Tata Power - JP Morgan

Asia Pacific Equity Research
03 July 2021
Initiation
Overweight
Tata Power TTPW.NS, TPWR IN
Price (02 Jul 21): Rs120.95
Growth play which is in-line with the macro; Initiate
Price Target (Mar-22): Rs150.00
coverage at OW
We initiate coverage of TPWR with an OW rating and Mar-22 PT of Rs150 India
implying 24% potential upside. TPWR is growing its renewables and Electric Utilities
distribution capacities, while right-sizing it’s Rs1trn B/S (D/E 1.7x, target
Deepika Mundra AC
1.1x). First, equity for renewables (4GW to 15GW by 2025) and regulated
(91-22) 6157-3582
distribution assets is likely to be self-funded, in our view. Second, value deepika.mundra@jpmorgan.com
unlocking is on the horizon for RE (~20% of B/S) and non-core assets (Rs35- Bloomberg JPMA MUNDRA <GO>
40bn equity). Third, we expect TPWR to report a sharp 27% FY21-25E Kevyn H Kadakia, CFA
earnings CAGR led by regulatory/renewable asset growth and tax benefits (91-22) 6157-3250
outweighing Mundra UMPP (26% of B/S) losses, which will increase with the kevyn.h.kadakia@jpmorgan.com
coal price rally. TPWR is our top pick in utilities due to its superior growth, J.P. Morgan India Private Limited
better ESG rating and our view that the full extent of its growth ambition isn’t
factored into the relative premium valuation of 16x FY23E P/E and 1.6x P/B,
compared to NTPC (Neutral) at 7x/0.8x, respectively.
Style Exposure
 Right-sizing the balance sheet. TPWR’s Mar-21 net debt of Rs360bn
equates to 1.4x net D/E and 4x EBITDA; ~1/4th is in regulated assets where
interest costs are a pass-through in tariffs, ~1/3rd is in renewables, leaving
~40% or Rs167bn for Mundra UMPP and the coal SPV. Management aspires
to reduce leverage to 1.1x via asset monetization: 1) Rs35-40bn equity release
from non-core assets, i.e. 48% stake in Tata Projects, 298MW overseas power
plants and land. ~Rs27bn of assets were sold in FY21 (ships, Cennergi,
Defense). 2) Renewable assets are on the anvil for listing/InvIT; we value
equity for operational assets at Rs130bn at 9x FY23E EV/EBITDA. Table 1: TPWR: JPM vs Consensus (Rs bn)
 Regulated business cash flows sufficient to fund growth. FY21-25E FY22E FY23E FY24E
Rs90-110bn OCF/year is sufficient to service ~Rs41bn interest cost/year and EBITDA – Cons. 81.1 89.1 114.3
fund 30% equity for Rs140bn of regulated capex ambition over the next four EBITDA – JPM 76.9 94.6 106.2
JPM vs Cons (%). (5.2) 6.2 (7.1)
years, i.e. Rs11bn/year and Rs20bn equity/year for renewable capex i.e.
Consol PAT – Cons. 17.2 22.0 27.9
2GW p.a. TPWR’s profitable businesses are growing faster, outstripping Consol PAT – JPM 17.8 23.8 26.5
Mundra UMPP losses: 1) Regulated T&D capex aspiration implies a 10% JPM vs Cons. (%) 3.9 8.0 (5.2)
equity CAGR over FY21-25E. We model in-hand projects only, i.e. 7/9% Source: Bloomberg Finance L.P., J.P. Morgan estimates.
CAGR in regulated equity/PAT from Rs97/12.4bn in FY21, respectively. Figure 1: TPWR: 1 year fwd P/B
2) Solar EPC order book (Rs87bn as of Mar-21) is seeing tailwinds.
2.0
3) Solar/Wind generation (2.7GW to 7.6GW in FY25E) to see 15% PAT +1 SD
1.8
CAGR despite reduced tariffs; we again model a haircut to targets. 1.6
1.6
4) Mundra losses (Rs20bn next four years) to be offset by tax gains on Averag
1.4 1.4
merger with parent. By itself, cash breakeven is at <$53/MT of FOB coal. e
 Earnings set to double in two years. We estimate an FY22/23E EPS 1.2 1.1
CAGR of 45% led by a reduced tax rate on the merger of Mundra in parent, 1.0
-1SD
Odisha distribution acquisition and debt reduction. As per our estimates, 0.8
every Rs10bn reduction in non-regulated debt provides ~3% EPS upside. 0.6
0.5
Our Mar-22 PT of Rs150 includes Rs54 for regulated assets at 1.7-2.5x 0.4
equity, -Rs18 for Mundra post-tax benefit, Rs29 for coal mines, Rs40 for
Jan-09
Jan-11
Jan-13
Jan-15
Jan-17
Jan-19
Jan-21
domestic renewables, Rs35 for EPC businesses and cash and balance Rs10
for overseas RE and domestic thermal assets. New ESG-positive businesses, Source: J.P. Morgan estimates, Bloomberg Finance L.P.
i.e. EV charging, micro grid, rooftop solar and solar pumps, are at early
cycle, hence at deep option value.
Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.
See page 28 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Deepika Mundra Asia Pacific Equity Research
(91-22) 6157-3582 03 July 2021
deepika.mundra@jpmorgan.com
Price Performance Summary Investment Thesis and Valuation

