3 November 2017
2QFY18 Results Update | Sector: Utilities
Tata Power
BSE SENSEX
33,686
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
S&P CNX
10,453
TPWR IN
2,705
229.2 / 3.5
91 / 67
2/-11/-13
413
67.0
CMP: INR85
Maintain Sell
TP: INR72 (-15%)
Sell
Higher coal prices, RE and Maithon drive PAT growth
Tata Power’s (TPWR) 2QFY18 adj. consolidated PAT grew 14% YoY to INR3.8b (est.
INR3.6b). The PAT is adjusted for exceptional charge of INR1.5b pertaining to Tata
Teleservices and impairment of Rithala plant. The growth was driven by net benefit
(Mundra & Coal) of higher coal prices, RE and higher generation at Maithon.
Mundra+Coal:
The under-recovery at Mundra was down from INR0.93/kWh in
1Q to INR0.70/kWh on higher availability (85% vs. 61% in 1Q) and savings in
fuel coal. FoB cost of coal was unchanged QoQ (at USD59/t). Coal mining JVs
PAT was up ~19% QoQ (6.5x YoY) to INR3.3b on higher coal prices. Mundra
EBITDA + Coal JVs and logistics PAT (hedge) was up 72% QoQ / 37% YoY to
INR5.1b.
RE (ex-standalone):
Capacity was up 25MW QoQ to 1,601MW. Generation was
down 12% QoQ to 610MU, 2Q being a seasonally weak quarter. EBITDA was
thus down 13% QoQ to INR4.1b.
Other businesses:
Maithon PAT grew 28% YoY to INR680m on higher
generation. Interest cost has declined 180bps on refinancing, but it is pass-
through in tariffs. Delhi distribution PAT was impacted by impairment at Rithala
plant. Delhi’s regulated equity was down 2% YoY to INR12.2b as growth capex
is offset by recovery of regulatory assets (-11% YoY). Mumbai’s regulated
equity was up 4% YoY to INR38.1b.
Financials & Valuations (INR b)
Y/E Mar
2017 2018E 2019E
Net Sales
279.0 312.3 324.9
EBITDA
58.5
66.4
72.5
PAT
14.0
19.7
20.4
EPS (INR)
5.2
7.3
7.5
Gr. (%)
83.8
41.1
3.3
BV/Sh (INR)
43.5
47.6
55.4
RoE (%)
11.9
16.0
14.6
RoCE (%)
6.8
6.2
6.6
P/E (x)
16.4
11.6
11.3
P/BV (x)
1.9
1.8
1.5
Estimate change
TP change
Rating change
Lack of RoE accretive growth opportunities; Sell
TPWR is struggling for RoE accretive growth opportunities. The regulated business
is facing challenges and lacks material growth. RE is a potential driver, but the
market is very competitive. Coal prices are boosting earnings, but are volatile and
drive cost of equity higher. The SOTP based TP is INR72/sh.
Maintain Sell.
