Tata Power Q3 net profit up 40 per cent at 141 crore

Tata Power has posted an appreciable profit growth, on falling sales going by the standalone financials for the quarter ending December 2009. The fall in sales comes even as generation and sales volume remained fairly constant.

The company posted a 40 per cent higher net profit at Rs 141 crore for the third quarter of this fiscal, up from Rs 101 crore in the same period last year, thanks to lower fuel expenditure and cheaper power from other sources.

The decline in sales revenue is due to the significant drop in fuel prices, which is a pass-through cost meaning the company ahs to charge a lower rate to its customers, on lower fuel costs if the fuel costs decline.

However, analysts say the market seems to have reacted negatively to the sales decline with the stock shedding 2.73 per cent intra-day and closing finally on a 1.43 per cent loss. While sales were down 17 per cent, the fall in total revenue was lower at 12 per cent on account of gains from revenue adjustment in the prior period.

Total revenue currently stands at Rs1,566.5 crore. As regards costs, fuel cost has come down more sharply, by 26 per cent and is down by 8 percentage points, as a percent of sales. The savings in fuel cost is Rs344 crore for the quarter, which more than makes up for the decline of Rs293 crore in actual sales.

According to analysts, the fuel cost saving accounts for more than two-thirds of the increase in pre-tax profits. Depreciation increased by 50 per cent, on account of commissioning of some capacities, and tax provisions were up four times to Rs46.3 crore. However, the effective tax rate currently stands at 24 per cent, and is in line with industry rates. Net profit is at Rs147.9 crore, an increase of 28 per cent.