Comments
CLSA
Tata Power (Buy)
Target: ₹74
CMP: ₹56.70
Indian mid- and small-cap utility stocks rose 4-7 per cent, following the securities regulator's decision to modify the scheme characteristics of $19 billion in multi-cap mutual funds (MCMF) to allocate a higher 75 per cent against 65 per cent of assets in equities, with a minimum 25 per cent each in mid- and small-cap companies.
The start of power reform in Q2FY21 with a blend of liquidity injections and structural measures to fix weak discom financials, renewable-led growth, de-levered balance sheets, growing profitability and inexpensive valuations (20-22 per cent discount to SOTP) are catalysts to buy mid and small-cap utility stocks such as JSW Energy, Tata Power and CESC.
After guiding for 42 per cent y-o-y debt reduction through the divestiture of $2.5 billion in assets in FY21, Tata Power
announced corporate restructuring. This will unleash huge tax breaks.
Tata Power is on track to monetise its 2.6GW in RE assets through a private InvIT. The transfer of assets to the InvIT should allow Tata Power to churn capital and reduce net debt by 39 per cent and improve debt-to-equity from 1.8x to 1x post-InvIT.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.