Tata Power
Net down 15% hit by statutory adjustments and higher taxation
Tata Power for the quarter ended Jun '08, registered a 15% fall in the net
profit (after statutory appropriations) at Rs 162.55 crore, even while its
net revenue for the quarter was higher by 36% (to Rs 2049.13crore) and
operating profit grew by 28% (to Rs 366.80 crore).
During the quarter the company has made adjustment towards future tariff by
a deduction of Rs 23 crore in revenue (taken as part of EO) and an statutory
appropriation (relating to excess profit after retaining its level on
certain performance incentives) amounting Rs 28 crore. Usually the company
account for these adjustments annually on fourth quarter and now has changed
its accounting policy to account it on quarterly basis.
Consequently to these adjustments the Net Profit after Tax for the quarter
ended June 30, 2008 is reduced by Rs 20 crore and the Net Profit after Tax
and Statutory Appropriations for the quarter ended June 30, 2008 is reduced
by Rs 48 crore. But for this adjustments and higher taxation the bottom-line
for the quarter would have witnessed a growth rather than a decline.
Quarterly Results
Revenue for the quarter ended Jun '08 was higher by 36% to Rs 2049.13 crore.
Sales volume for the quarter rose by 1.45% at 4115 MUs against 4056 MUs in
the corresponding period last year.
Operating profit was higher by 28% to Rs 366.80 crore limited by erosion in
OPM to 17.9% compared to 19% in the corresponding previous period.
Other income was lower by 29% to Rs 48.31 crore and thus the PBIDT was
higher by 17% to Rs 415.11 crore. The interest cost was lower by 6% to Rs
52.16 crore. The depreciation was higher by 2% to Rs 73.11 crore. The PBT
before EO was higher by 27% to Rs 289.84 crore. The EO on account of income
utilized towards future tariff determination was Rs 23 crore compared to nil
in corresponding previous period. The resulting PBT after EO had increased
by 17% to Rs 266.84 crore.
The tax incidence for the quarter more than doubled (up 102%) to Rs 76.29
crore with the company account for cumulative net impact of deferred tax
adjustments on the future tariff amounting Rs 27.10 crore.
Since the company is having deferred taxation liability fund and there was
enough amount available in that fund, it has not provided for deferred tax
in the books for the Mumbai license area in earlier years. But during the
quarter the units in which the company has invested had to be redeemed
incurring a loss of Rs 155.47 crore and that being adjusted against the
deferred taxation liability fund, which is a statutory appropriation.
According to regulations the company is entitled to recover tax as and when
we pay and hence to that extent the consumer will also be paying for this
provision of deferred tax in future when the tax liability arises. However,
the consumers have also been paying for certain expenses for which the
company have been making provisions in the profit and loss of the past year,
which is not permitted for tax calculation leading to a deferred asset. And
hence, the current provision to the extent of Rs 27 crore is made to account
for this cumulative deferred asset that it has created, which has to be
adjusted against the deferred tax liability claims that it have on the
consumers. Thus the limited by higher taxation the PAT before statutory
appropriation was Rs 190.55 crore, nearly unchanged to Rs 190.20 crore in
corresponding previous periods.
Statutory appropriation accounted for the quarter was Rs 28 crore according
to change in accounting policy. Thus the net profit of the company after
statutory appropriation was lower by 15% to Rs 162.55 crore.
Subsidiaries performance
Tata Power Trading, which is a 100% subsidiary of the company and into power
trading had a significant increase in turnover to Rs.413 crore (from Rs.158
crore) largely contributed by almost doubling of the MUs traded, and the
rest of the increase has been due to increase in the power costs it have
traded in. Its profits after tax were higher by 96% to Rs 1.41 crore.
NDPL the distribution company in Delhi showed an increase of 20% yoy in PAT
to Rs 33.99 crore.
PowerLink, the JV with Powergrid and a subsidiary of the company had a
profit of Rs 9 crore for the quarter against Rs 8.04 crore in corresponding
previous periods, translating into a growth of 12% yoy.
Other developments
Supreme Court in its judgment upheld the company's right to supply power to
retail consumers in Mumbai Licence Area, irrespective of consumption limits.
Earlier the company used to enjoy distribution rights to serve all customers
and this was curtailed by the order of regulator in 2004-05 stating TPCL not
to service consumers below 1000 kVA till it sort out some level playing
field problems. Later, it was challenged by TPCL's competitor, and the ATE
said that TPCL have no license, and now the Supreme Court has restored
TPCL's status to status quo. This judgment allows the company to do the
retail business without any hindrance.
TPCL agreed to take 26% equity stake in 114 MW run-of-the-river Dagachhu
Hydro Electric Power Project being developed by The Royal Government of
Bhutan (RGoB) over river Dagachhu through Druk Green Power Corporation
(DGPC).The project will be executed by the Special Purpose Vehicle-Dagachhu
Hydro Power Corporation (DHPC). Tata Power Trading also agreed to off-take
power from the project for a period of 25 years and the power will be
delivered at India-Bhutan Border.
Management comment
Prasad R. Menon, Managing Director of Tata Power Company while commenting on
the Company's performance for the quarter said, "One of the key milestones
for the Company is the Hon'ble Supreme Court's judgment on the retail
licence issue. We welcome the Hon'ble Supreme Court's order upholding our
distribution rights in the Mumbai Licence Area. The Company takes this
opportunity to thank its consumers for the extra-ordinary support and
confidence that they have shown in us for the last few years. It will be our
endeavour to continue to provide reliable and quality power to our consumers
and we look forward to servicing Mumbai as we have been doing for the last
nine decades. All our generating units are running at high plant load factor
leading to higher generation and enhanced efficiencies. Our future growth
plans are in accordance with the expectations of our stakeholders and the
growth continues as per our stated objective."
33.41 as on Mar 31, '08 and 32.25 as end of Jun '07.
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