Tata Power shares fall despite strong Q1 show; here’s what brokerages say

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mumbai-based electric utility company Tata Power’s shares were down three percent at Rs 131.10 on the BSE on Monday soon after hitting a 52-week high, despite the company reporting its seventh quarter of strong earnings.

The Tata Power stock earlier saw an intraday low of 3.03 percent at Rs 131.05 on the BSE. Tata Power shares sharply underperformed the S&P BSE Sensex index, which was flat.

Tata Power shares traded lower for most of the day having switched direction shortly after opening at a 52-week high of Rs 137.90 on the bourse.

After the market hours on Friday, Tata Power reported a nearly 74 percent jump in net profit to Rs 465.69 crore for the quarter ended June 30. Its total income rose to Rs 10,145.89 crore from Rs 6,540.42 crore in the corresponding period a year ago.

Tata Power has shown improvement in all parameters for the seventh quarter in a row and the momentum is expected to continue in the coming quarters, CEO and Managing Director Praveer Sinha told CNBC-TV18.

The company is seeing a consistent performance in transmission projects. It will see the whole year’s impact on Odisha distribution companies in the coming quarters, he said.

Sinha also said two cyclones in May impacted the company’s power generation capacity in Q1. The company expects to divest Zambia and Georgia assets this year, which will help it improve its balance sheet, he added.

Here’s what brokerages say on the company’s Q1 performance:

Edelweiss

The brokerage has maintained a ‘buy’ call on the stock with a target price of Rs 170 apiece. The company began FY22 on a strong note on the PAT front, according to Edelweiss. The company posted a Rs 3,000 crore sequential increase in net debt largely due to the refinancing of perpetual debt, it said.

There was a strong ramp-up in the EPC business, but with less than 4% margins due to higher module prices. The Odisha aggregate technical and commercial (AT&C) loss rose by 200 bps, on account of the impact of the second wave of the pandemic, according to Edelweiss.

JPMorgan

The brokerage has retained an ‘overweight’ call on the stock with an increased target price of Rs 155. The company beat expectations with its Q1 earnings, according to JPMorgan. The management’s key focus remains on scaling up its renewables and adjacent businesses while keeping its leverage contained, the brokerage said.

JPMorgan said Tata Power is its top pick in utilities.

CLSA

The brokerage has a ‘buy’ call on the stock with a raised target of Rs 160. The repricing of debt and net long coal drove the company’s solid Q1 performance, according to CLSA.

Macquarie

The brokerage has retained an ‘underperform’ call on the stock with a target price of Rs 101 citing expensive valuation. Monetisation of the renewables platform could take up to 18 months, which might delay further deleveraging in the interim, Macquarie said.

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PM transfers about Rs 19,500 cr to over 9.75 cr farmers under PM-KISAN

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Prime Minister Narendra Modi on Monday virtually transferred about Rs 19,500 crore to over 9.75 crore beneficiaries farmers under the government’s PM-KISAN scheme. With this, the government has so far transferred nine instalments amounting to around Rs 1.57 lakh crore to farmer families under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme.

After the release of the amount, the Prime Minister interacted with beneficiaries of this scheme from across the country. An annual financial benefit of Rs 6,000 is provided to eligible beneficiary farmer families, payable in three equal four-monthly instalments of Rs 2,000 each, under the PM-KISAN scheme.

The scheme was announced in February 2019 in the Budget. The first instalment was for December 2018-March 2019 period. The fund is transferred directly to the bank accounts of the beneficiaries.

Addressing the virtual event in the presence of the Prime Minister, Agriculture Minister Narendra Singh Tomar said that before the ninth instalment, the central government had disbursed about Rs 1.37 lakh crore to around 11 crore beneficiaries under the scheme. The government has linked 2.28 crore PM-KISAN beneficiaries with Kisan Credit Card scheme, under which they have been able to avail loan up to 2.32 lakh crore so far.

