"Net debt declined to Rs 44,400 crore on account of asset monetization and WC management despite the current Covid-19 environment. While certain clarity is pending with regard to upcoming new regulations for Indonesian coal mines (concerning tax and royalty), at current levels, we view the risk-reward as favorable. Divestment-related measures (International Shipping business, Arutmin, and Tata SED) and approval for the infusion of Rs 2,600 crore from promoters would continue to aid debt reduction. Debt reduction should lead to lower interest costs, and with normalization in its EPC businesses and some WC, we expect EPS to increase at a 9–10% CAGR over FY20–23. The approval of a tariff hike at Mundra, merger of CGPL & Tata Power
Solar with TPWR, and favorable InvIT valuations provide upsides," said analysts at Motilal Oswal Financial Services. They have upgraded the stock to 'Buy' with target price of Rs 66.
Apart from Q1 results, the company announced merger of three of its subsidiaries with itself as a part of its strategic initiative.
"Three wholly owned subsidiaries i.e., Coastal Gujarat Power Ltd. (CGPL), Tata Power
Solar Systems Ltd (TPSSL) and Af-Taab Investment Company Ltd (AfTaab) are proposed to be merged with Tata Power (parent company) for greater synergies in financing, compliance, and oversight. This merger, subject to necessary approvals, is part of a strategic initiative to simplify the group holding structure and a broader plan to set the company for future growth through fiscal consolidation and strengthening of balance sheet. The merger aims to achieve the long-term objectives by facilitating efficient use of cash and making available corporate support to the businesses of the said wholly owned subsidiaries as needed," it said in a statement.
As of June 30, CGPL held total assets worth Rs 18,403 crore, while its net worth was Rs 3,158.79 crore. It reported a turnover of Rs 1,742.28 crore for the first quarter of FY21. TPSSL, on the other hand, had total assets worth Rs 2,933.56 crore. It's net worth was Rs 624.77 crore, while turnover during the June quarter was Rs 406.78 crore.
"CGPL is engaged in the business of generating electricity at its UMPP (4150 MW installed capacity), while TPSSL is engaged in the business of a manufacturer of solar photo-voltaic cells and modules as well as in the Engineering, Procurement and Construction (EPC) in the solar energy market, wherein the manufactured cells/modules are utilized," the company said. READ HERE
"Such an arrangement would further facilitate higher dividends from the coal mines in Indonesia as well as tax savings on the interest component of the proposed renewable InVIT. We highlight that the proposed merger is subject to approvals from various stakeholders including the beneficiary states from Mundra UMPP, though it has no bearing on the resolution of the under-recovery at Mundra UMPP," said analysts at Kotak Institutional Equities. They maintain 'Buy' call on the stock with a fair value price of Rs 62.
At 11:00 am, the stock was trading nearly 8 per cent higher at Rs 57 on the BSE, as against 0.25 per cent gain in the S&P BSE Sensex. A combined 57.74 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.