Tata Power Q2 net rises 61 per cent on higher other income

Second quarter results of power utility major Tata Power are in line with market expectations. The company has achieved modest top line growth, but rising input costs and costlier fuel have pulled down operating margins further. Higher other income and lower tax provisions have helped the company to report better growth in net profits.

For the quarter ended 30 September 2006, Tata Power has reported a 60.99 per cent increase in net profits to Rs202.32 crore, or Rs10.21 per share, from Rs125.67 crore, or Rs6.34 per share, for the same quarter of previous year. Net income fromoperations went up 13.12 per cent to Rs1,200.83 crore from Rs1,061.57 crore

Operating profits, excluding other income, went up by a modest 3.84 per cent over the previous year quarter. Operating margins as a percentage of net income declined to 20.78 per cent from 22.64 per cent a year ago.

Cost of power purchased, fuel and other inputs went up by 12.77 per cent over the previous year quarter. Increase in staff costs at 40.8 per cent and other operating costs at 34.94 per cent over the same quarter of previous year resulted in lower margins.

Bottom line growth looks impressive because of an 86.08 per cent surge in other income to Rs78.34 crore and a decline of 70 per cent in tax provisions to Rs13.66 crore from Rs45.57 crore. Interest costs declined by 9.85 per cent while deprecation charges went up by a modest 7.28 per cent.

Tata Power is expanding its generating capacity near Mumbai by adding a 250 MW coal-based plant and diesel generating sets for another 100 MW. Work on a 100 MW met coke-based plant in Haldia in West Bengal is progressing.

The company would hold 74 per cent in a JV with Tata Steel to set up captive power plants at the steel units of Tata Steel. (See: Tata Power to set up captive power plants for Tata Steel in three states) Tata Power is also implementing a 100 MW wind energy project in Maharashtra.

Among the larger projects, work on the 1,000 MW Maithon hydro-electric project is progressing. Two gas- or coal-based plants of 1,000 MW each are being planned on the west coast of Maharashtra.

The company would submit detailed bids for setting up ultra-mega power projects of 3,500 MW each at Sasan and Mundra. Tata Power has formed a consortium with Siemens and Doosan Heavy of South Korea to bid for the ultra-mega projects. The company has also been planning power ventures in South Africa and Bangladesh.