He also said the farmers have worked hard despite the challenges of COVID-19 and ensured bumper production last year. Better output is expected in the coming days due to continued farmers’ efforts.

Expressing concern over shortage of edible oils and pulses, Tomar said the government is focusing on boosting the domestic production through several schemes so that the country’s dependence on imports Union Ministers of State for Agriculture Kailash Choudhary and Shobha Karandlaje, as well as Agriculture Secretary Sanjay Aggarwal were among state ministers and officials present in the event.

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Tata Power improves for 7th straight quarter; management expects continued momentum

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tata Power reported earnings for the June-ended quarter with revenue up 54 percent boosted by transmission and distribution and there has been a positive surprise on the margin front. Praveer Sinha, MD and CEO at Tata Power discussed the performance.

This is the seventh consecutive quarter where the company has shown improvement in all the parameters.

“I think we are on very solid footing, very solid foundation and I do expect this momentum will continue in the next quarters also,” he said.

“We have done a lot of things starting from cleaning up of our balance sheet, the deleveraging that we have done and that has helped us to save the interest cost, in our performance we have gone for cluster business, our thermal generation continues to do exceedingly well and that will continue in the coming quarters,” he added.

Also read: Tata Power shares fall despite strong Q1 show; here’s what brokerages say

The transmission and distribution performance has been improving steadily.

“Every year we are adding a large number of capacity in Mumbai and going forward we will also take up greenfield projects. On distribution, Four DISCOMs got added during the last financial year. The whole impact will start coming now as we move forward,” Sinha elaborated.

On the renewables side, the EPC continues to do well. “You will see large number of projects getting completed in Q2FY22 and Q3FY22,” he shared.

Sinha expects margins to improve.

“We are very confident that our distribution business will do very well in the coming quarters,” he said.

In terms of divestment of Zambia and Georgia assets, he mentioned, “We will be able to divest in this financial year. Some of the other non-core investments that we have, we are looking at divesting some of those also. So we do expect there will be good turnaround in terms of our balance sheet also.”

On the renewables push, the management seemed enthusiastic but cautious.

“There have been more aberrations but we have been very cautious and careful and some of the bids that we did last year, we have also won in last quarter have been very reasonable bids. We do see an opportunity not only for pure solar or pure wind project but also hybrid projects. Our focus is to provide value-added services,” said Sinha.

For the full interview, watch the accompanying video.

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Mutual funds witness 5th straight month of equity inflows in July; 4.5X higher versus June: AMFI data

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Equities saw inflows for the fifth straight month in July, data from the Association of Mutual Funds in India (AMFI) showed on Monday.

July’s net equity inflows stood at Rs 20,742.8 crore vs Rs 4,608.7 crore last month, the data showed. NFOs, meanwhile, contributed Rs 13,709 crore.

The hybrid fund stood at Rs 19,481 crore and liquid fund at Rs 31,740 crore in July, the data further showed.

The number of systematic investment plan (SIP) accounts outstanding stood at 4.17 crore as compared to 4.02 crore in the previous month. The contribution from SIP stood at Rs 9,609 crore in July compared to Rs 9,156 crore in the previous month.

Arbitrage funds got inflows of Rs 14,924 crore in July 2021.

Exchange traded funds (ETF) investing in gold saw net outflows of Rs 61 crore compared to net inflows of Rs 359 crore.

N S Venkatesh, Chief Executive, AMFI said: “RBI’s accommodative stance, healthier earnings growth, vaccination-driven steady containment of Covid pandemic and global and domestic liquidity is driving the equity markets to historic highs. Taking the cue, retail Investors too are participating in the equity rally, largely through Mutual Fund SIPs, on a continued rising quantum at record levels.”

“Rising affinity towards mutual fund asset class is seen from a steep jump in retail SIP accounts at 4.17 crore, monthly SIP Contribution at Rs 9,609 crore, SIP AUM at Rs 5.03 crore, Retail AUM at Rs 16.25 lakh crore and net retail flows at Rs 40,302 crore and equity flows at Rs 22,583.52 crore in July 2021, all at record highs, driving overall mutual fund industry AUMs too to historic high at Rs 35.31 lakh crore,” Venkatesh added.