TPWR’s well-defined ESG framework/goals and execution
are on track. The company’s growth focus is rooted in
solar/wind generation capacity, regulated electricity
transmission/distribution and new ESG-positive businesses
such as EV charging, solar micro grids, rooftop solar and solar
EPC. Regulated businesses in particular provide steady
earnings and cash flow. TPWR is putting a pause to its coal
capex and retiring coal plants in-line with PPA expiry. Non-
fossil-fuel-based capacity will be 60% of total by FY25 and
YTD 1m 3m 12m
80% by FY30.
Abs 56.9% 16.0% 15.5% 163.2%
Rel 45.0% 15.3% 10.1% 112.9% Regulated businesses in particular provide steady earnings and
cash flow. The steady improvement in operating cash flow is
Company Data
likely to fund the equity requirement for growth capex along
Shares O/S (mn) 2,705 with potential asset monetization, i.e. both non-core and value
52-week range (Rs) 132.70-45.75
Market cap ($ mn) 4,388 unlocking in renewables.
Exchange rate 74.56
Free float(%) 45.5% Our Mar-22 PT (20.2x FY23E P/E and 1.9x P/B) of Rs150
3M - Avg daily vol (mn) 54.44
3M - Avg daily val ($ mn) 81.3 includes Rs54 for regulated assets at 1.7-2.5x equity, -Rs18
Volatility (90 Day) 43 for Mundra post-tax benefit, Rs29 for coal mines, Rs40 for
Index NIFTY domestic renewables, Rs35 for EPC businesses and cash and
BBG BUY|HOLD|SELL 16|4|1
balance Rs10 for overseas RE and domestic thermal assets.
Key Metrics (FYE Mar) New ESG-positive businesses, i.e. EV charging, micro grid,
Rs in millions FY21A FY22E FY23E FY24E rooftop solar and solar pumps, are at early cycle, hence at deep
Financial Estimates option value.
Revenue 324,681 413,757 447,351 467,545
Adj. EBITDA 75,390 76,879 94,615 106,231
Adj. EBIT 47,940 46,891 62,004 69,982
Performance Drivers
Adj. net income 11,334 17,846 23,784 26,458
Adj. EPS 3.55 5.58 7.44 8.28
BBG EPS 4.82 5.83 7.18 -
Cashflow from operations 127,682 90,005 87,945 97,620
FCFF 131,011 7,931 (1,879) (1,704)
Margins and Growth
Revenue growth 11.4% 27.4% 8.1% 4.5%
EBITDA margin 23.2% 18.6% 21.2% 22.7%
EBITDA growth (2.8%) 2.0% 23.1% 12.3%
EBIT margin 14.8% 11.3% 13.9% 15.0%
Net margin 3.5% 4.3% 5.3% 5.7%
Adj. EPS growth (2.2%) 57.5% 33.3% 11.2%
Ratios
Adj. tax rate 53.3% 64.3% 42.7% 40.9%
Interest cover 1.9 2.2 2.4 2.5
Net debt/Equity 1.5 1.5 1.5 1.6
Net debt/EBITDA 4.9 5.1 4.6 4.5
ROCE 3.4% 2.5% 4.9% 5.3%
ROE 5.4% 7.8% 9.9% 10.4%
Valuation
FCFF yield 33.9% 2.1% (0.5%) (0.4%)
Dividend yield 1.3% 2.1% 2.8% 3.1%
EV/Revenue 2.1 1.7 1.7 1.7
EV/EBITDA 9.2 9.3 8.0 7.6
Adj. P/E 34.1 21.7 16.3 14.6
Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables. Note: Price history may not be complete
or exact.2
(91-22) 6157-3582 03 July 2021
Investment Thesis
We initiate coverage of TPWR with an OW rating, and Mar-22 PT of Rs150
implying 24% potential upside. Its well-defined ESG framework/goals and
execution are on track. TPWR’s growth focus is rooted in solar/wind generation
capacity, regulated electricity transmission/distribution and new ESG-positive
businesses such as EV charging, solar micro grids, rooftop solar and solar EPC.
Regulated businesses in particular provide steady earnings and cash flow. TPWR is
putting a pause to its coal capex and retiring coal plants in-line with PPA expiry.
Non-fossil-fuel-based capacity will be 60% of total by FY25 and 80% by FY30. The
steady improvement in operating cash flow is likely to fund the equity requirement
for growth capex along with potential asset monetization, i.e. both non-core and
value unlocking in renewables. TPWR’s growth drivers are aligned with the
government's priorities of de-carbonization and de-licensing electricity distribution,
thus the policy and regulatory framework should largely remain positive, in our view.
Equity dilution not on the cards, renewables stake sale can aid value-unlocking.
While TPWR is incurring significant growth capex for renewables and distribution
capacity, it is still keeping a strong focus on right-sizing its Rs1trn B/S (D/E 1.7x,
debt/EBITDA 4x). In FY21, net debt reduced by from Rs436 to Rs360bn with equity
capital infusion from Tata Sons, non-core asset sales and operating cash flow.
TPWR aims to reduce its D/E to 1.1x via further non-core asset sales (Rs35-40bn
equity release) and stake in renewables (we value the operational portfolio at
~Rs130bn). 1/4th of the debt is in regulated assets with servicing cost as a pass-
through. We estimate that every Rs10bn reduction in non-regulated debt should
result in a ~3% upgrade to FY22/23E EPS. Even without any asset monetization, we
estimate Rs90-110bn OCF/year in FY21-25E, sufficient to service Rs38-46bn
interest cost and fund 30% equity for ~Rs140bn of regulated capex ambition, i.e.
Rs11bn/year and Rs20bn equity/year for renewable capex, i.e. 2GW p.a. We note
TPWR’s profitable businesses are growing faster, outstripping Mundra UMPP losses.
Premium multiples – potential to sustain. We model an FY21-25E 26% earnings

CAGR, led by regulatory and renewable asset growth, and tax benefits on Mundra
merger with parent. Mundra UMPP losses are bound to increase with the rally in
coal, however, Indonesian coal mine profits provide a hedge. TPWR de-rated for
almost a decade with the change in law in Indonesia impacting Mundra plant’s
profitability, the build-up of receivables in Delhi/Mumbai and a lack of growth
avenues. In 2021, the stock has re-rated (TPWR is +60% YTDCY21 vs NIFTY
+12.5%) and back to +1SD multiples on P/B and above historical mean on P/E as the
company in the past 12M outlined its strategy in growth, de-leveraging and ESG.
TPWR is trading at 20x 1 year forward P/E and 1.6x P/B and at a premium to other
India utilities on average at ~12x P/E and 1.3x P/B.
TPWR is our top pick in the India utilities sector; potential upside catalysts not
in the price yet. There are four potential catalysts not included in our estimates for
TPWR: 1) Mundra tariff resolution, although this is a significant challenge, 2) the
full extent of regulated asset and renewable growth aspirations, 3) value-unlocking
and growth potential of new ESG positive businesses, i.e. EV charging, micro grid,
rooftop solar and solar pumps are at deep option value, and 4) debt and interest cost
reduction from non-core asset monetization.
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(91-22) 6157-3582 03 July 2021
TPWR is trading at 1.6x one-year Figure 2: P/B (x)

fwd P/B, i.e. at +1SD to mean, yet 2.0
below the peak level of 2x back in
1.8 +1 Stdev
2009-10 1.6
1.6
Average
1.4 1.4
1.2 1.1
1.0 -1 Stdev
0.8
0.6
0.4
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Source: Bloomberg Finance L.P., J.P. Morgan estimates.
TPWR is trading at 20x one-year Figure 3: P/E (x)

forward P/E vs mean of 18x. Even 35
at its low, it has traded at a
premium to regulated utilities on 30
P/E. Our long term earnings +1 Stdev 25.1
estimates don’t factor in potential 25
upside from de-leveraging via 20.1
20 Average 17.8
asset sale, ~40% haircut to
renewables and regulated capex 15
ambition, i.e. we factor in only in-
hand projects -1 Stdev
10
10.4
5
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Source: Bloomberg Finance L.P., J.P. Morgan estimates.
TPWR is trading at 9.6x one-year Figure 4: EV/EBITDA (x)