FY17
2Q
3Q
72,089 66,837
-23.8 -27.6
57,473 52,809
14,616 14,029
20.3 21.0
4,476 5,318
7,243 7,010
1,029 -792
-3,064 1,523
862 2,432
0
0
862 2,432
-1,117
706
-129.6 29.0
1,383 4,356
3,362 6,082
3,362 6,082
FY18
2Q 3QE
76,573 78,104
6.2 16.9
58,075 60,139
18,498 17,966
24.2 23.0
5,900 5,930
9,814 9,716
1,331 1,000
-2,641
0
1,474 3,320
-1,488
0
-15 3,320
1,553 1,105
-10,707 33.3
3,909 4,136
2,342 6,351
3,830 6,351
FY17
FY18E
FY18 vs Est
2QE (%)
71,080
8
-1.4
55,403
5
15,677
18
22.1
5,886
0
9,193
7
1,000
33
0
1,597
-8
0
1,597 -101
1,305
81.7
3,271
3,563 -34
3,563
7
Quarterly Performance (Consolidated) – INR million
Y/E March
1Q
Net Sales
68,383
YoY Change (%)
-24.9
Total Expenditure
52,028
EBITDA
16,355
Margins (%)
23.9
Depreciation
4,393
Interest
7,915
Other Income
-477
Rate regulated activity
-2,721
PBT before EO expense
849
Extra-Ord expense
0
PBT
849
Tax
1,449
Rate (%)
170.6
Minority Interest & Profit/Loss of Asso. Cos. 1,324
Reported PAT
725
Adj PAT
725
4Q
1Q
71,668 69,686
-23.2
1.9
58,201 51,375
13,467 18,311
18.8
26.3
5,698 5,857
8,973 9,286
2,262
313
-1,832 -2,438
-775 1,044
-6,515
0
-7,289 1,044
-1,496 2,630
20.5 252.0
3,169 3,224
-2,625 1,638
3,890 1,638
4QE
87,904 278,977 312,268
22.7
-5.4
11.9
76,241 220,510 245,830
11,663 58,467 66,438
13.3
21.0
21.3
5,891 19,886 23,577
8,640 31,140 37,456
688
2,022 3,332
5,079
-6,095
2,900
3,369 8,738
0
-6,515 -1,488
2,900
-3,145 7,250
-868
-458 4,420
-29.9
14.6
61.0
4,124 10,142 15,392
7,892
7,455 18,222
7,892 13,969 19,710
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Dhruv Muchhal – Research Analyst
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549
Sanjay Jain – Research Analyst
(SanjayJain@MotilalOswal.com); +91 22 6129 1523

Tata Power
Exhibit 1: TWPR adj. PAT – INR m
a. Subsidiaries
Standalone
Mundra
Maithon
Delhi
Trading
Solar Manuf
RE
Logistics
Others
b. Minority interest
c. JVs and associates
Coal mining
Infra
Cennergi
Powerlink
IEL
ITPC
Others
Adj. reported PAT
2QFY17
1,980
4,473
-800
530
690
-120
0
150
450
-3,394
-490
1,873
520
310
-290
180
150
20
520
3,362
1QFY18
-1,586
1,882
-4,310
760
840
0
0
1,150
0
-1,909
-571
3,795
2,810
430
-110
350
280
290
-340
1,638
2QFY18
-79
1,635
-2,790
680
210
0
0
970
0
-784
-343
4,252
3,340
490
-90
230
190
390
0
3,830
Source: MOSL, Company
Exhibit 2: CGPL
Revenues
per unit
EBITDA
per unit
PAT
Generation
Sales
Availability
FoB price of coal
Revenue
Under recovery
INR m
INR/kwh
INR m
INR m
MU
MU
%
USD/t
INR/kWh
INR/kWh
1QFY17
12,150
2.40
2,190
0.40
-3,830
5,420
4,987
63
42
2.47
-0.30
2QFY17
15,920
2.40
2,460
0.40
-800
7,196
6,629
85
45
2.43
-0.43
3QFY17
14,970
2.40
330
0.10
-2,440
6,849
6,304
77
52
2.37
-0.70
4QFY17
17,950
2.60
260
0.00
-1,420
7,995
6,919
93
55
2.36
-0.86
1QFY18
11,660
2.40
-770
-0.20
-4,310
5,310
4,876
61
59
2.39
-0.93
2QFY18
16,900
2.61
1,150
0.18
-2,790
7,018
6,468
85
59
2.59
-0.70
