14-Jan-2022

TATA POWER COMPANY LIMITED

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TataDHDPower Company Limited, India’s largest integrated power company has a presence across the power value chain viz. generation
of renewable as well as conventional power (including hydro and thermal energy), transmission & distribution and trading. In line
with the company's view on sustainable and clean energy development, Tata Power is steering the transformation of traditional
utilities to providers of integrated solutions by initiating new business models in EV (electric vehicle) charging, solar pumps and
rooftops, microgrids, home automation and smart meters.
Consolidated operations of the company can be categorised into four segments:
• Transmission and Distribution: It comprises of transmission and distribution network, sale of power to retail customers and power
trading business.
• Generation: Comprises of generation of power from hydroelectric sources and thermal sources (coal, gas and oil).
• Renewables: It comprises of generation of power from renewable energy sources, i.e., wind and solar. It also includes EPC
(Engineering, Procurement and Construction) and maintenance services with respect to solar.
• Others: Comprising of project management contracts, infrastructure management services, property development, lease rent of
oil tanks, satellite communication and investment business.

As on 31st March, 2021, the company had 59 subsidiaries (of which 44 are wholly-owned), 33 joint ventures (JVs) and 5 associates.

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Segmental & regional installed capacity
DHD As on 31st March, 2021, the Tata Power group of
companies have a generation capacity of 12,808
MW (Domestic - 12,321 MW and International -
487 MW) based on various fuel sources.
Of the total installed capacity, the company
(including its subsidiaries) has 69% from thermal
generation sources and 31% of its capacity (in
MW terms) in clean and green generation
sources (hydro, wind, solar and waste heat
recovery).
The company is focused on increasing its clean
energy percentage to 80% by 2030.

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REVENUE FROM OPERATIONS* (FY21)

DHD An update on the integrated solutions under its new business model is
as under:

1% Its wholly-owned subsidiary, Tata Power Solar Systems Limited

(TPSSL), is one of India’s largest utility-scale solar EPC company with
presence across 11 states in India and has an order book of over 2,800
17% MW with a value of ~₹8,700 cr as on 31st March, 2021.
TP Renewables Microgrid Ltd (TPRMG) completed installation of 161
microgrids with another 40 under installation.
It had 532 EV (electric vehicle) charging points across 92 cities as on
50%
31st March, 2021. In addition to its partnership with Tata Motors and
Jaguar Land Rover, in FY21, Tata Power partnered with MG Motors, for
32% developing EV charging infrastructure for their customers and dealers.
It sold 6,432 solar pumps in Q4, taking total sales in the year to 12,928.
It is dedicated to set up ~1 million solar pumps by FY26.
It installed 79 MW worth ₹311 cr of rooftop solar in Q4 taking total
Transmission & Distribution of Power Generation Renewables Others installations to 175 MW, worth ₹629 cr in FY21.
*Incl. net movement in Regulatory Deferral Balances

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 GROWTH
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DHD SALES GROWTH

In FY21, the company reported net sales of ₹32,468
cr, a growth of 11.4% as compared to FY20.
This was on account of increased order execution in
large scale EPC projects, rooftop and solar business.
Additionally, the company acquired 51% stake in
three Odisha Distribution companies (Discoms),
namely, TP Central Odisha Distribution Ltd., TP
Western Odisha Distribution Ltd. and TP Southern
Odisha Distribution Ltd.
In H1 FY22, the net sales grew by 34.2% YoY to
₹19,778 cr from ₹14,743 cr in H1 FY21.
In Q2 FY22, net sales increased to ₹9,810 cr,
recording a growth of 18.3% YoY on account of
higher generation in renewables portfolio and
increased order execution in solar EPC business.

5 Year CAGR: 1.9%

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DHD EBITDA GROWTH

EBITDA for FY21 was marginally lower by 2.8% YoY at
₹7,539 cr.
The cost of power and raw material contributed a
major portion towards the increase in the operating
costs. However, the reduction in fuel cost coupled
with changes in deferred regulatory balances
restricted the decline in EBITDA.
In H1 FY22, EBITDA stood at ₹3,542 cr, witnessing a
decline of 13% YoY, primarily on account of increase
in power cost and changes in deferred regulatory
balances.
In Q2 FY22, EBITDA decreased to ₹1,355 cr from
₹2,124 cr in Q2 FY21, on account of similar reasons.

5 Year CAGR: 3.1%

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DHD PAT GROWTH

In FY21, the company reported a PAT of ₹611 cr, a de-
growth of 21% YoY on account of an exceptional
charge of ₹109 cr (disallowance of recovery of
standby charges by Maharashtra Electricity
Regulatory Commission) and increase in total

as
expenses.
Consolidated PAT (including share of profits from
joint ventures and associates) stood at ₹1,127 cr in
FY21. This included the company’s stake in PT Kaltim
Prima Coal (KPC), PT Baramulti Suksessarana Tbk
(BSSR), PT Nusa Tambang Pratama and Resurgent
Power Ventures Pte. Ltd.
In H1 FY22, it reported a loss of ₹17 cr, on account of
reduced operating profit, partly offset by increase in
other income. However, consolidated PAT in H1 FY22
stood at ₹813 cr, recording a growth of 67% YoY.

