TATAPOWER - Tata Power Co. Ltd Share Price

Management provided an optimistic outlook for Tata Power, projecting continued growth in the power sector. They anticipate a power demand growth of approximately 5% this year, with peak demand expected to reach 270 gigawatts. The company's reported PAT grew by 25% in Q4 FY '25 to Rs. 1,306 crores, with an adjusted PAT of Rs. 1,288 crores, up 16% from Rs. 1,109 crores last year. For the full year, Tata Power's PAT exceeded Rs. 5,000 crores for the first time, at Rs. 5,197 crores, representing a 26% year-on-year increase. The underlying EBITDA was over Rs. 15,000 crores, up 10% compared to the previous year.

Key forward-looking points from management include:

1. Renewable Capacity Additions: In FY '25, Tata Power added over 1,000 megawatts of renewable capacity and plans to add 5.5 gigawatts in the next 6 to 24 months. Their target is to achieve nearly 70% clean and green energy by 2030.

2. Solar Business Growth: The solar rooftop segment showed significant growth, with revenues rising by 40% to Rs. 865 crores in Q4. Moving into FY '26, this is expected to nearly double due to initiatives like the PM Surya Ghar project.

3. CAPEX Plans: The company reported a CAPEX of Rs. 16,200 crores for FY '25 and plans to increase this to Rs. 25,000 crores in FY '26, indicating strong investment in future growth.

4. Corporate Ratings Improvement: The company received a positive outlook upgrade from Moody's.

5. Debt and Financial Health: With net debt at Rs. 44,700 crores and a net debt to underlying EBITDA ratio of 2.93, Tata Power maintains a strong balance sheet amid substantial investments.

Overall, Tata Power is focused on sustained growth through an aggressive renewable strategy, improved operational efficiencies, and financial stability as they aim for doubled profitability by FY '30.

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

1. Question: "What led to the shortfall on CAPEX, and what challenges delayed your CAPEX and capacity addition targets?" Answer: "Our CAPEX for FY '25 was Rs. 16,200 crores and for Q4 was Rs. 4,000 crores plus. Delays occurred mainly in renewables due to transmission and evacuation systems set up by other companies. Additionally, some transmission lines faced right-of-way issues, which we've addressed. Any incomplete projects will be made up in the upcoming quarter."

2. Question: "Are the transmission evacuation issues sorted to commission 2.5 gigawatts of renewable as targeted this year?" Answer: "Yes, we plan to commission nearly 2.5-2.7 gigawatts of renewable projects this fiscal year. Last year, we completed 2.3 gigawatts successfully."

3. Question: "Given the operational success in the solar cell business, will this margin performance continue in FY '26?" Answer: "The cell plant has ramped up to full capacity, expecting over 3,700 megawatts in FY '26. This will drive improved margins as both the module and cell lines stabilize."

4. Question: "What is the proportion of third-party sales in the solar module and cell business?" Answer: "We have a large backlog of orders for our projects. Until Q3, we won't have excess capacity for third-party sales, as most of our production will be consumed internally, particularly for rooftop solar initiatives."

5. Question: "What is the impact of Note Number 2 regarding the CERC judgment?" Answer: "There is no financial impact this quarter. The Note pertains to prior quarters and supports our efforts in collecting receivables."

6. Question: "Can you break down the FY '26 CAPEX layout across various businesses?" Answer: "For FY '26, we anticipate a CAPEX of around Rs. 25,000 crores, with 60% allocated to renewables, about 30% to transmission and distribution, while the remainder will be adjusted dynamically."

7. Question: "Will Tata Power exit the coal business?" Answer: "Our focus is more on allocating capital towards growth sectors like renewables. While we're looking at opportunities opportunistically, we remain committed to our existing coal plants until our defined timelines are met."

8. Question: "What is the outlook for Odisha Discom profitability moving forward?" Answer: "The improvements you've seen are sustainable, as we've streamlined processes for billing and collections. We expect consistent performance similar to Q4."

9. Question: "What led to the high profitability of the rooftop solar segment this quarter?" Answer: "In Q4, we achieved stellar growth in revenues exceeding Rs. 860 crores with high PAT margins. Our market share and consumer trust have driven this performance."

10. Question: "What is the status of long-term PPAs for pumped storage plants?" Answer: "We're developing pumped hydro to provide bundled power with renewables. It will take six more months to secure long-term PPAs and position our offerings effectively for market needs."

These questions capture vital strategic and operational elements discussed in the earnings call, providing insights into Tata Power's performance and future direction.