Source: MOSL, Company
Exhibit 3: Mundra + Coal assets – INR million
Mundra EBITDA
Coal companies PAT
Mining
Infra
Logistics
Mundra+Coal
2QFY17
2,460
1,280
520
310
450
3,740
1QFY18
-770
3,740
2,810
430
500
2,970
2QFY18
1,150
3,960
3,340
490
130
5,110
Source: MOSL, Company
Exhibit 4: Maithon Power
Revenues
per unit
EBITDA
per unit
PAT
Generation
Sales
Availability
Regulated equity
INR m
INR/kwh
INR m
INR/kwh
INR m
MU
MU
%
INR m
1QFY17
5,990
3.40
2,150
1.20
670
1,845
1,742
95
14,440
2QFY17
5,690
3.80
1,930
1.30
530
1,596
1,501
81
14,440
3QFY17
6,240
3.30
2,180
1.20
740
1,984
1,870
97
14,440
4QFY17
6,130
3.40
1,950
1.10
610
1,932
1,826
94
14,440
1QFY18
6,200
3.40
2,080
1.10
760
1,952
1,842
94
14,450
2QFY18
6,460
3.24
2,030
1.02
680
2,112
1,992
98
14,450
Source: MOSL, Company
3 November 2017
2

Tata Power
Exhibit 5: Delhi Distribution
Revenues
EBITDA
PAT
Regulated equity
Regulatory assets
INR m
INR m
INR m
INR m
INR m
1QFY17
17,840
2,750
820
12,480
50,320
2QFY17
20,120
-1,340
690
12,560
47,100
3QFY17
14,980
3,000
1,130
12,690
46,500
4QFY17
13,060
840
10
11,630
45,740
1QFY18
17,450
2830
840
12,130
43,220
2QFY18
19,410
2,220
210
12,250
41,730
Source: MOSL, Company
Exhibit 6: Renewables (ex-standalone)
1QFY17
TPREPL (Renewable)
Revenues
INR m
INR/kwh
EBITDA
INR m
INR/kwh
PAT
INR m
Operating capacity MW
Generation
MU
Sales
MU
WREPL (Renewable)
Revenues
INR m
INR/kwh
EBITDA
INR m
PAT
INR m
Capacity
MW
Wind
MW
Solar
MW
Generation
MU
Sales
MU
770
6.4
770
6.4
110
312
125
120
2QFY17
870
5.9
880
6.0
150
282
152
147
450
410
3QFY17
710
8.8
880
10.9
138
370
83
80
2,700
7.3
2,550
60
1,141
146
995
369
367
4QFY17
830
6.3
1,160
8.9
290
449
137
131
1QFY18
1420
6.2
1,760
7.7
580
423
236
228
2QFY18
1,340
6.0
1,710
7.6
900
448
223
225
3,160
3,320
2,720
7.1
7.1
7.1
2,870
3,150
2,540
1,220
570
70
1,141
1,153
1,153
146
146
146
995
1007
1,007
448
469
385
448
469
385
Source: MOSL, Company
Exhibit 7: SOTP valuation
Regulated Business
Reg. Eq.
(a)
41,777
16,070
16,982
P/BV
(b)
1.7
1.5
1.5
Mumbai & Jojobera (S/A)
Delhi
Maithon
Subtotal (A)
CGPL (Mundra) and coal JVs
Equity
Value
EBITDA
d=axb
18,551 69,739
8,471 24,232
9,130 25,571
36,153
TPWR's share
Reg. Enterprise
(%) Eq. Val. Debt Value (EV)
(e)
(f)
(e+f)
100 69,739 57,869 127,609
51
12,358 37,498 49,856
74
18,923 21,783 40,706
218,170
EV
(g x h)
143,217
-87,873
74,636
129,980
EV
(j x k)
144,753
79,451
62,646
286,850
635,001
-481,819
11,452
29,271
193,904
2,705
72
Remarks
RoE = 15.5%, g = 5%
RoE = 15.5%, g = 3%
RoE = 17%, g=0
Ke=11.3%
Assumptions
no under recoveries
RB Index USD70
RB Index USD70
DCF value of fixed charges
Under recoveries in Var. cost
PAT from coal JVs
Subtotal (B)
Other businesses
EV/EBITDA(x) EBITDA
(g)
(h)
19,299
8
-10,984
10
7,464
15,779
EV/EBITDA(x)
(j)
8
8
10
EBITDA
(k)
18,094
9,931
6,265
28,025
72,494
1
0.8
Assumptions
TPREL
Haldia,SED, trading etc.
PAT of other JVs and assoc.
