Tata Power Optimistic On Margins After Q1 Impact

After a contraction in the first quarter, Tata Power Ltd. expects margins to improve as global pressures ease and the impact of the second Covid-19 wave wanes.

The margin profile of the company for quarter ended June got impacted due to delay in billing and receivables cycle, stalled project work, higher cost of imported solar panels, and increased shipping and container cost, Praveer Sinha, managing director and chief executive officer at Tata Power, said in an interview with BloombergQuint.

Tata Power reported a margin of 21% in the quarter ended June, down from 27% a year earlier.

Q1 Highlights

• Reversal of MAT led to a higher tax outgo; adjusted net profit was Rs 460 crore, up 74%.

• Tata Power's revenue rose 47% over a year earlier to Rs 9,800 crore in revenue, aided by Odisha distribution companies and solar power unit.

• Operating profit stood at Rs 2,180 crore, up 12% YoY. It was, however, impacted by higher power purchase cost in Odisha and higher material costs in Tata Power Solar.

• Consolidated other income doubled to Rs 170 crore, driven by favourable tariff for Mundra unit.

• Interest outgo fell 13% to Rs 940 crore.

Sinha, however, does not expect serious implications from a potential third wave. He also foresees another impressive quarter for coal gross profits, which are only expected to ebb in the second half of the financial year as more supply brings down prices of the fuel.

Other Highlights

• Discoms to start contributing better from September quarter and completely turn around by FY23.

• To merge Coastal Gujarat Power Ltd. (Mundra plant) with Tata Power in the ongoing financial year FY22.

• Looking at the best ways to leverage renewable portfolio.

• Divestment of the renewable portfolio is the top priority of the company