5 Year CAGR: 0.4%

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 GROWTH EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, the company continued to maintain the
EBITDA margin at ~24%.
The pace of transition from traditional to renewables
is a key monitorable for the margin profile.
In H1 FY22, the metric stood at ~21%. It witnessed a
decline on account of increased power cost and
charge due to movement in regulatory deferral
balance.
In Q2 FY22, EBITDA margin was ~18%.

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DHD PAT MARGIN

In FY21, the PAT margin was 1.7%. The joint ventures
and associates contributed a significant portion to
the net profit of the company.

During the year, the company completed the sale of

its strategic engineering division (SED) to Tata
Advanced Systems Ltd. (TASL) which was classified as
discontinued operations.

Over the years, the power sector has been facing

headwinds on the profitability front, thereby, driving
the need for cost reduction and revenue
optimization.

In H1 FY22 and Q2 FY22, the metric was in negative

territory due to losses.

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DHD ROCE
The company has been generating a steady ROCE in
the range of 6%-10%.

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DHD ROE
The ROE for FY21 stood at 2.9%.
The company issued equity shares at ₹53 per share
for an amount aggregating to ₹2,600 cr to Tata Sons
Pvt. Ltd. on 13th August, 2020.

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 PROFITABILITY EDGE METER: 2
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

The company has been able to maintain sustainable
cash flow from operations. Given the capital
intensive nature of the industry, depreciation and
finance cost formed a major portion of adjustments.
Cash flow from investing activities was positive on
account of dividend received from joint ventures
(₹1,846 cr in FY21) and sale of non-current
investments. The company also made net purchase
of property, plant and equipment to the tune of
₹1,787 cr.
The negative cash flow from financing activities was
primarily due to repayment of borrowing of ~₹6,000
cr and interest payments of ~₹3,700 cr during the
year. There was an inflow on account of issue of
shares.

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 EFFICIENCY
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WORKING
DHD CAPITAL CYCLE
The working capital cycle has remained negative over
the past 5 years.

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DHD FREE CASH FLOW

In FY21, the free cash flow per share was ₹3.85.
The free cash flow increased from ₹2,271 cr in FY20
to ₹2,539 cr in FY21.
The company expects capex (capital expenditure) to
be in the range of ₹7,000-₹8,000 cr in FY22, half of
which would be for the renewables segment. /

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
Over the last few years, the asset turnover ratio has
been stable at 0.35x.

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 EFFICIENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The metric improved during the year due to
repayment of borrowings by the company through
divestment of various assets and strategic fund raise
from promoters.
The non-current borrowings in FY21 stood at
₹30,045 cr and current borrowings reduced from
₹11,844 cr in FY20 to ₹8,436 cr in FY21.
The company raised ₹2,600 cr by way of issue of
equity shares on preferential basis to Tata Sons
Private Limited, helping in its objective of
deleveraging.
During the quarter ended 30th June, 2021,
capitalizing on the low interest regime, it prepaid
₹1,500 crore of 11.4% perpetual debt, which would
reduce its overall interest outgo.

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INTEREST
DHD COVERAGE RATIO
In FY21, the interest coverage ratio was 1.22x.
The company reduced its average interest cost to
7.4% per annum in FY21 compared to 8.3% in FY20.
Finance cost of the company in FY21 reduced due to
repayment of loans from sale of non-core assets,
issue of shares and lower rate of interest.
In H1 FY22, the same stood at 7.25% on account of
selective prepayment of high cost debt.

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DHD CURRENT RATIO

In FY21, the current ratio stood at 0.84x.
As on 30th September 2021, the cash and cash
equivalents and bank balance stood at ₹4,608 cr.

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 SOLVENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
TTM PE of Tata power stood at 53.68x.
With the growth opportunities coming in from EVs,
microgrids and solar space, Tata Power will be
uniquely positioned to leverage its experience in
order to gain market share.

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DHD DIVIDEND YIELD

The company has been consistently paying dividends.
The directors of the company declared a final
dividend of ₹1.55 per for the year ended 31st March,
2021, implying a dividend pay-out ratio of ~44%.

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 VALUATION
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DHD KEY LEVELS

Tata Power Company was on a downward spiral
between January 2018 to May 2020 wherein the
stock price fell from a high of ~₹100 to a low of ₹27.
However, the stock has been showing significant
strength since then.
In line with our expectations, the stock broke out
above the ₹150 mark in Sep, 2021 and went on to
make a lifetime high of ₹249 in Oct, 2021.
The zone of ₹180-₹200 is likely to act as a support
zone and can be used by investors for fresh
accumulation.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
The management plans to limit its exposure to coal-
based projects and does not intend to expand its
existing portfolio.
The management plans to invest in and promote the
development of Charging Point Operators (CPOs) in
the next four years. It is investing towards SMART
grid technologies such as smart meters, sensors, IOTs
to make networks more efficient.
It is planning to sell its Home Automation products
through e-commerce platforms such as Amazon,
Flipkart, Tata CLiQ and modern retail stores such as
Croma.

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SHAREHOLDING
DHD PATTERN
The promoter shareholding has remained the same
in the last six quarters.
The shareholding of Tata Sons increased from 35.27%
in FY20 to 45.21% in FY21, and has remained at that
level in December 2021.
FII holding in the quarter further reduced to 10.84%
from 11.06% in September 2021.
DII holding decreased to 15.90% in December 2021,
from 20.44% in September 2021,.
Top Public Shareholding:-
Life Insurance Corporation of India 6.53%
HDFC Life Insurance Company Limited 1.25%
Matthews Pacific Tiger Fund 1.20%
General Insurance Corporation of India 1.14%

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 QUALITY
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DHD SECTOR POTENTIAL

• The global energy storage market grew significantly even in the pandemic year, achieving record installations of 5.3 GW in 2020
from 3.4 GW in 2019, led by China, and followed by the US and Europe. It is expected to grow substantially in the next couple of
years, with the Asia-Pacific region accounting for more than 50% of the global market share.
• Climate change is one of the biggest challenges of the 21st century, with the energy sector contributing 25% (Source: IPCC AR5
2014) to the global GHG (green house gas) emissions. As energy is an essential requirement for economic growth and societal

• 0
wellbeing, renewable energy (RE) is gaining prominence globally.
Going forward, the emerging trend and general direction of growth in the renewables sectors would be in the form of
hybrid/round-the-clock RE (renewable energy) solutions. The hybrid solutions would include a combination of wind and solar
plants along with some battery electric storage solutions (BESS).
• To propagate its twin priorities of agriculture and renewable energy, the Government of India is heavily focusing on distribution of
solar water pumps. It aims to benefit 3.5 million farmers by providing them solar pumps with 60% subsidy through the Pradhan
Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) scheme. It is focussing on RE growth in alignment to the
sustainability and carbon emission reduction targets with an intent to increase the RE capacity 3-fold from the targeted level of
175 GW in 2022 to 450 GW by 2030.
• A complementary mix of policies is being carefully laid out by the Government of India to promote EV adoption in India. Presence
of a suitable public charging infrastructure is crucial for successful transformation of mobility towards EV in India.

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COMPETITIVE
DHD LANDSCAPE
Tata Power is an integrated player and the other
players in the sector include Adani Green Energy Ltd.,
Power Grid Corporation of India Ltd., Adani Power
and CESC.
It has developed a technology roadmap with
emphasis on evolving business opportunities. These
include hydrogen as an energy source, carbon
capture and valorisation, Energy as a Service (EaaS),
Battery Storage, SMART metering solutions and
growth in innovative solutions in renewables like
hybrid, round the clock model, floating solar among
others.

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DHD FUTURE OUTLOOK

• Scale-up renewables, distribution, services and energy solutions businesses: It intends to increase the share of clean and green
energy in the company's portfolio to 80% by 2030. The management also plans to set up more than 1 lakh EV chargers across India
by FY26. It intends to increase its capacity to 25 GW in FY25.
• Deleveraging balance sheet: It plans on reducing debt through divestment of non-core assets and strengthening of balance sheet.
Additionally, it intends to adopt debt-light models through innovative financial engineering and re-structuring.
• Carbon emission management: It is consistently building on its innovative initiatives to reduce GHG emissions and improve
operational efficiency to reduce energy consumption. Also, aggressively grow its renewable energy based capacity including utility
scale, microgrids and rooftop. It intends to attain carbon neutrality before 2050.
• Leverage digital platforms to drive new customer centric businesses: Establish digital platforms for new businesses like EV
charging, home automation and energy services. Leveraging data analytics to deliver customized solutions and value added
services to customers.
• Minimizing coal cost under recovery in CGPL: Optimising the coal cost under recovery through better coal sourcing, optimal
blending and freight management.
• It recently acquired four distribution companies in Odisha through competitive bidding and expanded its customer base to 11.8
million. This business vertical provides an opportunity to closely interact with its customers. It envisages to serve 40 million
customers by FY26.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
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DHD
Edge Meter Aspects Grade
Growth 4
Profitability 2
Efficiency 4
Solvency 4
Valuation 3
Quality 4
TOTAL 21

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
This document and the process of identifying the potential of a company has been produced only for learning purposes. Since
equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

www.stockedge.com

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time
of public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have managed or co-managed public offering of securities for the subject company in the past twelve
months.
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the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past twelve months.
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