Subtotal ( C )
Consolidated
Consolidated EV (A+B+C)
Less: Debt
Investment unquoted
Investment quoted
Net Equity value
No. of shares
Target Price (INR/share)
at book value
20% discount to MTM
3 November 2017
3

Tata Power
Financials and Valuations
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Consolidated PAT
Change (%)
Income Statement
2013
330,254
0.0
64,447
0.0
20,517
43,930
26,355
3,692
0
12,767
11,780
92.3
-854
7,646
0.0
0
0.0
2013
2,373
105,012
107,385
393,823
0
0
10,254
532,108
504,687
148,396
356,291
23,576
26,427
209,278
20,265
33,050
24,673
131,290
140,706
68,572
532,108
2014
356,487
0.0
68,478
0.0
27,296
41,182
34,399
2,273
0
9,055
10,084
111.4
-3,295
-3,295
0.0
0
0.0
2014
2,373
104,733
107,106
416,725
0
0
11,379
557,943
550,345
179,730
370,616
33,887
26,787
219,373
20,733
45,426
18,956
134,258
156,040
63,333
557,943
2015
337,276
0.0
63,012
0.0
21,742
41,270
36,993
4,167
0
14,837
10,749
72.4
1,678
-4,715
0.0
0
0.0
2015
2,705
122,716
125,421
423,419
0
0
14,014
587,779
583,351
202,217
381,133
36,505
27,326
243,207
18,442
55,640
21,064
148,062
166,650
76,557
587,779
2016
295,009
0.0
71,470
0.0
16,487
54,983
32,358
913
0
12,807
6,803
53.1
4,064
14,794
0.0
0
0.0
2016
2,705
113,629
116,334
403,486
0
0
20,969
558,286
476,643
112,536
364,108
13,449
114,468
215,266
13,734
35,402
16,740
149,389
142,311
72,955
565,036
2017
278,977
0.0
58,467
0.0
19,886
38,581
31,140
2,022
0
-3,145
-458
14.6
7,455
20,064
0.0
0
0.0
2017
2,705
115,090
117,795
503,154
0
0
17,598
657,237
577,520
130,311
447,209
21,779
108,592
226,458
15,996
38,321
20,521
151,621
164,127
62,332
657,237
2018E
312,268
0.0
66,438
0.0
23,577
42,861
37,456
3,332
0
7,250
4,420
61.0
18,222
19,710
0.0
0
0.0
2018E
2,705
126,084
128,789
516,842
0
0
17,598
684,009
614,578
153,888
460,690
21,779
112,733
223,279
15,996
37,657
18,006
151,621
151,797
71,482
684,009
2019E
324,913
0.0
72,494
0.0
25,027
47,466
36,493
3,332
0
23,231
5,200
22.4
29,293
20,367
0.0
0
0.0
2019E
2,705
147,148
149,853
502,215
0
0
17,598
691,810
640,068
178,915
461,153
21,779
117,128
226,665
15,996
38,281
20,396
151,993
152,239
74,426
691,811
(INR Million)
2020E
340,200
0.0
73,228
0.0
26,239
46,989
35,047
3,332
0
15,274
5,678
37.2
21,202
21,202
0.0
0
0.0
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Capital Cont. from cust.
Approp. to project cost
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Net Current Assets
Total Assets
(INR Million)
2020E
2,705
160,031
162,736
484,777
0
0
17,598
688,636
665,219
205,154
460,065
21,779
121,649
220,936
15,996
39,135
22,365
143,440
153,118
67,817
688,636
3 November 2017
4

Tata Power
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Fully Diluted Cons. EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2013
3.2
0.0
11.9
45.3
1.2
35.7
28.9
2.1
0.0
9.5
1.2
7.0
7.0
0.0
0.6
37
22
2.9
2014
-1.4
0.0
10.1
45.1
1.3
-90.0
-61.1
1.9
0.0
9.1
1.5
-3.1
6.1
0.0
0.6
47
21
3.1
2015
0.6
0.0
8.7
46.4
1.3
209.5
124.3
1.7
0.0
10.1
1.7
1.4
6.1
0.0
0.6
60
20
2.7
2016
2.8
0.0
8.9
43.0
1.3
46.3
23.0
1.5
0.0
8.2
2.0
6.3
8.6
0.0
0.5
44
17
2.9
2017
5.2
0.0
12.5
43.5
0.0
0.0
16.4
1.9
0.0
12.5
0.0
11.9
6.8
0.0
0.4
50
21
3.5
2018E
7.3
0.0
16.0
47.6
1.3
17.8
11.6
1.8
0.0
11.3
1.5
16.0
6.2
0.0
0.5
44
19
3.3
2019E
7.5
0.0
16.8
55.4
1.3
17.3
11.3
1.5
0.0
10.1
1.5
14.6
6.6
0.0
0.5
43
18
2.8
2020E
7.8
0.0
17.5
60.2
1.3
16.6
10.8
1.4
0.0
9.8
1.5
13.6
6.5
0.0
0.5
42
17
2.5
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
Cash Flow Statement
2013
64,447
2,694
-23,511
-10,833
0
32,796
-42,702
-9,906
0
-160
-42,863
2,858
28,779
-29,912
-7,592
-5,867
-15,933
31,223
24,673
2014
68,478
5,861
38
-9,546
0
64,831
-43,361
21,469
0
5,943
-37,418
259
7,234
-33,931
-6,216
-32,654
-5,242
17,896
18,956
2015
63,012
10,493
-5,611
-8,085
0
59,809
-34,936
24,873
0
-3,813
-38,749
20,692
-1,026
-33,842
-8,210
-22,386
-1,326
13,845
21,064
2016
71,470
9,873
20,488
-4,295
0
97,536
-39,864
57,672
0
-4,903
-44,767
149
-13,037
-33,515
-9,277
-55,680
-2,911
12,616
9,991
2017
58,467
-4,409
21,843
-6,323
0
69,578
-33,223
36,356
0
-40,967
-74,190
9
49,608
-32,704
-6,975
9,937
5,325
2,398
20,521
2018E
66,438
0
-11,665
-4,420
0
50,353
-37,058
13,295
0
15,647
-21,410
0
13,688
-37,456
-7,690
-31,458
-2,515
9,543
18,006
2019E
72,494
0
-554
-5,200
0
66,739
-25,490
41,249
0
21,592
-3,898
0
-14,628
-36,493
-9,330
-60,451
2,390
7,028
20,396
(INR Million)
2020E
73,228
0
8,578
-5,678
0
76,128
-25,151
50,976
0
12,898
-12,254
0
-17,438
-35,047
-9,420
-61,905
1,969
9,418
22,365
3 November 2017
5

Tata Power
Corporate profile
Company description
Exhibit 1: Sensex rebased
The Tata Power Company Limited generates and
supplies electricity. The Company constructs and
operates independent power plants, as well as
specializes in transmission and distribution of
electricity. Tata Power Company delivers its
products and services in India.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Sep-17
Promoter
DII
FII
Others
33.0
24.6
26.2
16.2
Jun-17
33.0
24.7
26.4
15.9
Sep-16
33.0
24.7
26.0
16.3
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Life Insurance Corporation Of India
Matthews Pacific Tiger Fund
ICICI Prudential Balanced Fund
First State Investments Icvc- Stewart
Investors Global Emerging Markets Leaders
Fund
General Insurance Corporation Of India
% Holding
12.1
6.1
4.7
3.6
2.5
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
N Chandrasekaran
Anil Sardana
S Padmanabhan
Sandhya S Kudtarkar
Ashok S Sethi
Designation
Chairman
Managing Director & CEO
Director
Director
Executive Director & COO
Exhibit 5: Directors
Name
S Padmanabhan
Sandhya S Kudtarkar
Pratip Chaudhuri
Anjali Bansal
Deepak Satwalekar
Name
K M Chandrasekhar
N H Mirza
Sanjay Bhandarkar
Vibha Padalkar
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells LLP
Parikh & Associates
S R B C & Co LLP
Sanjay Gupta & Associates
Type
Statutory
Secretarial Audit
Statutory
Cost Auditor
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
7.3
7.5
7.8
Consensus
forecast
5.6
6.9
8.0
Variation (%)
30.0
9.2
-2.5
Source: Bloomberg
3 November 2017
6

Tata Power
NOTES
3 November 2017
7

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Tata Power
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Analyst ownership of the stock
Tata Power
No
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3 November 2017
8