Strategic Finance Management Assignment

NAVEEN KUMAR | N044

INTRODUCTION
Tata Power Company Limited, a prominent Indian electric utility and electricity generation firm
headquartered in Mumbai and a part of the Tata Group, stands as India's largest integrated power
company with an installed electricity generation capacity of 14,110 MW. Notably, 5250 MW of this
capacity is derived from Non-Conventional (Green Energy) sources, while the rest is from thermal
sources. In a significant milestone in February 2017, Tata Power became the first Indian company
to ship over 1 GW of solar modules.

History:
Originating as the Tata Hydroelectric Power Supply Company in 1910, the company underwent
amalgamation with the Andhra Valley Power Supply Company in 1916. It achieved a milestone by
commissioning India's second hydro-electric project in Khopoli in 1915, generating 72 MW.
Subsequent power plants were established in Bhivpuri (75 MW) in 1919 and Bhira (300 MW) in
1922.

Operations:
Tata Power operates not only in India but also extends its presence to Singapore, Indonesia, South
Africa, Zambia, Georgia, Mauritius, and Bhutan. With operations based in 20 locations across
India, the company's thermal power stations are situated in various states, including Trombay in
Mumbai, Mundra in Gujarat, Jojobera and Maithon in Jharkhand, Kalinganagar in Odisha, Haldia
in West Bengal, and Belgaum in Karnataka. Hydro stations are located in the Western Ghats of
Maharashtra, while wind farms are spread across Ahmednagar, Supa, Khanke, Brahmanwel,
Gadag, Samana, and Visapur. Tata Power has played a pioneering role with installations such as
India's first 500 MW unit at Trombay, the first 150 MW pumped storage unit at Bhira, and a flue gas
desulphurization plant at Trombay for pollution control.

The company also has a distribution presence in Delhi and Ajmer, Rajasthan. In Rajasthan, Tata
Power exclusively produces Green Energy, boasting 445 MW of solar energy (Tata Power Solar) and
185 MW of Wind Energy, contributing to a total green energy generation of 630 MW.

Major Power Plants:

Among Tata Power's major power plants are the Mundra Ultra Mega Power Plant in Gujarat, the
Trombay Thermal Power Station near Mumbai, the Maithon Power Plant in Dhanbad, and the
Jojobera Power Plant in Jamshedpur.

International Operations:
Tata Power has executed noteworthy overseas projects in the Middle East, Africa, and South East
Asia. These include the Jebel Ali 'G' station in Dubai, Al-Khobar II in Saudi Arabia, Jeddah III in
Saudi Arabia, Shuwaikh in Kuwait, EHV substations in UAE and Algeria, and power plant operation
and maintenance contracts in Iran and Saudi Arabia. Additionally, the company's Russian
subsidiary, Far Eastern Natural Resources LLC, holds a license for a coal mine in Kamchatka Krai.

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Strategic Finance Management Assignment
NAVEEN KUMAR | N044

SEGMENT REVENUE FY2023

RAPID SCALE UP OF MICROSOFT

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Strategic Finance Management Assignment
NAVEEN KUMAR | N044

BALANCESHEET

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 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Life Cycle Stage of Tata Power

1. Founding and Early Years (1910-1922):
• Tata Power traces its origins back to the Tata Hydroelectric Power Supply Company, established
in 1910.
• It merged with the Andhra Valley Power Supply Company in 1916.
• The company commissioned India's second hydro-electric project in 1915 at Khopoli, generating
72 MW of power.
• Subsequent power plants were set up in Bhivpuri (75 MW) in 1919 and Bhira (300 MW) in 1922.

2. Operations and Expansion:

• Tata Power operates in various countries, including India, Singapore, Indonesia, South Africa,
Zambia, Georgia, Mauritius, and Bhutan.
• Its thermal power stations are located in Trombay (Mumbai), Mundra (Gujarat), Jojobera, Maithon
(Jharkhand), Kalinganagar (Odisha), Haldia (West Bengal), and Belgaum (Karnataka).
• The company also has hydro stations in the Western Ghats of Maharashtra and wind farms in
several locations.
• Tata Power actively contributes to pollution control through a flue gas desulphurization plant at
Trombay.

