Do you know that Tata Power Company Limited has distributed electricity to Mumbai city and its suburbs since 1915? And it is the largest integrated power company in India with power generation, transmission, and distribution services.
Overview of Tata Power
Over the years, the company has evolved to cater to the ever-growing power needs of India. As a result, the company has a 35% of generation capacity through clean and green sources and is committed to achieving carbon neutrality much before 2050.
Not only does the company play a crucial role in securing India’s power needs, but it has also created wealth for its shareholders. In the last three and five years, Tata Power share price has given 61% and 23% CAGR returns, respectively. In addition, it is a consistent dividend-paying company.
Listed on 3 April 1996 on the NSE, Tata Power share price made an all-time high of ₹298 on 7 April 2022. The stock underwent a split in the ratio of 10:1 on 26 September 2011.
With more than 100 years in operation, Tata Power has witnessed India’s evolving power needs and has successfully kept itself viable with changing customer needs. This blog article will look at the company’s fundamentals and financial metrics and the long-term growth outlook of Tata Power share price.
Tata Power was established as a Tata Hydroelectric Power Supply company in 1910. In 1915, the company set up India’s first hydroelectric power generation station at Khopoli with an installed capacity of 40 MW. Since then, the company has grown, contributing plenty of national firsts. For instance, it commissioned India’s first 150 MW thermal plant, India’s first multi-fuel burning generating station, India’s first cross-border hydropower project, commissioned the first 4000 MW mega power plant at Mundra, and more.
The company’s core functions through which it earns significant revenue include generation, transmission, distribution, and renewables. The company also ventured into ramping up EV charging infrastructure and EPC contracts in recent years.
In FY 2022, the revenue from operations was ₹42,576 crores, registering a growth of 28% y-o-y. And, in the first six months of FY23, the income from operations came in at ₹28,526 crores, posting a y-o-y growth of 43%.
Tata Power’s business segment has four parts: generation, renewables, transmission, and distribution. Let’s dive deep into each segment to better understand business performance.
The company’s generation segment operates under various business models and earns most of its revenue through power sales in the domestic and international markets. In FY 2022, the company earned ₹11,211 crores in revenue from the generation business, lower by around 20% compared to the previous fiscal year. As a result, EBIT (Earnings before interest and tax) came in at ₹2,632 crores.
One of the key reasons for the fall in generating revenue is the low utilization ratio of Mundra UMPP, which operated at 25% of the capacity in FY 2022 versus 73% in FY 2021 due to higher fuel costs. However, in FY 2023, there has been a considerable increase in generating revenue in the first six months, registering 100% y-o-y growth at ₹9,959 crores. EBIT during the period came in at ₹2,720 crores.
In the renewables segment, the company earns revenue through the sale of power, project management services, sale of solar products, and more. In FY 2022, the company earned ₹ 7,748 crores in revenue from the renewables business, up from ₹5,887 crores in FY 2021. EBIT during the period was ₹1,923 crores.
And, in H1 of FY 2023, the revenue came in at ₹ 3,693 crores, up by almost 20% compared to the previous period. EBIT during the period is ₹1,030.72 crores.
The primary revenue source is through the sale of power to DISCOMs, and other services rendered. In FY 2022, the company earned ₹ 27,493 crores in revenue, which is 63% higher than the previous fiscal year. EBIT came in at ₹2,138 crores.
And, in HI of FY 2023, the company recorded a revenue of ₹17,978.83 crores, 35% higher than d to the same period last year. EBIT during the period is ₹951.90 crores.
CEO & Managing Director Dr. Praveer Sinha leads the company. He has over 36 years of experience in India’s Power Generation and Distribution sector and holds a Ph.D. from IIT-Delhi.
Mr. Vijay Namjoshi manages the Power Generation business, and Mr. Ashish Khanna and Mr. Sanjay Banga manage the Transmission & Distribution. At the same time, Mr. Sanjeev Churiwala is the company’s, Chief Financial Officer.
On revenue of ₹42,576 crores in FY 2022, EBITDA during the period came in at ₹8,191 crores, and profit after tax (PAT) is at ₹2,156 crores. The net debt in FY 2022 increased to ₹ 39,708 crores, up by 9.7% in the last one-year period.
The interest coverage ratio stands at 1.31 times, which was 1.30 times in FY 2021. However, the interest coverage ratio could decline based on the revenue and profitability metrics recorded in H1 of FY 2023.
In FY 2022, the net debt-to-equity ratio increased to 1.53 times from 1.43 times in FY 21. The increase is due to higher net debt during the period and reduced profit levels.
The current ratio or liquidity ratio for the budget year ending on 31 March 2022 stands at 0.66 times, and in H1 of FY 2023, it stands at 0.69 times, up from 0.59 times in the same period last year.
In FY 2022, the operating profit margin was 14%, and the net profit margin (excluding exceptional items) was 7%. And in the H1 of FY 2023, the operating profit margin and net profit margin came in at 15% and 6%, respectively.
Over the past year, Tata Power share price has underperformed, which is in line with the broader Indian equity market. As a result, the stock is down by almost 23% from its 52-week elevated level of ₹298.
As of 14 November 2022, Tata Power share price is trying to break above the 200-day moving average (DMA). It is a psychologically important slope for traders, and if the stock successfully clears above the line, it will spur buying and resume its upside momentum.
As the company operates in a highly regulated marketplace, changes in government policy decisions and lack of availability of fuel sources affect the stock price. As a result, the Tata Power share price has shown volatile trends in the past and underperformed the broader market between 2010 and 2020. In May 2020, Tata Power share price made a low of ₹27.
Tata Power has consistently paid dividends to its shareholders, and in the last three fiscal years, the company paid dividends of ₹1.75, ₹1.55, and ₹1.55.
Tata Power is on the path toward business transformation through expansion, innovation, and sustainability in focus. The company plans to increase its generation capacity from 13.5 GW to 30 GW in the next five years and reach a customer base of 40 million from the current 12 million. And the addition in capacity will mostly come from clean energy sources. By FY 2030, the company wants to increase its clean energy portfolio to over 80%.
In the next five years, 80% of the capital expenditure will be towards developing a clean and green portfolio. In FY 2023, the company aims to increase ROE to over 12% from 9.5% and reduce net debt/EBITDA to below 1.5 times.
With robust fundamentals, the company will benefit the most from the change in the power sector in India. As a result, many brokerage houses are bullish on the stock and have given an upward revision to Tata Power share price.
India’s power demand is back above the pre-covid levels, and robust performance in all its business segments has helped Tata Power share price to recover and post substantial gains over the last three years. Some of the key reasons that can improve the company’s financials and increase Tata Power share price are:
- Strong order book in solar rooftop installations and TPPSL’s large EPC order book of ₹15,261 crores at the end of Q2 FY 2023
- Robust performance in the distribution business as the company has been able to reduce AT&C losses by a significant margin in all operating areas
- Expanding its EV charging infrastructure with cumulative installations of 722 EV charges in Q2 and adding 38 cities to the network, taking the total number of cities to 475.
The key risk that threatens the company’s profitability is the increase in fuel costs in thermal generation plants, like the Mundra UMPP, that left the plant idle for a long time. However, the company’s increasing green and clean energy mix to over 80% of the portfolio will reduce risk significantly in the next three to five years, providing stable earnings. Also, sector-specific risks like poor financial conditions and creditworthiness of state-run DISCOMs can derail the sector’s growth, impacting Tata Power share price.
The details shared above are based on the quarterly and annual reports of Tata Power and are for information purposes only. However, we suggest doing your due diligence before you make investment decisions.
Disclaimer Note: The stocks and financials mentioned in this article are for information purposes only. They shouldn’t be considered as a recommendation by Research & Ranking. We will not be liable for any losses that may occur.
What is the market cap of Tata Power?
At the closing price of Tata Power share price on 11 November 2022, the market cap of Tata Power stood at ₹73,412 crores.
How has Tata Power share price performed in the last three and five years?
Tata Power share price CAGR return in the last three and five years is 61% and 23%, respectively. The stock made a low of ₹27 in May 2021, and as of 11 November 2022, Tata Power share price is ₹230.
What is the 52-week high and low Tata Power share price?
The 52-week high of Tata Power share price is ₹298, and the 52-week low is ₹190.
Read more: About Research and Ranking