According to Aashish Somaiyaa, CEO, White Oak Cap Mgmt, there is definitely a trend change as far as a hybrid is concerned because balanced advantaged and anti-dynamic asset allocation funds have given negative flows for a long time.

“It is one of the first months that both these categories — balanced advantaged as well as the aggressive hybrid category — are positive. So, that is a trend change in some sense and also makes sense given the way markets have been functioning. It makes sense that this category gets more flows,” he said.

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Centre could withdraw new farm laws considering upcoming UP assembly polls: BJP leader

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A BJP leader has supported farmers’ agitation against the three new farm laws and said that the BJP-led central government could withdraw them keeping in mind Uttar Pradesh assembly polls. “The demands made by the farmers are right. Keeping in mind the assembly polls and anger among the farmers, the Modi government could withdraw (new) farm laws,” UP BJP working committee member Ram Iqbal Singh told reporters here on Sunday night.

Due to protests against the farm laws, BJP leaders could not enter villages in western UP, he said, adding the farmers can also gherao them in the future.

On the deadlock in parliament over Pegasus snooping, Singh said the opposition’s demand should be considered in a democratic country. “If the opposition wants probe, the government should go ahead with it. It is the responsibility of the government that parliament runs smoothly,” he said.

Questioning preparations of the predicted third wave of COVID-19, Singh said the state government did not learn from the second wave and no effective arrangements were made to tackle the expected surge in cases by the end of the month.

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Sovereign Gold Bond Series V opens today: Should you invest in it?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The fifth tranche (Vth) of the Sovereign Gold Bond (SGB) scheme for 2021-22 opened for subscription on Monday. The issue price for the same has been fixed at Rs 4,807 per gram of yellow metal. Online subscribers can, however, secure these bonds at a discount of Rs 50 per gram.

This subscription of bonds will remain open till August 13, as per the Reserve Bank of India (RBI).

According to Nish Bhatt, Founder & CEO, Millwood Kane International – an Investment consulting firm, investment in non-physical gold, via digital or paper gold, is highly recommended as it provides high liquidity, no storage cost, and is easier to sell in comparison to physical gold.

“Investment in SGBs comes with an interest coupon payable semi-annually. Investment in SGB is a superior alternative to physical gold. The investments in non-physical gold will help the government to keep a check on the currency and larger fiscal deficit,” Bhatt said.

On gold prices, he said that they have softened in the past few weeks to touch a one-month low.

“In the past one week alone, gold has dropped nearly Rs 1,000/10gm in value. The rising US Dollar and Treasury yields on the back of a sooner than expected policy tightening by the Fed have largely led to softening of gold prices. Gold prices domestically and internationally have traded in a narrow range in the past few months. The latest variant of the virus, the pace of vaccination, unlocking, and signs of policy tightening by the Fed will guide gold prices going forward,” Bhatt added.

Further, Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart added that gold shows free-fall after strong US job reports but it is expected to hold its long-term support levels $1,680-1,700 zone.

Jain also believes that it’s a good time to subscribe to SGB at lower levels.

With SGBs, investors do not have to worry about the storage of gold as it is in a demat form. It pays interest of 2.5 percent along with the price appreciation which no other gold investment offers.

After investing, individuals get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash.

Those looking to subscribe to the SGBs in this tranche can apply through banks, Stock Holding Corporation of India Limited (SHCIL), stock exchanges NSE and BSE, designated post offices, or through agents.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

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Aviation Ministry refutes reports on high Delhi-London fare; says it has ‘no proven basis’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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An economy-class ticket on the Delhi-London flight has been available for between Rs 1.03 lakh and Rs 1.47 lakh during August, the Ministry of Civil Aviation said on Sunday. “There are media reports claiming India-UK one-way economy class fares have touched Rs 4 lakh. These reports have no proven basis. The veracity of Shri Sanjeev Gupta’s claim has been thoroughly checked by DGCA,” the ministry said on Twitter.