3. Recent Achievements:
• Tata Power boasts an installed electricity generation capacity of 13,515 MW based on various fuel
sources.
• Approximately 34% of its capacity comes from clean and green generation sources (hydro, wind,
solar, and waste heat recovery).
• The company serves more than 12 million consumers via its Discoms under public-private
partnership models.

4. Sustainable Initiatives:
• Tata Power is committed to sustainable and clean energy development.
• It shapes the power sector transformation through new business models in EV charging, solar
rooftop and pumps, microgrids, storage solutions, ESCO, home automation, and smart meters.
• The company aligns with the United Nations Sustainable Development Goals (SDGs) and aims to
empower a billion lives through innovative energy solutions.

Influence of Industry Life Cycle on Strategic Decisions

• Industry Life Cycle: The power sector is undergoing a major transformation with new energy sources,
new players, new technologies, and new challenges. The sector is moving from a mature stage to a
renewal stage, where innovation and sustainability are the key drivers of growth and
competitiveness.
• Strategic Decisions: Tata Power has adopted a strategy that aligns with the changing industry
dynamics and focuses on the following aspects:
- Fuel growth in renewables business, including solar rooftop solutions, to increase the share of
clean energy in the generation portfolio and reduce carbon footprint.
- Expand distribution presence and network, including microgrids, to reach more customers and
provide reliable and quality power supply.
- Invest in Next-Gen power solutions, such as electric vehicles, digitalisation, battery storage,
cyber security, big data analytics, hydrogen fuel, etc., to leverage new opportunities and create
value for stakeholders.
- Set new benchmarks in operational excellence and financial returns for existing businesses, by
optimising efficiency, reducing losses, maximising incentives, and resolving issues.
- Create an engaged, agile and future ready workforce, by fostering a culture of innovation, learning,
and collaboration.

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 Strategic Finance Management Assignment
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- Leverage digital to establish new business models and enhance existing business delivery, by
improving asset performance, enhancing customer experience, productising IT assets and
services, and exploring new business opportunities.
- Build a customer-centric organisation, by offering customised solutions, value-added services,
and incentives to customers.

Cost of Capital
As of today (2024-02-05), Tata Power Co's weighted average cost of capital is 13%. Tata Power Co's ROIC
% is 3.94% (calculated using TTM income statement data). Tata Power Co earns returns that do not
match up to its cost of capital. It will destroy value as it grows.
Annual Data
Trend Mar 2019 Mar 2020 Mar 2021 Mar 2022 Mar 2023
WACC % 7.98 7.39 9.24 11.19 9.7

Quarterly Data
Trend Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
WACC % 11.32 - 9.70 - 11.82

WACC % Distribution
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average
to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of
capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average
of the costs of these sources of financing, each of which is weighted by its respective use in the given
situation. By taking a weighted average, we can see how much interest the company has to pay for every
dollar it finances.
WACC % Calculation
𝐸𝐸 𝐷𝐷
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 = 𝑋𝑋 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 + 𝑋𝑋 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑋𝑋 (1 − 𝑇𝑇𝑇𝑇𝑇𝑇 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅)
(𝐸𝐸 + 𝐷𝐷) (𝐸𝐸 + 𝐷𝐷)
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the
weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Tata Power Co's market
capitalization (E) is ₹1245383.588 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of
debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-
Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As
of Sep. 2023, Tata Power Co's latest one-year quarterly average Book Value of Debt (D) is
₹528999.4667 Mil.

𝐸𝐸 1245383.588
a) Weight of Equity = = = 0.7019
(𝐸𝐸+𝐷𝐷) (1245383.588 + 528999.4667)

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 Strategic Finance Management Assignment
NAVEEN KUMAR | N044
𝐷𝐷 28999.4667
b) Weight of Debt = = = 0.2981
(𝐸𝐸+𝐷𝐷) (1245383.588 + 528999.4667)

2. Cost of Equity:
We used Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-
Free Rate of Return)
Cost of Equity = Risk Free Rate of Return + Beta of Asset 𝑋𝑋 (Expected Return of the Market
− Risk Free Rate of Return)
a) We used 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The
current risk-free rate is 7.22%. Please go to Economic Indicators page for more information.
Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where
the company is headquartered. If the data for that country/region is not available, then we will
use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market
returns. Tata Power Co's beta is 1.46.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. We
requires market premium to be 6%.
d) Cost of Equity = 7.22% + 1.46 𝑋𝑋 6% = 15.98%

3. Cost of Debt:
We used latest TTM Interest Expense divided by the latest one-year quarterly average debt to get
the simplified cost of debt.
As of Sep. 2023, Tata Power Co's interest expense (positive number) was ₹43695.6 Mil. Its total
Book Value of Debt (D) is ₹528999.4667 Mil.
3695.6
Cost of Debt = = 8.26%
528999.4667

4. Multiply by one minus TTM Tax Rate:

We used the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to
calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the
calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it
is set to 0%.
15789.9
The latest calculated TTM Tax Rate = = 27.56%
57283.2

Tata Power Co’s Weighted Average Cost of Capital (WACC) for Today is calculated as:
𝐸𝐸 𝐷𝐷
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 = 𝑋𝑋 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 + 𝑋𝑋 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑋𝑋 (1 − 𝑇𝑇𝑇𝑇𝑇𝑇 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅)
(𝐸𝐸 + 𝐷𝐷) (𝐸𝐸 + 𝐷𝐷)
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 = 0.7019 ∗ 15.98% + 0.2981 ∗ 8.26% ∗ (1 − 27.56%) = 13%

Return On Invested Capital (ROIC)

ROIC % measures how well a company generates cash flow relative to the capital it has invested in its
business. It is also called ROC %. Tata Power Co's annualized return on invested capital (ROIC %) for
the quarter that ended in Sep. 2023 was 5.38%.

As of today (2024-02-05), Tata Power Co's WACC % is 13.17%. Tata Power Co's ROIC % is 3.94%
(calculated using TTM income statement data). Tata Power Co earns returns that do not match up to its
cost of capital. It will destroy value as it grows

Microsoft Annual Data

Trend Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
ROIC % 3.17 4.16 3.30 3.60 2.66

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 Strategic Finance Management Assignment
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Microsoft Quarterly Data

Trend Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
ROIC % 1.99 2.65 3.36 4.95 5.38

ROIC % Distribution
For the Utilities - Independent Power Producers industry and Utilities sector, Tata Power Co's ROIC %
distribution charts can be found below:

* The bar in red indicates where Tata Power Co's ROIC % falls into.

ROIC % Calculation
Tata Power Co's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Mar.
2023 is calculated as:
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁
ROIC % (A: Jun. 2023) =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
Operating Income ∗ ( 1 − Tax Rate % )
ROIC % (A: Mar. 2023) =
((𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2022) + 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023))
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
45923.7 ∗ (1 − 30.19%)
ROIC % =
(1125347.1 + 1281274.4)
2
32059.33497
ROIC % =
1203310.75
ROIC % = 2.66%

Where,
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2022)
= 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 & 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 − 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝐶𝐶𝐶𝐶𝐶𝐶ℎ

= 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 & 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

− (𝐶𝐶𝐶𝐶𝐶𝐶ℎ, 𝐶𝐶𝐶𝐶𝐶𝐶ℎ 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸, 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
− 𝑚𝑚𝑚𝑚𝑚𝑚(0, 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 − 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴
+ 𝐶𝐶𝐶𝐶𝐶𝐶ℎ, 𝐶𝐶𝐶𝐶𝐶𝐶ℎ 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸, 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆))
= 1128846 − 144512.8 − (34877.6 − 𝑚𝑚𝑚𝑚𝑚𝑚(0, 387336.5 − 246322.6 + 34877.6)) = 1125347.1

𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023)

= 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 & 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 − 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝐶𝐶𝐶𝐶𝐶𝐶ℎ
= 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 & 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
− (𝐶𝐶𝐶𝐶𝐶𝐶ℎ, 𝐶𝐶𝐶𝐶𝐶𝐶ℎ 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸, 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
− 𝑚𝑚𝑚𝑚𝑚𝑚(0, 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 − 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴
+ 𝐶𝐶𝐶𝐶𝐶𝐶ℎ, 𝐶𝐶𝐶𝐶𝐶𝐶ℎ 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸, 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆))
= 411976 − 22247 − (111256 − 𝑚𝑚𝑚𝑚𝑚𝑚(0,104149 − 184257 + 111256)) = 309621

NAVEEN KUMAR | FMS 7

 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Sustainable Growth Rate

As of March 31, 2023, Tata Power Company Limited has demonstrated sustainable growth with a rate of
approximately 9.64%. The company is dedicated to sustainable and clean energy development and has
a strong presence across the entire power value chain, including generation (both renewable and
conventional), transmission, distribution, and trading. Let's delve deeper into Tata Power's commitment
to sustainability:

1. Installed Capacity:
• Tata Power, along with its subsidiaries and jointly controlled entities, has an installed/managed
capacity of 14,110 MW across various fuel sources.
• Approximately 37% of this capacity is derived from clean and green generation sources such as
hydro, wind, solar, and waste heat recovery.

2. Business Models and Initiatives:

• Tata Power is at the forefront of driving the transformation of the power sector through pioneering
efforts in renewable energy, energy storage, and EV charging infrastructure.
• The company focuses on innovative solutions such as solar rooftop and pumps, microgrids,
storage solutions, ESCO, home automation, and smart meters.
• These initiatives align with the United Nations Sustainable Development Goals (SDGs) and reflect
Tata Power's vision to "Empower a billion lives through sustainable, affordable, and innovative
energy solutions".

3. Business Responsibility and Sustainability Report (BRSR):

• Tata Power's BRSR provides a comprehensive account of its business performance and
impacts.
• Aligned with the National Guidelines on Responsible Business Conduct (NGRBC), the report
covers social, environmental, and economic responsibilities.
• It reflects Tata Power's unwavering commitment to responsible and sustainable business
practices.

4. Strategic Objectives:
• Tata Power aims to increase the share of clean and green portfolio in its overall capacity to 70%
by 2030.
• The company targets a customer base of 40 million across its distribution businesses by FY28.

Return on Equity (ROE)

ROE % is calculated as Net Income divided by its average Total Stockholders Equity over a certain period
of time. Tata Power Co's annualized net income for the quarter that ended in Sep. 2023 was ₹35,021 Mil.
Tata Power Co's average Total Stockholders Equity over the quarter that ended in Sep. 2023 was
₹301,363 Mil. Therefore, Tata Power Co's annualized ROE % for the quarter that ended in Sep. 2023 was
11.62%.

NAVEEN KUMAR | FMS 8

 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Annual Data
Trend Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
ROIC % 13.59 5.37 5.38 7.78 13.03

Quarterly Data
Trend Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
ROIC % 12.76 14.72 10.81 13.51 11.62

ROE % Distribution
For the Utilities - Independent Power Producers industry and Utilities sector, Tata Power Co's ROE %
distribution charts can be found below:
* The bar in red indicates where Tata Power Co's ROE % falls into.

ROE % Calculation
Microsoft's annualized ROE % for the fiscal year that ended in Jun. 2023 is calculated as:

Net Income (A: Mar. 2023)

ROE % =
(𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2022) + 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 (𝐴𝐴: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
33364.4
ROE % =
224415.6 + 287874.3
2
33364.4
ROE % =
256144.95
ROE % = 13.03%

Current Ratio
Tata Power Co has a current ratio of 0.73. It indicates that the company may have difficulty meeting its
current obligations. Low values, however, do not indicate a critical problem. If Tata Power Co has good
long-term prospects, it may be able to borrow against those prospects to meet current obligations.

𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿
310914.2
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
440927.8
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = 0.71

NAVEEN KUMAR | FMS 9

 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Quick Ratio
The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. It is
calculated as a company's Total Current Assets excludes Total Inventories divides by its Total Current Liabilities.
Tata Power Co's quick ratio for the quarter that ended in Sep. 2023 was 0.64.
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 − 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼
𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿
310914.2 − 39428.8
𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 =
440927.8
𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = 0.62
Debt/Equity Ratio
Tata Power Co's Short-Term Debt & Capital Lease Obligation for the quarter that ended in Sep. 2023 was
₹156,597 Mil. Tata Power Co's Long-Term Debt & Capital Lease Obligation for the quarter that ended in Sep.
2023 was ₹368,658 Mil. Tata Power Co's Total Stockholders Equity for the quarter that ended in Sep. 2023
was ₹301,363 Mil. Tata Power Co's debt to equity for the quarter that ended in Sep. 2023 was 1.74.

A high debt to equity ratio generally means that a company has been aggressive in financing its growth with
debt. This can result in volatile earnings as a result of the additional interest expense.
Annual Data
Trend Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Debt-to-Equity 2.65 2.65 2.09 2.28 1.84

Quarterly Data
Trend Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
Debt-to-Equity 2.07 N/A 1.84 N/A 1.74

Debt to Equity Ratio for the fiscal year that ended in Jun. 2023 is calculated as
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿

𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸

𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 & 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 + 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 & 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂
=
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
187039 + 342191.9
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 =
287874.3
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 = 1.84
Debt to Equity Ratio for the quarter that ended in Sep. 2023 is calculated as
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 & 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 + 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 & 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂
=
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
156597 + 368658.1
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 =
301363.1
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑡𝑡𝑡𝑡 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 = 1.74

NAVEEN KUMAR | FMS 10

 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Inventory Turnover Ratio

Inventory Turnover measures how fast the company turns over its inventory within a year. It is calculated as
Cost of Goods Sold divided by Total Inventories. Tata Power Co's Cost of Goods Sold for the three months
ended in Sep. 2023 was ₹104,094 Mil. Tata Power Co's Average Total Inventories for the quarter that ended
in Sep. 2023 was ₹36,599 Mil. Tata Power Co's Inventory Turnover for the quarter that ended in Sep. 2023 was
2.84.
Days Inventory indicates the number of days of goods in sales that a company has in the inventory. Tata
Power Co's Days Inventory for the three months ended in Sep. 2023 was 32.08.
Inventory-to-Revenue determines the ability of a company to manage their inventory levels. It measures the
percentage of Inventories the company currently has on hand to support the current amount of Revenue.
Tata Power Co's Inventory-to-Revenue for the quarter that ended in Sep. 2023 was 0.23.
Quarterly Data
Trend Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Inventory Turnover 12.36 10.8 12.18 9.79 10.04

Quarterly Data
Trend Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
Inventory Turnover 2.29 2.14 2.78 2.55 2.84

For March 2023

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑄𝑄: 𝑀𝑀𝑀𝑀𝑀𝑀. 2022) + 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑄𝑄: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
410427.4
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
42315.2 + 39428.8
2
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 = 10.04
For September 2023
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑄𝑄: 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆. 2023) + 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 (𝑄𝑄: 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆. 2023)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
104093.6
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
0 + 36599.1
1
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 = 2.84
Investment and Financial Assets
1. Financial Assets as of March 31, 2022:
- Investments: Tata Power's investments amounted to ₹10,711.38 million.
- Loans: The company had loans totaling ₹453.17 million.
- Finance Lease Receivables: Tata Power held finance lease receivables worth ₹520.91 million.
- Other Financial Assets: Additionally, other financial assets were valued at ₹97.30 million.

2. Total Assets as of March 31, 2023:

- Total Assets before Regulatory Deferral Account: ₹46,259.49 million.
- Regulatory Deferral Account - Assets: ₹1,913.22 million.
- Total Assets: ₹48,172.71 million⁷.

3. Sustainable Growth Rate (SGR):

- As of 2023, Tata Power has demonstrated sustainable growth with a rate of approximately 9.64%.
- The company's expanding asset base and enhanced margin profile contribute to its positive earnings
outlook.
NAVEEN KUMAR | FMS 11
 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Tata Power can achieve a sustainable growth rate that aligns with its strategic objectives through the
following ways:
1. Renewable Energy Expansion:
- Tata Power should continue to invest in renewable energy sources such as solar, wind, and hydro.
- Expanding its renewable energy portfolio will not only contribute to environmental sustainability but also
enhance its revenue streams.

2. Energy Efficiency and Innovation:

- Implementing energy-efficient technologies and practices across its operations can lead to cost savings
and improved performance.
- Innovation in grid management, smart meters, and demand-side management can optimize energy
distribution and consumption.

3. Grid Modernization and Digitalization:

- Upgrading the power distribution infrastructure with smart grids and advanced metering systems can
enhance reliability and reduce losses.
- Leveraging digital technologies for real-time monitoring, predictive maintenance, and customer
engagement is crucial.

4. Diversification and Risk Management:

- Diversifying its business beyond power generation can mitigate risks associated with market
fluctuations.
- Exploring opportunities in electric vehicle charging infrastructure, energy storage, and energy services
can be beneficial.

5. Stakeholder Engagement and Social Responsibility:

- Engaging with local communities, regulators, and other stakeholders is essential for sustainable growth.
- Tata Power should continue its commitment to social responsibility, community development, and
employee well-being.

6. Financial Prudence and Capital Allocation:

- Efficient capital allocation, debt management, and financial discipline are critical.
- Balancing growth investments with debt reduction and maintaining a healthy debt-to-equity ratio is
essential.

7. Adaptability to Regulatory Changes and Policy Environment:

- The power sector is influenced by regulatory policies, subsidies, and incentives.
- Tata Power should stay informed about policy changes and adapt its strategies accordingly.

Return on Equity (ROE) is a measure of financial performance calculated by dividing net income by
shareholders' equity. It measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
The key drivers of ROE are:

Profit Margin
Net margin is calculated as Net Income divided by its Revenue. Tata Power Co's Net Income for the three
months ended in Sep. 2023 was ₹8,755 Mil. Tata Power Co's Revenue for the three months ended in Sep.
2023 was ₹157,380 Mil. Therefore, Tata Power Co's net margin for the quarter that ended in Sep. 2023 was
5.56%.

Net Margin % Calculation

Net margin - also known as net profit margin is the ratio of Net Income divided by net sales or Revenue,
usually presented in percent.

NAVEEN KUMAR | FMS 12

 Strategic Finance Management Assignment
NAVEEN KUMAR | N044

Tata Power Co's Net Margin for the fiscal year that ended in Mar. 2023 is calculated as

Net Margin = Net Income (A: Mar. 2023)/Revenue (A: Mar. 2023 )
= 33364.4/540542.9
= 6.17 %
Tata Power Co's Net Margin for the quarter that ended in Sep. 2023 is calculated as

Net Margin = Net Income (Q: Sep. 2023)/Revenue (Q: Sep. 2023 )
= 8755.3 /157380.3
= 5.56 %

2. Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated
as Revenue divided by Total Assets. Tata Power Co's Revenue for the three months ended in Sep. 2023
was ₹157,380 Mil. Tata Power Co's Total Assets for the quarter that ended in Sep. 2023 was ₹1,321,064
Mil. Therefore, Tata Power Co's Asset Turnover for the quarter that ended in Sep. 2023 was 0.12.

Asset Turnover is linked to ROE % through Du Pont Formula. Tata Power Co's annualized ROE % for the
quarter that ended in Sep. 2023 was 11.62%. It is also linked to ROA % through Du Pont Formula. Tata
Power Co's annualized ROA % for the quarter that ended in Sep. 2023 was 2.65%.

𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 (𝑄𝑄: 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆. 2023)
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 (𝑄𝑄: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023) + 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 (𝑄𝑄: 𝑀𝑀𝑀𝑀𝑀𝑀. 2023)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
540542.9
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
1128846 + 1283488.9
2
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 = 0.45

3. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in
Earnings Before Interest and Taxes (EBIT). Tata Power Co's Degree of Financial Leverage for the quarter
that ended in Sep. 2023 was 1.18. The higher Degree of Financial Leverage, the more volatile earnings
will be.

NAVEEN KUMAR | FMS 13