EV/EBITDA, compared to 12
NTPC/PWGR at 8x/7x,
respectively, and renewable stocks 11 10.3
at 9-18x 10
9.6
9 8.8
8
7 7.2
6
5
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Source: Bloomberg Finance L.P., J.P. Morgan estimates, Grey line indicates historical average.
4
(91-22) 6157-3582 03 July 2021
SOTP Valuation
Our Mar-22 PT of Rs150 includes Rs54 for regulated assets at 1.7-2.5x equity, -Rs18
for Mundra post tax benefit, Rs29 for coal mines, Rs40 for domestic renewables at
9x FY23E EV/EBITDA, Rs35 for EPC businesses and cash and the balance Rs10 for
overseas renewable and domestic thermal assets.
Table 2: TPWR – SOTP valuation

FY23E FY23E FY23E FY23E FY22E Valuation
Asset Description MW Stake Equity EBITDA PAT RoE Debt P/B (Rsbn) Rs/share Methodology
Thermal
7x FY23E EV/EBITDA
Mundra PPA tariff 4,150 100% 156 6.9 (2.9) -2% 131 (0.5) (83) (26) less debt from parent
Mundra Tax Benefit 25 8
Maithon Regulated 1,050 74% 18 8.6 2.8 20% 21.1 1.7 22 7 1.7x Regulated Equity
Regulated
Jojobera & PPA 428 100% 5 0.8 16% 1.3 7 2 1.3x Regulated Equity
Kalinganagar Fixed Tariff 40 100% 1 0.1 16% 1.3 1 0 1.3x Regulated Equity
Jamshedpur Bilateral -
(Waste Heat) Captive 120 100% 1 0.2 16% 1.3 2 1 1.3x Regulated Equity
Kalinganagar Bilateral -
(Waste Heat) Captive 135 100% 4 0.6 16% 1.3 5 2 1.3x Regulated Equity
Haldia (Waste Bilateral -
Heat) Captive 120 100% 2 0.3 16% 1.3 3 1 1.3x Regulated Equity
Prayagraj PPA tariff 1,980 54% 15 1.1 7% 0.6 9 3 0.6x P/B
IEL Captive 415 74% 7 1.1 20% 1.7 9 3 1.7x Regulated Equity
Total Thermal 8,438 209 4.1 0 0
Coal
5x FY23E EV/EBITDA in-
KPC + other mines KPC + Coal line with Indo Coal cos
+ infra Infra Co's 30% 22.0 6.6 31.7 78 25 less debt from parent
Pending sale proceeds at
Arutmin 14 4 book value
Total Coal 22.0 6.6 31.7 92 29
Renewable MW
Domestic 4,642 114 29.9 5.3 140 129 40
9x FY23E EV/EBITDA
Welspun PPA - Fixed 1,010 100% 34 10.3 3.8 12% 44 1.5 49 15 less debt from parent
TPREL PPA - Fixed 3,095 100% 75 16.5 0.9 1% 86 0.8 62 19 9x FY23E EV/EBITDA
Standalone 379 100% 3 2.1 0.5 16% 3 5.2 16 5 9x FY23E EV/EBITDA
Others 158 100% 2 1.0 0.1 5% 8 0.7 1 0 9x FY23E EV/EBITDA
Overseas 424 25 - 0.7 0 - 10 3
Zambia Regulated 120 50% 8 10% 0.8 3 1 0.8x P/B
Georgia Regulated 178 51% 13 10% 0.8 5 2 0.8x P/B
Bhutan Merchant 126 26% 4 0.7 17% 1.4 1 0 1.4x P/B
Total 5,066 138 30 6.0 139 44
Transmission and Distribution
Mumbai (G+T&D) Regulated 100% 44 7.5 17% 1.8 81 25 1.8x Regulated Equity
Delhi Regulated 51% 19 12.1 2.4 21% 2.5 24 7 2.5x Regulated Equity
Odhisa Regulated 51% 21 7.5 2.6 16% 2.3 25 8 2.3x Regulated Equity
Powerlinks Regulated 51% 5 0.5 22% 1.8 4 1 1.6x Regulated Equity
Total 88 19.6 13.1 - 134 42
Non Power Business
Solar EPC Subsidiary 100% 14 4.4 2.4 0.3 5.1 36 11 15x FY23E P/E
Tata Projects Investment 48% 0.9 18 6 20x FY23E P/E
Cash 57 18
Total 14 4 3.3 0 12 123 35
Mar-22 PT 13,504 450 104 24.8 384 488 149
Source: J.P. Morgan estimates.
5
(91-22) 6157-3582 03 July 2021
# 1 De-leveraging to drive earnings and

cash flow upgrades
TPWR had Rs360bn net debt as of Mar-21, i.e. 1.4x net D/E and 4x EBITDA. In
FY21, TPWR reduced net debt by Rs75bn via: 1) Rs26bn pref issue to Tata Sons at
Rs53/share, 2) Rs26.5bn (ships, defense, land and others) from non-core asset sales,
and 3) the balance driven by operations.
In FY21, TPWR reduced net debt Figure 5: FY21 net debt reduction walk (Rsbn)
by Rs75bn 525
500 9.4 10.1
38.5 12.2
475 26.0
450 39.6
26.5
425
400 70.5
375 435.8
350
325 359.3
300
Source: Company reports, J.P. Morgan.
Rs27bn of non-core assets were Table 3: TPWR: FY21 Asset Monetization

monetized in FY21
Amount
Asset Description (Rs mn)
Trust Energy Three Ships for $213mn 16,070
Strategic Engineering Division Sold to Tata Sons for an EV of Rs10.8bn; received Rs6bn 5,970
Land Hadapsar land 264
Transmission Vikhroli Transmission Lines 1,183
Others 3,013
Total 26,500
Source: Company reports
Management aspires to reduce leverage further to 1.1x by FY25 via asset

monetization: 1) Rs30-45bn from overseas genco investments, BSSR Indo coal mine
and land, 2) in addition, TPWR’s 48% stake in Tata Projects is likely to be sold to
the Group, as per the company, 3) potential renewable stake sale; we value
operational solar/wind assets at ~Rs130bn at 9x EV/EBITDA; the equity release will
go towards reducing debt. In addition Rs124bn, i.e. ~1/3rd of consolidated net debt
was housed in 2.6GW renewable assets.
TPWR has Rs30bn as held-for-sale Table 4: TPWR: Planned Divestments

assets (based on book value) on its
% Stake Investment Net Worth TPWR's share FY21 PAT
Balance Sheet and further plans to
Zambia 50% 6,107 3,947 -
monetize its stake in Tata Projects
Georgia 51% 4,980 6,597 (266)
BSSR 26% 10,691 3,807 569
Other JV/Associates 3,023 NA NA
Land (Book Value) 3,303 NA NA
Financial Investments, loans 2,277 NA NA
Total Assets Held for Sale 30,382 14,351 303
Tata Projects 48% 6,907 6,737 601
Total Monetizable Assets 37,289 21,088 904
Source: Company reports.
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(91-22) 6157-3582 03 July 2021
Assuming no asset monetization, we still expect net D/E to remain stable from FY21
levels at ~1.5x and 4.3x net debt/EBITDA led by significant operating cash flow
generation. Management has guided to further de-leveraging potential and aims to
achieve 1.1x net D/E by FY25.
Assuming no asset monetization, Figure 6: TPWR: FY21-25E Net Debt movement

we estimate Rs511bn of net debt Rs in billion
by FY25E; but net D/E to remain
700
stable from FY21 levels at 1.5x and 650
net debt/EBITDA at 4.2x 600 30 18 26
550 118
500 209 18
Asset monetization and interest 450
cost savings can drive FY25E net 400 61
D/E to 1.2x and Net Debt/EBITDA 350 511
300 419
to 3.5x 250 359
200
Our estimates don’t factor in the full
Repayments
FY21 Net Debt
Regulated Debt
FY25E Net Debt
Assets held for sale
Tata Projects stake
(20% at 9x FY23E
Interest saving
FY25E Bull case

Renewables Debt
at 20x FY23E P/E
Renewable IPO
(Base Case)
EV/EBITDA)
at book value
extent of the company’s growth
net debt
ambitions in renewables or
regulated capex and earnings /
leverage from those
Source: Company reports and J.P. Morgan estimates.
Figure 7: TPWR: Net D/E and Debt/EBITDA Figure 8: TPWR: EBITDA/Interest

Rs in billion, year end March (x), year end March
550 511 8.5 6.5 6.1
468466446 471
500 436 426 7.5 6.0
450 383387387
400 354 359385 6.5 5.5 4.9
350 294 5.0 4.6
5.5
300 4.5 4.2
212 4.5 3.9
250 4.0
200 160 3.5
128 3.5
150 84 2.5
100 3.0 2.5 2.5 2.4 2.5 2.4
50 1.5 2.5 2.2 2.2
1.9
0 0.5 2.0 1.7 1.6 1.5 1.7 1.9
FY22E
FY23E
FY24E
FY25E
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
1.5
1.0
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY25E
Net Debt (Rs.bn) Net D/E (x) Net Debt/EBITDA
Source: Company reports and J.P. Morgan estimates. Source: Company reports and J.P. Morgan estimates.
Renewable multiples are attractive

Tata Power has 2693MW of operational RE assets in TPREL (1146MW), Welspun
(1010MW), Standalone (379MW) and Others (158MW). TPWR has a pipeline of
~1.5GW with PPAs signed (tariff range Rs2.2-Rs2.97/kWh). The ambition is to have
15GW of renewables by FY25, i.e. 2GW addition p.a.
Initially, a 51% stake in the operational renewable portfolio was targeted to be

transferred to the InvIT in FY21, resulting in the transfer of ~Rs120bn of debt and
equity unlocking. TPWR was targeting Rs250bn of net debt by FY21 (vs actuals at
Rs360bn). However, TPWR is now exploring other options to monetize its
renewable portfolio. With increased investor focus on ESG, Tata Power can look to
monetize a wider portfolio and not only operational renewable assets, in our view.
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(91-22) 6157-3582 03 July 2021
TPWR aims to merge some renewable capacities into TPREL to simplify the holding
structure. TPWR entered into a business transfer arrangement for 349MW wind and
solar assets to TPREL effective on 1st April 2021.
In India, recent transaction multiples for renewables have been in the 8-9.7x
EV/EBITDA range, whereas global consensus trading multiples range from 9-18x
for 2022E. TPWR is currently trading at 10.0x FY22E and 8.6x FY23E EV/EBITDA
(without JV profit). We value the operational renewable portfolio at 9x FY23E
EV/EBITDA, i.e. Rs58mn/MW (in-line with recent transaction multiples) to arrive at
an equity value of Rs130bn or Rs40/share.
Table 5: India Renewables: EV/MW for recent transactions

Capacity EV/MW EV/EBITDA
Buyer Seller Asset (MW) EV (Rsmn) (Rsmn/MW) Date
7.5x fully operational
Adani Green SB Energy Largely Solar 4954 262,500 53.0 20-May-21 portfolio
RMG Acquisition ReNew Solar & Wind 9900 588,450 59.4 19-Feb-21 9.7x for full platform
Total (20% stake) Adani Green Solar & Wind 14840 937,500 63.2 18-Jan-21
Actis Acme Solar 400 23,000 57.5 6-Aug-20
Ayana ReNew Wind 300 15,000 50.0 6-Jun-20
Actis Acme Solar 600 30,000 50.0 28-Feb-20
Edelweiss Engie Solar 813 42,600 52.4 23-Jan-20
Adani Green Essel Solar 205 13,000 63.4 29-Aug-19
Sprng Energy SP Group Solar 194 14,000 72.2 31-Mar-19
Aggregate 32206 1,926,050 59.8
Source: Renew Power, Adani Green, ET, Mint, Mercom.
Global consensus trading multiples Figure 9: Global Renewable stocks 2022E EV/EBITDA
for renewables range from 7-18x (x)
for 2022E; EU and North America
trade higher than Asia 21.0
19.0
Asia Europe North America
17.0
TPWR is currently trading at 10.0x 15.0
FY22E and 8.6x FY23E 13.0
11.0
EV/EBITDA 9.0
7.0
5.0
Enel SpA
Iberdrola SA
Orsted AS
Corp Renewable
China Longyuan
NHPC Ltd
Algonquin Power
GCL New Energy
EDP Renovaveis
NextEra Energy
NextEra Energy
Emera Inc
RWE AG
China Yangtze
China Datang
Partners LP
& Utilities Co
Power
Power
Inc
CY22E EV/EBITDA Median
Source: Bloomberg Finance L.P. estimates.
Earnings upside from de-leveraging

~1/4th of TPWR’s debt can be attributed to regulated assets where interest costs are a
pass-through; ~1/3rd is in renewables, leaving ~40% or Rs167bn for Mundra UMPP
and the coal SPV. We estimate that every Rs10bn reduction in non-regulated debt
would result in a ~3% upgrade to FY22/23E EPS.
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~1/4th of debt can be attributed to Figure 10: Breakdown of FY21 consolidated gross debt by entity (Rsbn)
regulated assets where interest 200 196.3
costs are a pass-through
180
~1/3rd is in renewables (includes 160
Rs44bn standalone debt as 140
support to Welspun subsidiary) 120
100
~40% or Rs167bn for Mundra
80
UMPP (Rs40bn in SPV and 52.3
60 46.0 40.6
Rs90bn at parent level) and the 36.7 33.3
coal SPV (Rs37bn acquisition debt) 40 17.8
20 4.6 3.4 0.8
0
S/A TPREL Welspun Mundra Coal SPV TPDDL Maithon TPSSL Odisha Others
UMPP DISCOMs
Source: Company reports, Red highlights indicate regulated business
#2 Carbon neutral by 2050

In Aug-20, TPWR announced its intention to be carbon neutral by 2050. TPWR
already scores well on overall ESG rankings among thermal utility peers based on
FTSE global comparisons. From an environmental perspective, total energy
consumption, NOx and SO2 emissions are lower among peers. The path to carbon
neutrality by 2050 includes:
1. Investment in renewables: By FY25, the company aims to lower the carbon

footprint of its business portfolio through 15GW renewable capacity additions,
10,000 microgrids and green power supply for customers. TPWR targets 60%
renewable energy share in the overall portfolio by FY25 from 31% currently
(including hydro). On a longer-term basis, the company aims to increase clean
and green capacity share to 80% by FY30 and 100% by FY50.
Figure 11: TPWR portfolio by fuel mix as of FY21 (MW, %) Figure 12: TPWR portfolio by fuel mix by FY25 (MW, %)
Hydro, 880, Other
7% RE,
Wind, 932, 7% 375,
3% Other RE,
7,836, 31%
Thermal,
Solar, 1,762, 8,360, 33%
14%
Thermal,
8,860, 69%
Hydro, 871,
4%
Solar, 7,005,
28%
Wind, 932, 4%
Source: Company reports Source: Company reports, Other RE includes 7GW of hybrid + 836MW of waste heat recovery
2. Putting a pause on thermal capex: TPWR will phase out coal-based generation
completely as PPAs expire, e.g. Maithon FY35, Mundra FY37, Trombay
extended by five years to FY24 and Jojobera FY31/32. Also, no new coal-based
capacity will be developed by Tata Power and the Resurgent platform will not
participate in any further coal-based stressed assets (Prayagraj in FY20). TPWR
expects to reduce thermal and coal mine revenue contribution from around 50%
in FY20 to less than 30% in FY25E and profit contribution from around 30% to
less than 5%.
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3. Emission reduction: The company is targeting a 33% reduction in GHG

emission intensity by FY25 vs FY15, 40% reduction of specific water
consumption, 100% compliance to SO2/NOx/PM norms and zero waste to
landfill.
Table 6: TPWR: Consolidated renewable portfolio
Overview of India renewables portfolio FY20 1QFY21 2QFY21 3QFY21 4QFY21 FY21 FY22E FY23E FY24E FY25E
Capacity (MW) 10,338 2,626 2,656 2,656 2,693 2,693 3,642 4,642 6,142 7,642
% of total MW 20.6% 20.6% 20.8% 20.8% 21.0% 21.0% 26.5% 33.6% 42.9% 53.4%
TPREL 4,377 1,136 1,139 1,139 1,146 1,146 2,095 3,095 4,595 6,095
WALWHAN 4,040 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Standalone (Tata Power)/Wind Assets 1,518 379 379 379 379 379 379 379 379 379
Others 403 101 128 128 158 158 158 158 158 158
Revenue 46,560 10,820 16,400 14,800 34,100 76,120 97,276 118,959 140,221 163,564
% of Consol 16.0% 16.8% 19.8% 19.5% 33.7% 23.4% 23.5% 26.6% 30.0% 33.0%
TPREL 9,170 2,600 2,390 2,160 2,450 9,600 14,560 20,050 28,202 36,319
WALWHAN 12,010 3,310 2,700 2,740 3,130 11,880 11,964 11,964 11,964 11,964
Standalone (Tata Power)/Wind Assets 2,840 580 830 420 460 2,290 2,840 2,840 2,840 2,840
Others 1,140 280 340 250 290 1,160 1,160 1,160 1,160 1,160
EPC 21,400 4,050 10,140 9,230 27,770 51,190 66,752 82,945 96,056 111,282
EBITDA 24,520 5,980 6,300 5,660 7,070 25,010 30,307 35,571 43,760 51,136
% of Consol 31.6% 30.7% 29.7% 29.9% 44.9% 33.2% 39.8% 37.9% 41.5% 44.0%
TPREL 8,220 2,320 2,070 2,050 2,050 8,490 12,640 17,176 23,830 30,374
WALWHAN 10,930 3,140 2,490 2,530 2,770 10,930 10,915 10,846 10,776 10,706
Standalone (Tata Power)/Wind Assets 2,250 430 610 150 220 1,410 2,130 2,130 2,130 2,130
Others 1,050 240 280 180 180 880 1,044 1,032 1,021 1,009
EPC 2,070 (150) 850 750 1,850 3,300 3,578 4,387 6,003 6,917
PAT 4,570 1,010 1,460 780 2,150 5,400 7,395 7,767 9,128 9,834
% of Consol 46.6% 44.0% 48.9% 30.9% 61.1% 47.6% 40.0% 31.3% 33.0% 33.0%
TPREL 10 150 (40) 50 50 210 1,250 897 977 942
WALWHAN 2,920 1,080 600 650 880 3,210 3,693 3,836 3,973 4,104
Standalone (Tata Power)/Wind Assets 370 50 220 (140) (50) 80 473 510 548 585
Others 50 (10) 10 (90) (90) (180) 71 99 91 82
EPC 1,220 (260) 670 310 1,360 2,080 1,910 2,425 3,539 4,121
Net worth 83,700 77,930 84,350 84,300 86,680 86,680 94,075 101,842 110,970 120,804
% of Consol 38.2% 35.1% 34.7% 34.5% 34.3% 34.3% 35.2% 35.5% 36.0% 36.5%
TPREL 50,310 50,460 50,410 50,460 50,510 50,510 51,760 52,657 53,634 54,576
WALWHAN 23,000 24,080 24,680 25,120 26,000 26,000 29,693 33,528 37,501 41,606
Standalone (Tata Power)/Wind Assets 2,270 2,230 2,420 2,200 2,150 2,150 2,623 3,133 3,680 4,265
Others 1,210 1,170 1,180 1,300 1,790 1,790 1,861 1,960 2,050 2,132
EPC 6,920 6,250 5,660 5,220 6,230 6,230 8,140 10,565 14,104 18,225
Net debt 107,420 117,170 119,730 120,360 124,080 124,080 140,543 178,972 222,994 262,783
% of Consol 24.7% 29.2% 32.5% 33.1% 34.5% 34.5% 36.6% 42.1% 47.5% 51.6%
TPREL 51,870 58,920 61,340 60,220 59,750 59,750 84,811 126,558 173,732 216,297
WALWHAN 48,370 46,950 43,350 41,840 44,370 44,370 40,007 37,679 35,466 33,363
Standalone (Tata Power)/Wind Assets 4,860 4,620 4,640 3,790 3,790 3,790 2,790 1,790 790 -
Others 3,510 6,690 6,750 6,860 7,830 7,830 7,830 7,330 6,830 6,330
EPC (1,180) 2,470 3,650 7,640 8,340 8,340 5,104 5,614 6,176 6,793
Source: Company reports, J.P. Morgan estimates
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#3 FCFE positive: Strong operating cash

flow profile outweighs expansion and
interest burden
We estimate Rs90-110bn OCF/year in FY21-25E, which is sufficient to service
~Rs41bn p.a. of interest cost (assuming no de-leveraging from asset sales) and also
fund 30% equity for ~Rs140bn of regulated capex ambitions, i.e. Rs11bn/year and
Rs20bn equity/year for renewable capex i.e. 2GW p.a.
We model only in-hand T&D projects (Rs94bn of Rs150bn) and RE capacity
additions of 1-1.5GW p.a. vs management targets of 2GW+; thus we don’t assume
any requirement for equity dilution.
Equity for renewables capex too can be potentially self-funded from the business
itself without parent support; we model cash profits at Rs2.6/kWh incremental tariff
and 8% cost of debt to be sufficient for 20% equity contribution in under
construction projects. Management has guided to Rs80bn capex in FY22 (vs Rs33bn
in FY21) of which ~50% is expected to go towards renewables.
Table 7: Cash flow statement (Rsbn)
FY20 FY21 FY22E FY23E FY24E FY25E
EBITDA 77,540 75,390 76,879 94,615 106,231 116,852
Share of associate income less minority
interest 6,535 5,621 8,715 4,058 3,790 3,569
Less tax (8,620) (6,520) (8,921) (9,686) (10,449) (10,968)
Add Other income 5,630 4,392 6,152 6,302 6,452 6,602
Change in working capital (3,921) 48,799 7,180 (7,344) (8,404) (7,759)
Operating Cash Flow 77,164 127,682 90,005 87,945 97,620 108,297
Capex (22,258) (33,358) (82,074) (89,824) (99,324) (99,324)

Acquisitions/divestments 6,143 0 0 0 0
Change in investments (21,577) 36,686 (82,074) (89,824) (99,324) (99,324)
Investing Cash Flow (37,692) 3,329 7,931 (1,879) (1,704) 8,973
Change in equity 0 0 0 0 0 0
Change in debt (1,290) (52,070) 38,134 41,718 45,639 41,073
Interest expenses (44,940) (40,100) (34,992) (38,895) (43,316) (47,726)
Dividend (4,906) (4,953) (8,031) (10,703) (11,906) (12,792)
Change in other non-current assets 3,034 (29,337) 5,000 5,000 5,000 5,000
Change in other non-current liabilities 35,930 50,778 0 0 0 0
Exceptional items 369 (60) 0 0 0 0
Others (14,602) (15,084) 5,311 5,662 6,086 6,473
Financing Cash Flow (26,404) (90,826) 5,422 2,783 1,502 (7,972)
Change in cash 13,067 40,185 13,353 904 (202) 1,001

Opening Cash Balance 7,875 20,942 61,127 74,480 75,384 75,182
Closing Cash Balance 20,942 61,127 74,480 75,384 75,182 76,184
~70% of TPWR's PAT in FY23E, i.e. ~Rs24bn, is likely to come from regulated
generation, transmission and distribution assets, which are steady cash cows and no
longer seeing build-up of regulatory assets either. The loss-making Mundra UMPP's
cash burn (FY21 cash loss ~Rs700mn) is coming down with debt reduction and is
likely to be further offset by tax efficiency of ~Rs3.5bn p.a. (~Rs17bn PBT p.a. for
eleven years offset against accumulated Mundra plant’s loss of Rs180bn and assuming
a 20% tax rate) upon merger with the parent, i.e. NPV of Rs25bn.
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Table 8: TPWR: PAT breakdown (Rsbn)

FY20 FY21 FY22E FY23E FY24E FY25E
Tata Power (Standalone) 5.3 9.3 12.6 13.5 14.5 15.5
Mundra UMPP (8.9) (6.4) (10.4) (3.1) (3.2) (3.5)
Maithon Power 3.4 3.1 3.4 3.6 3.6 3.6
Tata Power Delhi Distribution Ltd. 4.1 4.3 4.5 4.7 4.9 5.1
Tata Power Trading 0.4 0.3 0.4 0.4 0.4 0.4
Tata Power Solar 1.2 2.1 1.9 2.4 3.5 4.1
Tata Power Renewable 0.0 0.2 1.2 0.9 1.0 0.9
Walwhan 2.9 3.2 3.7 3.8 4.0 4.1
Coal SPVs (3.3) (2.0) (1.7) (1.5) (1.2) (1.0)
Coal Logistics 2.0 2.9 2.3 2.3 2.3 2.3
Odisha 0.3 3.6 5.1 5.7 6.3
Others 0.2 (0.3)
Eliminations/inter company (4.1) (11.2) (12.4) (12.5) (12.8) (13.1)
PAT 3.3 5.7 9.1 19.7 22.7 24.9
JV/Associate profit 9.5 8.7 13.5 9.7 9.9 10.0
Less: Minority Interest 3.0 3.1 4.8 5.7 6.1 6.5
Adj PATAMI 9.8 11.3 17.8 23.8 26.5 28.4
Source: Company reports, J.P. Morgan estimates, * Increase in other income in FY21 to Rs12.5bn (due to higher dividend income
from Trust energy) vs Rs5.8bn in FY20. Note FY22E onwards S/A includes tax benefit from Mundra merger into parent.
While TPWR has a favourable net working capital cycle, interest burden from
overdue receivables remains a concern. Receivables have increased from Rs45bn as
of Mar-20 to Rs56bn as of Mar-21, however they have remained stable at 55 days of
sales in FY21. Discom overdues have moderated sequentially from Rs19.8bn
(Rs4.5bn thermal, Rs9.3bn RE and Rs6bn distribution) to Rs17.8bn (Rs3.9bn
thermal, Rs9.5bn RE and Rs4.4bn distribution) as of Mar-21.
Figure 13: TPWR: Net working capital and receivable days

60 0
55 (20,000)
50
(40,000)
45
(60,000)
40
35 (80,000)
30 (100,000)
FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Receivables (days of sales) Net WC ex cash (Rs.bn, RHS)
Regulatory assets increased from Rs65bn in FY20 and Rs74bn in FY21 led by the
acquisition of Odisha DISCOMs, an increase in Mumbai regulated business and
Delhi Distribution, which is the largest component at Rs55bn as of FY21.
Regulated Return businesses

TPWR's regulated equity investment has grown at a 7.5% CAGR in the last five
years from Rs68bn in FY16 to Rs97bn in FY21. TPWR is targeting Rs150bn of
regulatory T&D capex in FY20-25 (10% CAGR) of which ~Rs10bn was done in
FY21. ~Rs100bn is in existing T&D assets (Mumbai & Delhi ~Rs8-10bn p.a.,
Odisha – Rs11bn p.a.) and Rs56bn includes growth opportunities (e.g. union
territories distribution privatization), i.e. new distribution circles and a potential
upgrade to Mumbai’s transmission infrastructure.
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TPWR's other regulated assets are Maithon (1GW), Jojobera (Unit 2 and 3) totaling
2775MW (22% of total capacity) and one transmission JV. Thus, regulated business
contributed Rs12.4bn PAT in FY21 vs consolidated PAT at Rs11.3bn (lower due to
Mundra losses). Maithon recently completed some capex for rail, FGD capex is
ongoing (Rs12bn in total) and will earn a regulated return.
We model in-hand projects only, i.e. a 7/9% CAGR in regulated equity/PAT from
Rs97/12.4bn in FY21, to Rs125/17.5bn by FY25E respectively. There is upside risk
of a 10% CAGR to Rs143bn regulated equity investment if growth opportunities
fructify.
Figure 14: TPWR: T&D Capex – Visibility of Rs95bn capex through regulatory orders vs total
aspiration of Rs150bn
160 150.0
56.1
140
120
100 56.4
80
60
40 15.7
13.4 8.4
20
0
MO-T MO-D TPDDL Odisha Balance 5Y Target
Source: Company presentation
Table 9: TPWR: Regulated business vs consolidated (Rs bn)

FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Regulated business
Regulated Equity 71.7 87.1 96.7 106.6 114.1 119.7 125.4
PAT 11.2 12.6 12.4 15.0 16.2 16.9 17.5
RoE (%) 15.6% 14.4% 12.8% 14.1% 14.2% 14.1% 14.0%
% of Total PAT 196% 128% 109% 84% 68% 64% 62%
Consol business
Total PAT 5.7 9.8 11.3 17.8 23.8 26.5 28.4
Consol RoE (%) 3.3% 5.2% 5.4% 7.8% 9.9% 10.4% 10.6%
Source: Company reports, J.P. Morgan estimates, Regulated business consists of standalone business, Maithon, Delhi and Odisha
Distribution and Transmission business.
Odisha DISCOMs: From loss-making to cash cows

The four distribution circles in Odisha had a cumulative loss of Rs16bn in FY19.
Assuming ~15% RoE on regulated equity, we estimate the profit potential is Rs3.6bn
in FY22 and Rs6.3bn by FY25E implying a 22% CAGR. However, TPWR’s
acquisition of the DISCOMs has significant potential for ROE accretion not just via
regulated returns on equity, but also AT&C0led savings and incentives on arears
through collection efficiency.
 AT&C loss reduction led savings: TPWR's target is to reduce Aggregate
Technical and Commercial losses by 4-7%p from FY20 levels of 25-36% in three
years. There is an Rs300-500mn penalty from the regulator for every 1%p
shortfall in AT&C loss reduction target. On the other hand, any improvements in
AT&C loss trajectory vs target flow directly to bottom-line. Tata Power began
operations at CESU on 1 June 2020 when AT&C losses had spiraled to 40% due
to COVID-19 lockdowns. However from Jun-20 to Mar-21 AT&C losses had
improved to 25.54% taking full-year FY21 to 29.54%.
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 Incentive on arrears: The four circles have ~Rs103bn of receivables outstanding.

TPWR will get a 10% incentive on arrears collected. In CESU, collection
efficiency improved to 99% enabling TPWR to collect Rs1.8bn of past arrears
earning 10% incentives.
Figure 15: TPWR: Distribution revenues by FY25 with Rs105bn from Odisha DISCOMs (Rsbn)
300
43.7 270.0
250
24.7
33.1 12.8
200
36.0
150
119.8
100
50
0
FY20 actual CESU WESCO SOUTHCO NESCO Balance 5Y Target
Source: Company presentation
Table 10: TPWR: AT&C Loss trajectory for Odisha DISCOMs
Takeover in FY20 FY21 3Y target 3Y TPWR proj 5Y target 5Y TPWR proj Outstanding Arrears (Rs bn)
CESU 1 June 2020 30.44% 29.5% 23.76% 23.7% 20.19% 20% 17.0
SOUTHCO 1 Jan 2021 36.29% 32.2% 32.8% 25.75% 26.75% 25% 40.2
WESCO 1 Jan 2021 28.56% 27% 22.5% 17.4% 18.5% 15.9% 13.5
NESCO 1 Apr 2021 25.32% - 20.8% 17.09% 15.5% 13.83% 32.2
Table 11: Tata Power Delhi Distribution progress on operational parameters

Metrics 2002 2020
AT&C loss >53% <8%
System reliability 70% >99%
Street lights <40% >99.5%
Transformer failure 11% <1%
Power cuts 8-12 hrs Nil
Repair faults 11 hrs <1hr
Replace meters 25 days <3 days
New connection 52 days 2 days
Customer Satisfaction Index NA 94%
Table 12: TPWR: AT&C losses across Distribution circles
FY20 FY21
Mumbai 1.4% 0.7%
Delhi 7.9% 7.3%
Ajmer 10.0% 10.2%
Pending monetization of receivables in Mumbai and Delhi distribution

In regulated generation and transmission businesses, the tariff is determined by on a
cost-plus RoE basis. However, at the distribution level, TPWR invoices customers on
the basis of pre-approved tariff which is based on budget (despite regulated model)
and is subject to true up. Thus, as TPWR is entitled to a fixed RoE, it recognizes
accrual for the shortage / excess in the Regulatory Deferral Account.
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The Delhi distribution business has the highest pending accruals at Rs55bn as of
FY21 due to insufficient tariff hikes in the past which were not allowed by the Delhi
Electricity Regulatory Commission. Mumbai has Rs17.4bn of arrears. The increase
in FY21 is mainly due to lower sales volume on account of COVID-19 disruption
and the acquisition of three Odisha Discoms. Appropriate tariff orders and improved
sales volumes post COVID-19 should help in terms of improving cash collection.
Figure 16: TPWR: Regulatory assets in Mumbai and Delhi Distribution

