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Motilal Oswal Report
Tata Power Company Ltd.’s results reflect the benefit of asset monetization plans and better working capital management as net debt (excluding restricted cash at Central Electricity Supply Utility) declined to Rs 444 billion (from Rs 471 billion in FY20).
Divestment-related measures (part receipt of international shipping business, PT Arutmin, and Tata Power Strategic Engineering Division) and the infusion of Rs 26 billion from promoters would continue to aid debt reduction.
As we build-in expectations of normalization in its engineering, procurement and construction businesses and some working capital by FY22, we view the risk-reward as favorable at current levels.
The approval of a tariff hike at Mundra plant, possible benefits from the merger of Coastal Gujarat Power Limited (CGPL) and Tata Power Solar with Tata Power, and favorable infrastructure investment trust (InvIT) valuations provide upsides.
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