In this article, we will be discussing 1 energy stock that an investor needs to keep a close eye on for the long term. Moreover, we will discuss the key 4 points that the CEO of Tata Power shared in an interview on CNBC.
Tata Power– Business Overview:
- Tata Power is in the power generation business via traditional methods i.e., thermal as well as renewable sources as well. Currently, Tata Power is having conventional capacity of over 10,100 MW, while the renewable capacity stands at above 3,400 MW.
- Besides power generation, Tata Power is also into the transmission and distribution of power. Currently, Tata Power covers 3,500+ km of Transmission capacity and serves around 1.23 crore customers.
- Further, in the renewable business, the company also functions in Solar Rooftops, Solar Pumps, EV Charging Stations, and Home Automation.
4 Key Points about Tata Power:
1) Future Prospect:
- The management has stuck to the commentary made in the investor meets regarding the prospects – revenue will be 3x, profits will be 4x, and ROCE will rise to double digits.
- This confidence is gained as the company forays into unregulated businesses like rooftop solar, which has increased from 50 crores to 1500 crores within 3-4 years.
- In the solar pumps segment – the company increased its business to 900 crores from 30 crores.
2) Renewables vs Conventional Power business:
- The company management has taken a stand of not adding any more coal capacity rather the capital will be allocated towards renewables business.
- The growth and momentum in renewables are expected to catch up as EV penetration increases. Although, the charging stations will form a substantial number but not a big number like renewables.
- Expansion of renewables capacity from 4 GW to 20 GW is expected by 2027 along with some storage solutions.
3) Tata Group is merging all major businesses
- After Tata Sons, Tata Motors & Tata Steel – Tata Power is merging its subsidiaries on a group level by creating a renewable platform under which all the renewable businesses will be merged under a single entity.
- Post-merger, the number of subsidiaries is expected to come down to 20 from the current level of 90.
4) Expansion Strategy
- The company has brought the debt-equity levels down to 1.6 but will raise debt to fund the new renewable capacity expansion.
- The management is positive regarding the support from the existing cashflow on a group level and the enhanced debt levels will be within the prudent policies within which the company operates
What Should Investors Do?
Tata Power is one of the stocks which has shown some aggressiveness in terms of growth and expansion of the business. This interview with the company’s CEO shows some positivity about the prospect of the company. Hence, an investor needs to keep this stock on their radar and should regularly track it. Follow due diligence before making any investing decisions.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.