Renewables The Growth Engine- Tata Power Q4 Analyst Call

Tata Power has been on a roll recently. And that is not just the share price we are talking about. A series of decisions taken by the firm in the past 2-3 years, are finally leading to the firm delivering on the promise of being the largest integrated power firm in the country. Those changes may not be apparent in the Q4 results, but changes there are. The concall transcript, uploaded recently by the firm, had key management personnel, including CEO and MD, Dr. Praveer Sinha, CFO, Ramesh Subramanyam and others.

In particular, the  shift in focus to renewables is paying off, as the firm  has serious momentum behind it on every part of its renewable shift, be it manufacturing, EPC, projects and even rooftop solar.

But lets start  with the firm’s progress on distribution. Tata Power  successfully completed the takeover of the fourth distribution licence in Orissa, the Northern Distribution Company effective 1st April 2021. With the acquisition of the Northern distribution company the firm now has a  total consumer base of 12 million customers. That makes it the largest private power distribution company in India in less than a year’s time.

The firm claims that “cumulatively all the three DISCOMS in their limited period of operation have been able to give profits against the originally planned losses for the first and second year of operations and we can definitely expect more powerful performance in the coming years from Orissa”.

Coming to renewables, the management confirmed that the increase in PAT was led by the renewables cluster which reported a 2X growth in PAT from ₹ 88 crores in Q4 last year to ₹ 175 crores this year. And this is after eliminating Tata Power Solar’s profits from contracts executed for Tata Power group companies.

Thus, the firm clocked 2.4x growth in Tata Power Solar’s annual revenue growing from ₹ 2,141 crores last year to ₹ 5,119 crores this year. Tata Power Solar’s revenue for the quarter increased five times from ₹ 579 crores last year to ₹ 2,777 crores in Jan-March ’21.

Solar EPC orders grew at a healthy clip with orders worth ₹ 2,294 crores won in Q4, taking the total order book to ₹ 8,742 crores as on 31st March 2021. Amongst various projects we won 320 MW of solar projects from NTPC valued at approximately ₹ 1,200 crores and a 55 MW solar project from GSECL valued at  ₹230 crores. Of course, they added a fresh order yesterday, another 210 MWp from NTPC.

The good show has continued in solar rooftop, where revenues for the quarter crossed ₹ 300 crores and order book of over ₹ 600 crores awaits. The firm installed 79 MW of rooftop in the quarter with  while total installations for the year at 175 MW.

The solar pumps business sold 6500 pumps in the quarter, recording its largest quarterly revenue and total sales of around 13000 pumps during the 20-21 financial year.

With manufacturing capacity also doubled at its cell and module manufacturing plants, the firm is well placed to ride out price shocks as compared to other developers.

That means its renewable development portfolio is well placed, with LOA’s and signed PPA for 88 MW solar in the last quarter and another 1,314 MW of projects under implementation. With nearly 2,693 MW of operational wind and solar projects, the total portfolio is now over 4GW. And that is before counting projects won, were LOA’s are still to be issued.

Finally, even the microgrid business fared well, installing 33 microgrids during the quarter taking total installed numbers to 161 with another 40 under installation covering total 200 villages and nearly 4000 customers.

In fact, the turnaround from Covid disruptions has been heathy enough for the firm to promise a ‘much bigger’ offering for its InvIT plans, that had to be deferred after talks with Petronas broke down.