Tata Power

Industry Profile :   Power is one critical component for development of economy. Lack of availability of power is not sustainable for growth and development. India is one of the country having diverse source of natural resource like Water, Coal, Lignite, Natural Gas, Oil, Nuclear power, wind which also help development of power sector. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. India ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness Index, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner and moved up 73 spots to rank 26th in the World Bank’s list of electricity accessibility in 2017.

Power sector in india is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

Total installed capacity of power stations in India stood at 330,260.53 Megawatt (MW) as on May, 2017. The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity to be generated in the financial year 2017-18, which is 50 BU’s higher than the target for 2016-17. The annual growth rate in renewable energy generation has been estimated to be 27 per cent and 18 per cent for conventional energy.

The Government has added 10.2 Giga Watts (GW) of conventional energy generation capacity and 12.5 GW of renewable energy capacity in Financial Year 2017. Under the 12th Five Year Plan, the Government has added 93.5 GW of power generation capacity, thereby surpassing its target of 88.5 GW during the period.

Company Profile. : Tata Power, Electric Utility company is Founded in 1910. Core business of the company is generate, transmit and distribute electricity. The company has operations in India, Singapore, Indonesia, South Africa and Bhutan and has its operations based in 35 locations in India. Thermal power plant in trombay in Mumbai, Mundra in Gujarat (4000 MW UMPP), Jojobera and maithon in Jharkhand, Kalinga Nagar in Orissa, Haldia in West Bengal.  The hydro stations are located in the Western Ghats of Maharashtra and the wind farms in ahmadnagar, Supa. The company also operating and maintenance in middle East, south Africa. The strategic engineering division of the company is also operating in defence and engineering and also working for pinaka launchers.

Shareholding Pattern. :. 33.02% is heel by Promoter, which are nothing but Tata Group Companies. Out of which 4.34% are pledged. 3.44% held by Mutual Fund, mainly because the company is part of NIFTY. 0.6% held by Financial Institution. 19.37% held by Insurance Companies, out of which LIC holding large part. 27.26% held by foreign Investors. So yes. The company is largely held by Institutions. Remaining is held by Public.

Financials and Ratios :  

 2010 - 112011 - 122012 - 132013 - 142014 - 152015 - 162016 - 17
Net Profit941.491,169.731,024.69954.081,010.29771.62283.45
Net Profit Margin13.6013.7610.7111.0511.649.143.92
Book Value422.9945.3546.5250.0853.4853.6455.63
Dividend Per Share12.501.
Dividend Payout31.5325.3826.6535.4734.8445.61124.18
Debt to Equity0.670.710.870.740.730.730.75
Asset Turnover32.6233.8234.0528.2425.8524.7418.10

Future Prospects : Even though the company having great parentage, but the way it was managed, was not right. Concept of UMPP is good but the cost of it  is very large. It is visible even on balance sheet and Ratios. The company is holding is also holding stake in group companies which is like holding unnecessary risk when Tata Sons can buy from it. The company also in business of Defence. Why? Tata Motors and Nelco are sufficient for that. Right now it is not advisable to invest in this company.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter