1

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. 4185.70 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 Sub-

division of the Equity Shares of Rs.

10/- each into Equity Shares of

Rs.1/- each.

• 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 11 194507.60 49479.20 20881.20 88.00 11.51

FY 12E 213958.36 55874.21 22493.90 9.48 106.80

FY 13E 235354.20 61140.08 24406.28 10.29 98.44

Stock Data:

Sector: Power

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 1465.00/1007.00

Volume (2 wk. Avg.) 27000

BSE Code 500400

Market Cap (Rs in mn) 2402442.60

Share Holding Pattern

1 Year Comparative Graph

TATA Power BSE SENSEX

C.M.P: Rs. 1012.00 Target Price: Rs. 1144.00 Date: Aug. 27th, 2011 BUY

Tata Power Co. Ltd Result Update: Q1 FY 12

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 1012.00 2402442.60 88.00 11.51 1.83 125.00

NTPC Ltd 166.20 137039.62 11.32 14.68 2.00 38.00

Torrent Power Ltd 212.75 10051.34 23.50 9.05 2.10 55.00

Neyveli Lignite Corp. 80.05 13430.07 7.74 10.34 1.20 20.00

Investment Highlights

Q1 FY12 Results Update

Tata Power Co. Ltd disclosed results for the quarter ended June 2011. A net sale

for the quarter is raised 12.34% to Rs. 58245.10 million as compared to

Rs.51848.40 million during the corresponding quarter last year. During the

quarter, the company has reported Net Profit decreased to Rs.4185.70 million

from Rs.3176.70 million in previous year same quarter. Total income is increased

to Rs. 59488.40 million for the quarter ended June 30, 2011. The Basic EPS of

the company stood at Rs.17.64 for the quarter ended June 2011.

Quarterly Results - Consolidated (Rs in mn)

As At June-11 June-10 %change

Net sales 58245.10 51848.40 12.34%

PAT 4185.70 3176.70 31.76%

Basic EPS 17.64 13.39 31.76%

3

• Net Sales & PAT

During the quarter, net sales increase by 12.34% to Rs. 58245.10 million from

Rs.51848.40 million in the previous quarter and Total Profit for the quarter ended

June 2011 was Rs. 4185.70 million grew by 31.76% from Rs.3176.70 million

compared to previous quarter.

• EPS Growth

The Basic EPS of the company is stood at Rs. 17.64 for the quarter ended June

2011 from Rs. 13.39 for the quarter ended June 2010.

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. 1500 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.

5

Company Profile

Tata Power was incorporated on 18th September at Mumbai in 1919. 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

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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.

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 189858.40 194507.60 213958.36 235354.20

Other Income 5888.80 4105.00 4310.25 4655.07

Total Income 195747.20 198612.60 218268.61 240009.27

Expenditure -151658.70 -149133.40 -162394.40 -178869.19

Operating Profit 44088.50 49479.20 55874.21 61140.08

Interest -7638.70 -8102.10 -9155.37 -10070.91

Gross profit 36449.80 41377.10 46718.84 51069.17

Depreciation -8776.80 -9802.40 -10586.59 -11433.52

Profit Before Tax 27673.00 31574.70 36132.25 39635.65

Tax -6286.60 -9755.60 -12465.63 -13872.48

Profit After Tax 21386.40 21819.10 23666.62 25763.17

Extraordinary Items 88.90 285.20 270.94 284.49

Minority Interest -2334.60 -1965.00 -2259.75 -2530.92

Share of Profit & Loss of Asso 616.60 741.90 816.09 889.54

Net Profit 19757.30 20881.20 22493.90 24406.28

Equity capital 2372.90 2372.90 2372.90 2372.90

Reserves 111631.40 128663.00 152329.62 178092.79

Face value 10.00 10.00 1.00 1.00

EPS 83.26 88.00 9.48 10.29

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 31-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11E

Description 3m 3m 3m 3m

Net sales 44409.30 50154.80 58245.10 54750.39

Other income 782.50 1055.80 1243.30 1367.63

Total Income 45191.80 51210.60 59488.40 56118.02

Expenditure -33863.50 -38088.50 -44011.20 -41665.05

Operating profit 11328.30 13122.10 15477.20 14452.97

Interest -2109.20 -2193.70 -2629.60 -2866.26

Gross profit 9219.10 10928.40 12847.60 11586.71

Depreciation -2489.50 -2492.80 -2718.80 -2827.55

Profit Before Tax 6729.60 8435.60 10128.80 8759.16

Tax -2088.50 -2128.90 -5089.30 -2890.52

Profit After Tax 4641.10 6306.70 5039.50 5868.64

Extraordinary Items 10.00 305.20 -118.70 0.00

Minority Interest -307.40 -582.10 -824.30 -799.57

Share of Profit & Loss of Asso 80.00 525.60 89.20 82.06

Net Profit 4423.70 6555.40 4185.70 5151.13

Equity capital 2372.90 2372.90 2372.9 2372.9

Face value 10.00 10.00 10.00 1.00

EPS 18.64 27.63 17.64 2.17

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

No. of Shares(in mn) 237.29 237.29 2372.90 2372.9

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) 12.16 11.51 106.80 98.44

ROE (%) 18.76% 16.65% 15.30% 14.28%

ROCE (%) 17.71% 15.66% 16.03% 16.00%

Debt Equity Ratio 1.62 1.89 1.68 1.51

EV/EBITDA (x) 5.45 4.86 43.00 39.29

Book Value (Rs.) 480.44 552.22 65.20 76.05

P/BV 2.11 1.83 15.53 13.31

Charts:

Net Sales & PAT:

10

P/E Ratio(x):

Debt Equity Ratio:

11

EV/EBITDA(x):

P/BV:

12

Outlook and Conclusion

At the current market price of Rs.1012.00, the stock is trading at 106.80 x

FY12E and 98.44 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.10.29 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 43.00 x for FY12E and

39.29 x for FY13E.

Price to Book Value of the stock is expected to be at 15.53 x and 13.31 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.1144.00 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 1,76,990.40

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 115649.48 MW in which 96,743.38 MW was generated

from coal, 17,706.35 MW from Gas and 1,199.75 MW from oil. Further, Hydro power

in India (Renewable) provided 38,106.40 MW, Nuclear power provided 4,780.00 MW

and RES (MNRE) 18,484.52 MW.

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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

733.54 kilowatt in the year 2008-2009. 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 2012. According to the experts,

the total demand for electricity will be above 950,000 MW by 2030. 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, cost-

effective 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 2010-11 has been around 5.56 per cent.

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, 2011. 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, 2011. 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)

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• 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; non-

conventional 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.

16

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