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TATA Power lower sales and Coal realisation impact in Q3 2013

TATA Power narrowed its consolidated loss to INR 75 crore for the December 2013 quarter versus INR 329 crore last year. The overall performance is still a far cry from estimates of the Street, which was expecting a net profit of INR 223 crore on sales of INR 9,329 crore. The stock fell from INR 76 intra day to a low of INR 73.75 before closing at INR 75, a decline of 0.33 Percent over its previous closing.

A large part of the lower than expected profits can be attributed to the 4 Percent fall in revenues to INR 8,700 crore, primarily dragged by its standalone power business 22 Percent of the total wherein sales volumes declined and secondly, the coal business. Standalone generation suffered due to lack of fuel and demand for its power.

Similarly, the coal business was dented by lower realisations gross impact of INR 1,045 crore despite a higher quantity of coal sold and gains from rupee depreciation. These partly offset the revenue gains in the Mundra ultra mega power project and Maithon project. The commissioning of all 5 units at Mundra added INR 483 crore to revenues, while the Maithon power project gained because of recovery of the fixed cost and solar business, adding INR 215 crore to revenues.

However, lower generation and to some extent, plant unavailability meant the company spent less on fuel costs. On a consolidated basis, the 2 main components of costs namely the cost of power purchased fell 26 Percent to INR 1,635 crore, while fuel costs dropped 14 Percent to INR 2,307 crore. Some of these gains were offset by higher coal processing charges, transmission charges, royalty for the coal mining and other expenses.

Besides, other expenses jumped 29 Percent YoY, largely due to INR 152 crore of provision and tax adjustment for previous years in the coal business, which saw segment profits fall to only INR 17 crore versus INR 444 crore last year. Thus, consolidated operating profit fell 3.8 Percent to INR 1,786 crore.

Further, other income stood at a negative INR 94 crore versus a positive INR 11 crore last year. This, along with higher finance, cost led to a consolidated loss of INR 75 crore. These were lower than INR 829 crore loss of last year wherein the company had taken an impairment charge of INR 600 crore. While analysts say the quarter had a one off impact to the tune of INR 230 crore, the profit is lower than expectations even after adjusting for the same.

Source-On Request