“The fares offered on the Delhi-London sector (Economy class) range from Rs 1.03-1.21 lakhs for Indian carriers and Rs 1.28-1.47 lakhs for UK carriers for travel during August 2021,” it added.

On Saturday, Sanjeev Gupta, Secretary, Inter-State Council Secretariat, Union Home Ministry, had complained on Twitter that an economy-class ticket on British Airways’s Delhi-London flight for August 26 was priced Rs 3.95 lakh.

He added that economy-class ticket on Delhi-London flights of Vistara and Air India for August 26 was also priced between Rs 1.2 lakh and Rs 2.3 lakh amid college admission time in the UK. Gupta stated he has “alerted” Union Civil Aviation Secretary P S Kharola about this matter.

After Gupta’s Twitter post, the Directorate General of Civil Aviation (DGCA) asked the airlines that operate India-UK flights currently to submit details about their fares. While there have been lower and upper limits on all domestic airfares in India since May 25 last year, no such limits have been imposed on international airfares.

Vistara, which currently operates flights on Delhi-London as wells Mumbai-London route, said on Sunday, “Pricing is always a function of supply and demand. There are only 15 flights a week allowed currently on India-UK route for Indian carriers and when there is relaxation and more capacity allowed, it will automatically bring down prices.”

Scheduled international passenger flights have been suspended in India since March 23 last year amid the coronavirus pandemic. However, limited special international passenger flights have been operating since July 2020 under the air bubble arrangements formed with 28 countries, including the UK.

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Explained: Delhi’s colour-coded action plan to combat COVID-19 third wave

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a bid to counter the possible third wave of COVID-19, the Delhi government has implemented a “colour-coded” Graded Response Action Plan (GRAP). An official order in this regard was issued by the Arvind Kejriwal-led government on August 8.

In its official communiqué, the Delhi Disaster Management Authority (DDMA) said, “This graded action plan consists of three parameters of positivity rate, cumulative new positive cases and average oxygenated bed occupancy for lockdown/unlocking of Delhi.”

Under GRAP, which has been implemented with immediate effect, the DDMA will send daily alerts to all the districts in Delhi under a colour-coded system to help them make decisions.

How will the GRAP work?

As part of the GRAP — approved by Lieutenant Governor Anil Baijal last month — a colour will be assigned to an area after taking into account three parameters— positivity rate, cumulative new positive cases and average oxygenated bed occupancy. The restrictions put in place in an area will depend on the colour assigned to it.

Here are the details of the four colour codes that will determine restrictions and relaxations in an area:

Yellow Alert: More than 0.5 percent positivity rate for two consecutive days or 1,500 cases for seven days or oxygen bed occupancy of 500 for seven days.

Amber Alert: More than 1 percent positivity rate for two consecutive days or 3,500 cases for seven days or oxygen bed occupancy of 700 for seven days.

Orange Alert: More than 2 percent positivity rate for two consecutive days or 9,000 cases for seven days or oxygen bed occupancy of 1000 for seven days.

Red Alert: More than 5 percent positivity rate for two consecutive days or 16,000 cases for seven days or oxygen bed occupancy of 3000 for seven days.

As a result, the areas under the red alert will have the highest level of restrictions.

What curbs will be put in place?

Schools, colleges and other educational institutions will remain shut under every colour-coded region. Besides, there will be a ban on gatherings. Also, the number of people attending a wedding or a funeral will be capped.

While shops selling essentials will be allowed to operate for specific hours, commercial establishments like cinema halls, theatres, banquet halls, auditoriums, barbershops, salons, spas, gymnasiums, and yoga centres, and entertainment parks are to remain shut.

