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Tata Power share rises 9% on merger proposal, Q1 earnings; check what brokerages say

Company's consolidated net profit grew by 10% to Rs 268 crore for the quarter ended June against a net profit of Rs 243 crore during the same period a year ago, on the back of lower finance cost.

twitter-logoBusinessToday.In | August 13, 2020 | Updated 16:03 IST
Tata Power share rises 9% on merger proposal, Q1 earnings; check what brokerages say
Company's revenue from operations fell 16.9% YoY to Rs 6,453 crore in Q1 FY21

Tata Power share price jumped over 9% intraday in Thursday's session a day after the company declared its April-June quarter numbers.

Company's consolidated net profit grew by 10% to Rs 268 crore for the quarter ended June against a net profit of Rs 243 crore during the same period a year ago, on the back of lower finance cost.

In another update, Tata Power announced that its three wholly owned subsidiaries, Coastal Gujarat Power Ltd (CGPL), Tata Power Solar Systems (TPSSL) and Af-Taab Investment Company (Af-Taab) are proposed to be merged with the parent company.

"The merger aims to achieve the long-term objectives by facilitating efficient use of cash and making available corporate support to the businesses of the said wholly-owned subsidiaries as needed," the company said.

"This merger, subject to necessary approvals, is part of a strategic initiative to simplify the group holding structure and a broader plan to set the company for future growth through fiscal consolidation and strengthening of the balance sheet," it said in a statement.

Following the recent updates, Tata Power share price opened with a gain of 3.87% at Rs 55 and later climbed 9.25% to the intraday high of Rs 57.85 on BSE, as against the earlier closing of Rs 52.90. The stock also touched an intraday low of Rs 52.65 during today's session.

The stock price of Tata Power has jumped 13% in one week and 13.51% in one month. Tata Power shares trade higher than 5, 20, 50, 100 and 200-day moving averages.

Company's revenue from operations fell 16.9% YoY to Rs 6,453 crore in Q1 FY21.

Research and brokerage firm Motilal Oswal Financial Services upgraded Tata Power to buy, with an upside of 25 per cent and a target price of Rs 66 apiece post-April-June quarter earnings.

"The approval of a tariff hike at Mundra, the merger of CGPL and Tata Power Solar with TPWR, and favourable InvIT valuations provide upsides," the brokerage firm said.

"As we build-in expectations of normalisation in its EPC businesses, we view the risk-reward as favourable at current levels," it added.

Meanwhile, Jefferies downgraded Tata Power stock to 'underperform' from 'hold' in July 2020, adding that the Q1 results were weaker than expected as power business disappointed. The brokerage said the company has seen a severe downturn since Q1 but operations should improve sequentially. " Company reported near-zero EBITDA in Q1 as lockdown came in an already weak cycle," it added.

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