Tata Power has increased its target in medium term towards renewables development portfolio and asset light clean businesses. Tata Power has also raised money from marquee financial investors to fund the immediate capital needs of the clean energy businesses, highlighted brokerage DAM Capital.
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“In our opinion, Tata Power has the best green business portfolio. Plus, high coal international prices and expected Mundra resolution are positive for the company,” the note stated. The brokerage house has maintained its Buy rating on Tata Power shares with a target price of Rs261 apiece, implying a potential upside of over 27% from current stock level.
Tata Power has been supplying power from Mundra to procurers under emergency measure on cost plus basis from May 2022. Tata power has supplied 9BU in 9mFY23. It has accounted for 100% of mining profits to be shared with procurers, the brokerage highlighted.
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“However, the regulators have allowed only 30% (stake in mines) of the profits to be shared. As a result, there could be material upside from the order. Resolution under long term PPA imminent: Mundra is in works with procurers for long term resolution along similar lines as interim supply. Based on our estimates, we expect Mundra + coal profit to improve substantially,” it said.
Power tariffs for plants using imported coal should cover their costs as well as a “reasonable profit margin,” the Central Electricity Regulatory Commission (CERC) said in an order dated January 3, which came after Tata Power appealed to the CERC against the tariff fixed by the power ministry after the directive last year forced them to keep operating to avert a power crisis in the country.
Tata Power said the CERC order would benefit its power plant at Mundra in Gujarat, which burns imported coal. The plant would recover the full cost incurred for supplying power under the emergency direction last year, it said in a statement.
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Tata Power, a power generation company, provides power supply from its various plants located across India. Shares of Tata Power are down about 10% in a year’s period.
