Tata Power Company Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Tata Power Company Limited (TATAPOWER) Q3 FY22 Earnings Concall

Management Update:

• The company achieved almost 50% growth in revenue and doubled profit from renewable business on a YoY basis in 3Q22.

• TATAPOWER commented that its EV charging business continues to expand with about 1300 public charging and 158 fast charging points installed till 31 December, 2021.

Q&A Highlights:

•  Swarnim Maheshwari from Edelweiss Securities asked about the reason behind strong EPC margins of 10% and the sustainability of it. Praveer Sinha CEO said it depends on how many project and what type of projects are executed. And the company expects these types of margins to sustain in future.

• Sumit Kishore from Axis Capital enquired about the update on the cell and module manufacturing capacity. Praveer Sinha CEO answered that the cell and module factory of 4 gigawatt will come in one phase only. The company expects to commission the module line in about 13-14 months, while the cell line will take another four months. Therefore, in total 18 months both the cell and module lines should be ready.

• Sumit Kishore from Axis Capital asked about the state of progress on monetization of strategic stake in the RE portfolio and also about Mundra merger status. Praveer Sinha CEO said the company is in discussions with various strategic investors in the renewable business and should be in a position to finalize that soon. Secondly, on the Mundra merger, the process is on and is in the last phase of hearing and NCLT should happen. And within FY22, the company expects to get the order.

• Deepika Mundra from JPMorgan asked about any update on the initiative on selling of non-core asset and monetization process. Praveer Sinha CEO replied that the monetization process got slowed during the COVID period. The company is very much in the market for monetizing the Georgia and the Zambia plant. In Zambia, there has been a dispute with the government with regards to the payment, which the company is trying to get it resolved. In Georgia, the issue of water availability has been largely resolved.

• Puneet Gulati from HSBC asked about solar rooftop model of 370 megawatts of orders worth INR1,050 crores, if all of it is capex orders or if there are some opex orders also? Praveer Sinha CEO answered that it’s a mix of three types of orders. One is pure orders, where it is sell orders. Second one is under Wesco supply where it’s supplied at a cost. And the third is the group captive orders.

• Puneet Gulati from HSBC also asked about the SBI loan scheme that is collateral free and if the company will be taking the risk or if it’s on the end-user. Praveer Sinha CEO replied that these are loans taken by the end-users and the company is not providing any collateral in this. Therefore, it’s a relationship between the bank and the consumer.

• Puneet Gulati from HSBC queried about the EV charging business and the new tie-up with TVS, what’s the mix between four-wheeler and two-wheeler in the 1200-1300 odd charging stations. Praveer Sinha CEO answered that right now there is no two wheeler and it’s a new arrangement that the company has tied-up. It’s all four wheeler public chargers and also excludes the bus chargers which is separate.

• Puneet Gulati from HSBC also asked that in the 1.95 gigawatt of solar project pipeline how many is already signed for PPA and what’s still awaited.  Praveer Sinha CEO said that for everything the PPA has been signed. The company does not consider any project to take it on the company’s books until unless it has a firm PPA and an approval from the regulatory commission.

• Atul Tiwari from Citigroup asked about CGPL and the number of units operational pending the finalization of agreements with Gujarat government. Praveer Sinha CEO replied that during the month of January there were 2-3 units that were operating. Right now one unit is operating. And in January, export of coal was banned. And now that the coal supply has recommenced, the company expects to ramp up all the three units.

• Apoorva Bahadur from Investec asked about the transmission opportunity. Praveer Sinha CEO said the opportunity is very high in the country, considering the government plans to add 350 gigawatt in the next nine years and the evacuation arrangement has to be made for that. Studies show that INR30 lakh crores will be required in the renewable, power evacuation, and distribution space, which gives about INR3 lakh crore every year, which is a huge opportunity.

• Rajesh from ITI Long Short Equity Fund asked about the medium and long term targets for carbon neutrality. Praveer Sinha CEO answered that 32% of the company’s generation by capacity is renewable or non-carbon and 68% is carbon generation. By 2025, TATAPOWER expects it to be 40% and by 2030 60%. TATAPOWER added that it will become net zero carbon by 2050.

• Rajesh Majumdar from B&K Securities asked about the ROE of the company going forward, 3-4 years down the line. Praveer Sinha CEO said that ROE is a good metric for regulated business. For renewable projects it’s differently structured where the ROE is not a metric as it’s a longer period because of the tax reasons that initially one has a strong depreciation benefit.

• Rajesh Majumdar from B&K Securities also asked about the status of a significant capex on the Mumbai side of INR5,000 crores, INR6,000 crores on one particular project. Praveer Sinha CEO answered that every year the company is doing about INR600 crore and has a plan that in the next 7-8 years will do about INR5,000 to INR6,000 crores.