.80 -2718.80 -2827.55
Profit Before Tax 6729.60 8435.60 10128.80 8759.16
Tax -2088.50 -2128.90 -5089.30 -2890.52
Profit After Tax 4641.10 6306.70 5039.50 5868.64
Extraordinary Items 10.00 305.20 -118.70 0.00
Minority Interest -307.40 -582.10 -824.30 -799.57
Share of Profit & Loss of Asso 80.00 525.60 89.20 82.06
Net Profit 4423.70 6555.40 4185.70 5151.13
Equity capital 2372.90 2372.90 2372.9 2372.9
Face value 10.00 10.00 10.00 1.00
EPS 18.64 27.63 17.64 2.17
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Key Ratios
Particulars FY10 FY11 FY12E FY13E
No. of Shares(in mn) 237.29 237.29 2372.90 2372.9
EBITDA Margin (%) 23.22% 25.44% 26.11% 25.98%
PBT Margin (%) 14.58% 16.23% 16.89% 16.84%
PAT Margin (%) 11.26% 11.22% 11.06% 10.95%
P/E Ratio (x) 12.16 11.51 106.80 98.44
ROE (%) 18.76% 16.65% 15.30% 14.28%
ROCE (%) 17.71% 15.66% 16.03% 16.00%
Debt Equity Ratio 1.62 1.89 1.68 1.51
EV/EBITDA (x) 5.45 4.86 43.00 39.29
Book Value (Rs.) 480.44 552.22 65.20 76.05
P/BV 2.11 1.83 15.53 13.31
Charts:
Net Sales & PAT:
10
P/E Ratio(x):
Debt Equity Ratio:
11
EV/EBITDA(x):
P/BV:
12
Outlook and Conclusion
At the current market price of Rs.1012.00, the stock is trading at 106.80 x
FY12E and 98.44 x FY13E respectively.
Earning per share (EPS) of the company for the earnings for FY12E and
FY13E is seen at Rs.9.48 and Rs.10.29 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 7%
and 6% over 2010 to 2013E respectively.
On the basis of EV/EBITDA, the stock trades at 43.00 x for FY12E and
39.29 x for FY13E.
Price to Book Value of the stock is expected to be at 15.53 x and 13.31 x
respectively for FY12E and FY13E.
We expect that the company will keep its growth story in the coming
quarters also. We recommend ‘BUY’ in this particular scrip with a target
price of Rs.1144.00 for Medium to Long term investment.
Industry Overview
As the Indian economy continues to surge ahead, its power sector has been expanding
concurrently to support the growth rate. The demand for power is growing
exponentially and the scope of growth of this sector is immense.
The total installed capacity of India in 2011 is estimated to be around 1,76,990.40
mega watt (MW).Thermal power in India is responsible for two-third of power
generation in India which includes using gas, liquid fuel and coal. This year thermal
power in India has provided 115649.48 MW in which 96,743.38 MW was generated
from coal, 17,706.35 MW from Gas and 1,199.75 MW from oil. Further, Hydro power
in India (Renewable) provided 38,106.40 MW, Nuclear power provided 4,780.00 MW
and RES (MNRE) 18,484.52 MW.
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Power in India: Growth Drivers
In terms of power generation, India is the sixth largest in the entire world. Over the
past 30 years the demand for power in India has enhanced at 3.6 per cent per annum
on the back of economic growth of India. The per capita energy consumption was at
733.54 kilowatt in the year 2008-2009. The Government of India has set the target
‘Power for all by 2012’ to meet with the energy requirement of the entire country, by
adding 78,000 MW of installed generation capacity by 2012. According to the experts,
the total demand for electricity will be above 950,000 MW by 2030. India has taken all
the steps needed to provide energy from renewable sources such as wind and solar
power. In March 2011 the capacity of wind power in India stood at around 12,000
MW.
Azure Power, a producer in solar energy working independently, has announced a long
term financing tie-up with Exim Bank worth US$ 16 million. The main aim of the
collaboration is setting up a 5 mega watt (MW) solar power project in Rajasthan.
"India has set ambitious goals to promote solar power. Exim Bank is working with
U.S. exporters to make sure that they have a platform to participate in the
development of solar sector in India," according to Fred P. Hochberg, Chairman and
President of the Export-Import Bank of the United States.
“The world wind power market wants India to design a small wind-solar hybrid system
and commercialize it globally as there is a fast growing market for efficient, cost-
effective and sustainable sources of energy,” said Steve Sawyer, General Secretary of
the Global Wind Energy Council (GWEC).
Power Sector in India: Recent Trends and Investments
The power sector in India has grown rapidly over the years. Considerable growth has
been witnessed in all the sectors such as thermal (3.82 per cent), hydroelectric (9.97
per cent) and nuclear (40.94 per cent). As per the 11th Annual Plan, the overall
achievement growth in the year 2010-11 has been around 5.56 per cent.
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A new working group has been formed for further development of the sector, according
to the report released by the Planning Commission dated March 4, 2011. The objective
of forming this group lies in making the power supply sector more productive and
healthy. The group has been chaired by the secretary for power, government of India,
power ministry and also members of other ministries. Other notable representatives
from private corporate power companies also formed an important part of the group.
The power sector in India is having a bright future and a variety of recent investments
have been made both by private and government sector enterprises. The government
of Madhya Pradesh has invited Reliance power to go ahead with the purchase
agreement of its Chitrangi power plant project, according to a recent report released
on July 16, 2011. The total estimated power generation from the project stands at
3,960 MW. Apart from this, Reliance power is also focussing on projects in
Krishnapatnam (Andhra Pradesh) and Tilaya (Jharkhand).
Tata Power, one of the largest power manufacturers in the sector, is coming up with a
thermal power plant in Raigad, Maharashtra. The total estimated power generation of
the project stands at 1,600 MW.
“The scope for investments in the power sector of India stands at US$ 300 billion,”
according to Mr. Sushilkumar Shinde, Union Minister, Ministry of Power.
Power in India: Government Initiatives
The government has initiated several proactive steps to open the sector for the private
players and realise the full potential of the country in the power sector:
• Introduction of the Electricity Act 2003 and the notification of the National
Electricity Policy 2005
• Constitution of Independent State Electricity Regulatory Commissions in the
states
• Providing income tax holiday for a block of 10 years in the first 15 years of
operation and waiver of capital goods' import duties on mega power projects
(above 1,000 MW generation capacity)
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• 100 per cent FDI is permitted under the automatic route for generation and
transmission of electric energy produced in hydro-electric, coal/lignite-based
thermal plants, oil-based thermal plants and gas-based thermal plants; non-
conventional energy generation and distribution, distribution of electric energy
to households, industrial commercial and other users; and power trading
• The government has also taken up some ambitious programmes like the Ultra
Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana
(RGGVY), Accelerated Rural Electrification Programme and the goal of Power for
All by 2012 among others, to rapidly increase the installed capacity
Road Ahead
There has been a consistent improvement in power generation in the country over the
last few years. The Government has taken various steps to make the power sector
infrastructure more developed within a short span of time.
_______________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
16
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