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Sowmya Sundar

TATA Power's results for the quarter ending March 2004, was a disappointing not only due to the sharp drop in net profits but also due to drop in operating profits.

But the drop was due to a one time hit to the tune of Rs 72 .11 crore on account of the write-off of foreign currency liabilities on prepayment of foreign currency loan.

But for this charge, the operating profit would have actually increased by 10.6 per cent. Few bright points to consider are:

Tata Power's per unit cost of power sold has decreased from Rs 3.4 to Rs 3.26 for the year. The drop in realisation was expected as Tata Power has been working hard on cutting costs so as to provide competitive rates of power. The progressive reduction in fuel consumption per unit of electricity generated from Rs 1.65 in June 2003 to Rs 1.29 in March 2004 also indicates the same. The lower realisations too impacted operating margins.

Both generation and sale of power increased substantially by 19 per cent and 17.5 respectively. This is due to the higher capacity utilisation in its generating units and the result of its effort to diversify its customer base and sell power outside Maharashtra. The effort paid off as the sharp rise in sales was despite the lower offtake from Reliance Energy during the quarter. Tata Power commenced sale of power to Madhya Pradesh Electricity Board from December 2003.

Tata Power has reduced its stake in Tata Teleservices, a loss making subsidiary.

The reduced share of losses in the company has improved its consolidated per share earnings from Rs 16 to Rs 23.

The company has repaid loans to the tune of Rs 564 crore during the year resulting in interest savings of Rs 54 crore.

This has helped maintain margins at the net level despite the sharp drop in operating profit margins.

At Rs 7 per share, the dividend yield works out to 2.4 per cent. The stock trades at 11 times its 2003-04 per share earnings.

More Stories on : Financial Performance | Microscope | Power

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