Tata Power shares down 30% from 52-week high, brokerage sees more pain

Tata Power share price: Shares of Tata Power traded flat on Thursday, January 5, amid a range bound trade in the equity markets. Shares of the power generation company of the Tata Group quoted Rs 209 apiece on NSE, up marginally from the previous close of Rs 208.10.

Tata Power shares are moving sideways for the past few months and are available at a whopping 30 per cent discount from 52-week high of Rs 298.05, touched on 7 April 2022.

Global brokerage firm Morgan Stanley in its latest report on Tata Power has maintained Underweight rating and sees downside of around 10 per cent.

The report said that Tata Power receiving an order from Central Electricity Regulatory Commission (CERC) including the Mundra Plant of the Company would lead to onetime past recovery of Rs 500 crore to Rs 800 crore which is yet to be approved.  

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It said that the order awaits clarity as to whether section 11 provisions, which provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India, will continue from January 1.

The report mentioned that mining profit would be shared on actual coal supplied from Indonesian mines to the extent of its stake which is 30 per cent.

The brokerage firm has maintained the Underweight rating and has given a target of Rs 189 per share. 

According to the regulatory filing by Tata Power, the company has received an order from Central Electricity Regulatory Commission (CERC). On May 5 last year, the Ministry of Power issued directions under Section 11(1) of the Act to ICB Plants including Mundra Plant, to operate and generate power at full capacity. 

Consequently, the company filed a petition before CERC under Section 11(2) of the act to ensure full pass through of costs without any adverse financial impact of the aforesaid rirections. 

The filing further informed that after issue of the Section 11 directions, the full fixed cost of 90 paise/kWh to be provided by the Company and, therefore, all fixed charges are payable in full by all the procurers

Under operational parameters CERC has held that supply of power under Section 11 directions has to cover the variable cost of generation and a reasonable margin as per the Appellate Tribunal’s judgement. The operational parameters for computation of ECR shall be lower of the actuals or as per Tariff Regulations, 2009.

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