Here are the restrictions to be in place in different colour-coded zones:

Yellow Alert:

• Shops would be allowed to open between 10 am and 8 pm on an odd-even basis.
• Restaurants and bars would be allowed to operate at 50 percent capacity. While restaurants will be allowed to open from 8 am to 10 pm, bars can operate between noon and 10 pm.
• Metro services and buses will be allowed to operate at 50 percent passenger capacity. Only passengers with permission to travel will be able to board a bus service.
• Night curfew would be in place between 10 pm and 5 am.

Amber alert:

• Shops will be allowed to stay open between 10 am and 6 pm on an odd-even basis.
• Restaurants and bars would be shut.
• Hotels will be allowed to operate.
• Metro services will be allowed at 33 percent capacity and buses at 50 percent capacity. Only passengers with permission to travel will be able to board a bus service.

Orange alert:

• All shops other than those selling essentials would remain shut.
• Metro rail services would be stopped.
• Buses will be allowed to operate at 50 percent capacity only for passengers with permission to travel.

Red alert:

• Besides the curbs put in the orange alert regions, the red alert areas will be placed under a complete curfew.

Taking residents into confidence

The Delhi government has also laid stress upon effective communication with the locals regarding GRAP. According to the DDMA order, “All district magistrates shall interact and have a dialogue with resident welfare associations, market associations, mall associations, bar associations and other such bodies in their districts to circulate information in this regard.”

The direction goes on to say, “Principal Secretary (education) and Secretary (higher education) shall ensure that the guidelines regarding level of alerts are disseminated among students.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Govt faces challenges in granting relief to Vodafone Idea: Sources

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government faces challenges in granting relief to beleaguered telecom company Vodafone Idea, CNBC-TV18 learned from sources on Monday. The Department of Telecom (DoT) can’t allow the extension of the moratorium unilaterally amid media reports questioning the business viability of the telco, they added. Any extension of the moratorium on spectrum dues would require a nod from the finance ministry and the latter has shared concerns on the fiscal implication of a moratorium on spectrum dues.

The government had earlier allowed a moratorium on spectrum dues for both FY21 and FY22. The next tranche of Rs 15,900 crore of non-AGR spectrum dues becomes payable from April 2022.

Moreover, the decision on the floor pricing is the remit of the TRAI and not DoT. The TRAI had earlier rejected pleas for floor pricing and has batted for pricing under forbearance.

On June 7, KM Birla had written to the Cabinet Secretary seeking a moratorium on spectrum dues, floor pricing. Birla on August 4 resigned as a non-executive director, non-executive chairperson of Vodafone Idea.

Conversion of Vodafone debt into equity an option: Banks to DoT

Conversion of debt of the stressed telecom player Vodafone Idea Ltd (VIL) into equity could be an option to emerge out of the crisis, lenders led by the State Bank of India (SBI) have suggested to the Department of Telecommunications (DoT), according to a PTI report. The DoT had called senior bank officials on Friday to discuss the stress in the telecom sector arising out of the Supreme Court order last month on the adjusted gross revenue (AGR)-related dues payable by telecom majors, including Vodafone Idea and Bharti Airtel, the news agency quoted sources as saying.

The top court has given a time period of 10 years to telecom service providers struggling to pay Rs 93,520 crore of AGR-related dues to clear their outstanding amount to the government. Bankers also told senior DoT officials that conversion of debt of VIL into equity is an option but not a sustainable one, sources said, adding that since VIL had not defaulted on its debts so far, they cannot take any action yet.

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In a bid to keep a company a going concern, banks have used the option of converting debt into equity in many stress cases in the past. Capital infusion by promoters is the best option in the given scenario, sources said quoting bankers.

The UK-based Vodafone has a 45 percent stake while Aditya Birla Group owns a 27 percent stake in the VIL. Lenders, both public and private, stare at a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt.

Among the private sector lenders, Yes Bank and IDFC First Bank may be impacted the most. As a precursor, some private lenders with a funded exposure have already started making provisions. For example, IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 percent ( Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 percent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender had said in its Q1 FY22 investor presentation, referring to the account as “one large telecom account”. According to official data, VIL had an AGR liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow