Tata Power Co. Ltd Result Update: Q1 FY 12

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Tata Power Co. Ltd Result Update: Q1 FY 12 C.M.P: Rs. 1012.00 Target Price: Rs. 1144.00 Date: Aug. 27 th, 2011 BUY Stock Data: Sector: Power Face Value Rs. 10.00 52 wk. High/Low (Rs.) 1465.00/1007.

erstwhile known as Tata Electric is India's largest private sector power utility pioneered the generation of electricity nine decades ago.

1 Tata Power Co. Ltd Result Update: Q1 FY 12 C.M.P: Rs Target Price: Rs Date: Aug. 27 th, 2011 BUY Stock Data: Sector: Power Face Value Rs wk. High/Low (Rs.) / Volume (2 wk. Avg.) BSE Code Market Cap (Rs in mn) Share Holding Pattern 1 Year Comparative Graph SYNOPSIS Tata Power Company Ltd. erstwhile known as Tata Electric is India's largest private sector power utility pioneered the generation of electricity nine decades ago. During the quarter ended, the robust growth of Net Profit is increased by 31.76% Rs million. Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 6% over 2010 to 2013E respectively. Tata Power Company Ltd has proposed and approved of Subdivision of the Equity Shares of Rs. 10/- each into Equity Shares of Rs.1/- each. TATA Power BSE SENSEX Tata Power Company Ltd has successfully completed its offering of Perpetual Debentures of Rs. 1,500 crores. Years Net sales EBITDA Net Profit EPS P/E FY FY 12E FY 13E

2 Peer Group Comparison Name of the company CMP(Rs.) Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) Tata Power Co. Ltd NTPC Ltd Torrent Power Ltd Neyveli Lignite Corp Investment Highlights Q1 FY12 Results Update Tata Power Co. Ltd disclosed results for the quarter ended June A net sale for the quarter is raised 12.34% to Rs million as compared to Rs million during the corresponding quarter last year. During the quarter, the company has reported Net Profit decreased to Rs million from Rs million in previous year same quarter. Total income is increased to Rs million for the quarter ended June 30, The Basic EPS of the company stood at Rs for the quarter ended June Quarterly Results - Consolidated (Rs in mn) As At June-11 June-10 %change Net sales % PAT % Basic EPS % 2

3 Net Sales & PAT During the quarter, net sales increase by 12.34% to Rs million from Rs million in the previous quarter and Total Profit for the quarter ended June 2011 was Rs million grew by 31.76% from Rs million compared to previous quarter. EPS Growth The Basic EPS of the company is stood at Rs for the quarter ended June 2011 from Rs for the quarter ended June

4 Fixes Record Date for Stock Split Tata Power Company Ltd has fixed September 27, 2011 as the Record Date for the purpose of Sub-division of the Equity Shares of Rs. 10/- each into Equity Shares of Rs. 1/- each. Tata Power Completes its Perpetual Debenture Issue of Rs. 1,500 Crores Tata Power Company Ltd has successfully completed its offering of Perpetual Debentures of Rs. 1,500 crores. The Mandated Joint Lead Arrangers for the issuance are Standard Chartered Bank and Yes Bank Limited. The unique features of these Debentures are that they are perpetual in nature with no maturity or redemption and are callable only at the option of the Company. Face value of each Debenture is Rs. 10,00,000. These Debentures will be listed on National Stock Exchange of India Limited. CARE Assigns 'CARE AA' Rating To the Perpetual Debenture Issue of Tata Power Tata Power Company Ltd has stated that Rating agency, CARE (Credit Analysis & Research Limited) has assigned 'CARE AA' Rating to the Company's Perpetual Debenture issue. The Company's Perpetual Debenture Issue of Rs crores have a call option after 10 years from the issue date and every year thereafter. There is a step up of 100 bps after 10 years. The coupon (payable semi-annually) has an optional deferral clause which is linked to non payment of dividend, with a look back period of six months. There is a dividend stopper clause that restricts dividend payment on shares in case the coupon payment on the perpetual debentures is deferred. 4

5 Company Profile Tata Power was incorporated on 18 th September at Mumbai in The Company generates and supplies Electricity. The Tata Hydro-Electric Power System comprises the Tata Hydro-Electric Power Supply Co., Ltd., the Andhra Valley Power Supply Co. Ltd., and the Tata Power Co. Ltd. Tata Power today, is India's largest private sector power utility with an installed generating capacity of about 3120 MW and a presence across the entire value chain in power generation (thermal, hydro, solar, wind and geothermal) transmission, trading and distribution. Tata Power is spreading their footprint nationwide, creating new benchmarks in operational efficiencies, investing in global resources and redefining paradigms. Company strength lies in fulfilling their commitments and their ability to manage well in the changing environment. They take pride in building lasting and trusting relationship with their customers along with a legacy of caring for their communities in and around their areas of operations. As they strive to lead the reform process for sustainable power, they are excited to redefine the contours of Indian Power Sector. Services Offered Design & Development- Strategic Electronics Division (SED) SED (Mumbai) was established in 1967 and is today a leading development organization, having pioneered indigenous design and development of many hi-tech systems for Defence and Industry. The manufacturing facility was established in 1982 and is situated in Bangalore. Direct Marketing - Power Supply to Mumbai Consumers The Company also supplies power directly to such bulk consumers as Central and Western Railways, Mumbai Port, refineries, textile mills, fertilizer factories, BARC, Municipal Corporation water pumping plants and other major continuous processes industries requiring uninterrupted power supply. The latest addition to 5

6 the list is the commercial district at the Bandra-Kurla Complex and major commercial and residential complexes in the suburbs. Power Projects & Related Services Tata Power also extends its expertise for: Setting up Independent Power Plants (IPP) Setting up Captive Power Plants (CPP) Power Transmission and Distribution Projects Operation and Maintenance Services (O&M Services) Transmission & Distribution Transmission Business Tata Power owns and operates 1200 circuit kms of high voltage (220 kv & 110 kv) Transmission Network. The Company recently took a 51% stake in the Rs 1200 Cr, 1200 Km Tala Transmission project, which is a joint venture with the Power Grid Corporation of India. The JV Company named Power links Transmission Limited, has been formed primarily to evacuate power from the Tala Hydro Project in Bhutan and to carry surplus electricity from the North Eastern States to the Northern Indian belt. The Company makes its presence felt in generation in Northern India by participating in the 330 MW Hydro Generation Project in the state of Uttaranchal. Distribution Business Tata Power has a 935 km HT and LT cable distribution network connecting 17 major receiving stations and over 85 sub-stations in its Mumbai License area. With the privatization of Delhi Vidyut Board (DVB), Tata Power Company holds managing control in the distribution company North Delhi Power Limited (NDPL). NDPL today distributes and supplies power to the North-North West areas of Delhi. With predominantly industrial load consumption, this region has a consumer base of approximately 8 lakhs with an annual power consumption of around 6000 MUs. 6

7 Financial Results 12 Months Ended Profit & Loss Account (Consolidated) Value(Rs.in.mn) FY10 FY11 FY12E FY13E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Extraordinary Items Minority Interest Share of Profit & Loss of Asso Net Profit Equity capital Reserves Face value EPS

8 Quarterly Ended Profit & Loss Account (Consolidated) Value(Rs.in.mn) 31-Dec Mar Jun Sep-11E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Extraordinary Items Minority Interest Share of Profit & Loss of Asso Net Profit Equity capital Face value EPS

9 Key Ratios Particulars FY10 FY11 FY12E FY13E No. of Shares(in mn) EBITDA Margin (%) 23.22% 25.44% 26.11% 25.98% PBT Margin (%) 14.58% 16.23% 16.89% 16.84% PAT Margin (%) 11.26% 11.22% 11.06% 10.95% P/E Ratio (x) ROE (%) 18.76% 16.65% 15.30% 14.28% ROCE (%) 17.71% 15.66% 16.03% 16.00% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts: Net Sales & PAT: 9

10 P/E Ratio(x): Debt Equity Ratio: 10

11 EV/EBITDA(x): P/BV: 11

12 Outlook and Conclusion At the current market price of Rs , the stock is trading at x FY12E and x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.9.48 and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 6% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at x for FY12E and x for FY13E. Price to Book Value of the stock is expected to be at x and x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview As the Indian economy continues to surge ahead, its power sector has been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope of growth of this sector is immense. The total installed capacity of India in 2011 is estimated to be around 1,76, mega watt (MW).Thermal power in India is responsible for two-third of power generation in India which includes using gas, liquid fuel and coal. This year thermal power in India has provided MW in which 96, MW was generated from coal, 17, MW from Gas and 1, MW from oil. Further, Hydro power in India (Renewable) provided 38, MW, Nuclear power provided 4, MW and RES (MNRE) 18, MW. 12

13 Power in India: Growth Drivers In terms of power generation, India is the sixth largest in the entire world. Over the past 30 years the demand for power in India has enhanced at 3.6 per cent per annum on the back of economic growth of India. The per capita energy consumption was at kilowatt in the year The Government of India has set the target Power for all by 2012 to meet with the energy requirement of the entire country, by adding 78,000 MW of installed generation capacity by According to the experts, the total demand for electricity will be above 950,000 MW by India has taken all the steps needed to provide energy from renewable sources such as wind and solar power. In March 2011 the capacity of wind power in India stood at around 12,000 MW. Azure Power, a producer in solar energy working independently, has announced a long term financing tie-up with Exim Bank worth US$ 16 million. The main aim of the collaboration is setting up a 5 mega watt (MW) solar power project in Rajasthan. "India has set ambitious goals to promote solar power. Exim Bank is working with U.S. exporters to make sure that they have a platform to participate in the development of solar sector in India," according to Fred P. Hochberg, Chairman and President of the Export-Import Bank of the United States. The world wind power market wants India to design a small wind-solar hybrid system and commercialize it globally as there is a fast growing market for efficient, costeffective and sustainable sources of energy, said Steve Sawyer, General Secretary of the Global Wind Energy Council (GWEC). Power Sector in India: Recent Trends and Investments The power sector in India has grown rapidly over the years. Considerable growth has been witnessed in all the sectors such as thermal (3.82 per cent), hydroelectric (9.97 per cent) and nuclear (40.94 per cent). As per the 11th Annual Plan, the overall achievement growth in the year has been around 5.56 per cent. 13

14 A new working group has been formed for further development of the sector, according to the report released by the Planning Commission dated March 4, The objective of forming this group lies in making the power supply sector more productive and healthy. The group has been chaired by the secretary for power, government of India, power ministry and also members of other ministries. Other notable representatives from private corporate power companies also formed an important part of the group. The power sector in India is having a bright future and a variety of recent investments have been made both by private and government sector enterprises. The government of Madhya Pradesh has invited Reliance power to go ahead with the purchase agreement of its Chitrangi power plant project, according to a recent report released on July 16, The total estimated power generation from the project stands at 3,960 MW. Apart from this, Reliance power is also focussing on projects in Krishnapatnam (Andhra Pradesh) and Tilaya (Jharkhand). Tata Power, one of the largest power manufacturers in the sector, is coming up with a thermal power plant in Raigad, Maharashtra. The total estimated power generation of the project stands at 1,600 MW. The scope for investments in the power sector of India stands at US$ 300 billion, according to Mr. Sushilkumar Shinde, Union Minister, Ministry of Power. Power in India: Government Initiatives The government has initiated several proactive steps to open the sector for the private players and realise the full potential of the country in the power sector: Introduction of the Electricity Act 2003 and the notification of the National Electricity Policy 2005 Constitution of Independent State Electricity Regulatory Commissions in the states Providing income tax holiday for a block of 10 years in the first 15 years of operation and waiver of capital goods' import duties on mega power projects (above 1,000 MW generation capacity) 14

15 100 per cent FDI is permitted under the automatic route for generation and transmission of electric energy produced in hydro-electric, coal/lignite-based thermal plants, oil-based thermal plants and gas-based thermal plants; nonconventional energy generation and distribution, distribution of electric energy to households, industrial commercial and other users; and power trading The government has also taken up some ambitious programmes like the Ultra Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY), Accelerated Rural Electrification Programme and the goal of Power for All by 2012 among others, to rapidly increase the installed capacity Road Ahead There has been a consistent improvement in power generation in the country over the last few years. The Government has taken various steps to make the power sector infrastructure more developed within a short span of time. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 15

16 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods D. Ashakirankumar Automobile A. Rajesh Babu FMCG H.Lavanya Oil & Gas Dheeraj Bhatia Diversified Manoj kotian Diversified Nimesh Gada Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com 16

SYNOPSIS. C.M.P: Rs Target Price: Rs Date: July 16 th 2011 BUY

SYNOPSIS. C.M.P: Rs Target Price: Rs Date: July 16 th 2011 BUY SUDARSHAN CHEMICAL INDUSTRIES LTD Result Update: Q4 FY 11 C.M.P: Rs. 760.00 Target Price: Rs. 859.00 Date: July 16 th 2011 BUY Stock Data: Sector: Specialty Chemicals Face Value Rs. 10.00 52 wk. High/Low