Rs in billion, year end March
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Mundra UMPP, Coal Mines and Tax benefit of merger

Mundra UMPP (4GW): Debt retirement to drive cash profit generation
Mundra has made a cumulative loss of Rs180bn due to the underrecovery of
imported fuel cost in tariffs following the change in law in Indonesia from where
coal is sourced. The plant has PPAs with five states Gujarat, Maharashtra, Haryana,
Rajasthan and Punjab with fixed charges of ~Re1/kwh and ~55% of the fuel charge
is escalable every 6M, the balance 45% is fixed. The company had sought an
increase in power tariffs (Rs0.45/kwH under-recovery in FY21); a resolution has
been long overdue and we are reluctant to attach a probability to a favourable
outcome. While Gujarat had approved an amended PPA as per High Power
Committee (HPC) recommendations, the four other states are yet to finalize. In the
4QFY21 results call, management indicated that the revised compensatory tariffs
recommended by the states was below expectations and discussions are still ongoing.
Total debt for the project is Rs130bn including Rs90bn from TPWR standalone and
Rs40bn at the SPV level. The SPV debt has nearly halved in FY21. Further, asset
monetization will aid reduction in parent level debt as well which was taken to plug
project losses. The interest cost booked in the SPV (i.e. on Rs40bn) is now lower
than what is built in the fixed tariff.
In our view, Mundra UMPP with a reducing debt balance implies Mundra has
potential to achieve cash breakeven at <$53/MT of FOB coal price (HBA Index
~$70-55/MT). TPWR has made significant progress in rationalizing fuel costs by
blending to achieve high calorific value and also targeting consumption / logistics
efficiencies. That said, at current Indo coal prices (HBA Index ~$100/MT), fuel
under-recovery will result in losses increasing substantially; which will be offset by
coal mine profits. We expect Mundra to make a loss for the foreseeable future, but be
cash breakeven FY23E onwards assuming coal prices moderate to ~$70/MT.
Table 13: TPWR: CGPL P&L

FY20 1QFY21 2QFY21 3QFY21 4QFY21 FY21 FY22E FY23E FY24E FY25E
Revenue (Rs/kWh) 2.90 2.97 2.84 2.89 2.70 2.85 2.78 2.77 2.76 2.75
Fixed 1.02 1.09 0.90 1.03 0.98 1.00 0.99 0.98 0.97 0.96
Variable 1.88 1.88 1.94 1.86 1.72 1.85 1.79 1.79 1.79 1.79
Fuel under recovery (Rs/kWh) (0.46) (0.46) (0.30) (0.32) (0.74) (0.45) (0.86) (0.56) (0.55) (0.55)
FOB Price of coal used ($/MT) $ 50.3 $ 48.1 $ 43.0 $ 42.9 $ 55.2 $ 47.6 $ 61.1 $ 50.3 $ 50.3 $ 50.3
Landed Coal Cost ($/MT) $ 82.9 $ 74.7 $ 71.7 $ 69.8 $ 81.3 $ 74.3 $ 87.1 $ 76.3 $ 76.3 $ 76.3
Fuel Cost (Rs/kwh) 2.34 2.34 2.24 2.18 2.46 2.31 2.66 2.35 2.35 2.35
O&M Cost (Rs/kwh) 0.20 0.18 0.14 0.20 0.19 0.17 0.16 0.16 0.16 0.16
Revenue 70,180 17,420 19,020 16,920 16,530 69,900 70,313 70,136 69,959 69,705
Fuel Expense 57,278 13,700 15,000 12,750 15,090 56,560 67,097 59,400 59,400 59,400
O&M expense 4,962 1,050 920 1,150 1,170 4,290 4,042 4,047 4,051 4,051
Operating profit 7,940 2,700 3,100 3,020 270 9,050 (827) 6,689 6,507 6,254
Other income 160 30 20 10 110 170 170 170 170 170
EBITDA 8,100 2,730 3,120 3,030 380 9,220 (657) 6,859 6,677 6,424
Interest cost 11,790 2,960 2,910 2,250 1,810 9,910 4,055 4,055 4,055 4,055
Depreciation 5,210 1,320 1,310 1,720 1,330 5,690 5,690 5,690 5,690 5,690
PBT (8,900) (1,550) (1,100) (940) (2,760) (6,380) (10,402) (2,886) (3,068) (3,321)
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Mundra-Coal mine hedge

Tata Power is net long coal, i.e. CGPL + coal mine combined profit benefits during
rising coal price. At CGPL, fuel under-recovery remained flat Y/Y at Rs0.45/kWh in
FY21 with coal prices remaining weak in the first 3Qs. We expect the gap to widen
in FY22 as coal prices remain firmly up since Oct’20. Our regional coal analysts note
that coal prices are surging due to strong coal demand on global growth rebound
coupled with supply disruptions due to wet season/operational issues. However, we
believe supply should recover in 2H21 as weather disruptions dissipate and higher
prices incentivize producers. The thermal coal price forward curve has risen over the
past month, with prices remaining over $90/t through 2022. Spot at $116/t is the
highest since 2018. Our latest forecasts, based off the forward curve, look for
2021/2022 average prices of $101/$94/t, up 11-15% vs previous estimates (note).
The share of profit from Indo coal mines declined from Rs6.3bn in FY20 to Rs5.3bn
in FY21 due to realizations –12% y/y from $47.5/t to $42/t, which was the lowest in
last six years due to the collapse in coal prices early on in the year. However, gross
profit was only marginally lower at $10.1/t vs $10.7/t in FY20. Combined entity
losses moderated from Rs2.7bn in FY20 to Rs1.1bn in FY21. The combined cash
generation of CGPL and Coal in FY21 was Rs4.5bn.
We assume the coal index stays firm in FY22 and moderates thereafter, amounting to
a net positive outcome for coal mines + CGPL at Rs2.7bn in FY22.
Fuel under-recovery reduced sharply in FY20 at Rs0.46/kWh vs Rs0.78/kWh in

FY19 on account of lower coal benchmark prices, optimized blending and effective
coal procurement strategy. The under-recovery in FY21 (Rs0.45/kWh) is still higher
than the Rs0.35/kWh asked for as tariff relief recommended by the High Power
Committee (HPC).
Table 14: TPWR: Coal mine P&L

FY20 1QFY21 2QFY21 3QFY21 4QFY21 FY21 FY22E FY23E FY24E FY25E
Coal mined (MT) 61.2 14.5 15.0 15.3 14.3 59.1 59.1 59.1 59.1 59.1
Coal Sold (MT) 61.8 14.3 14.8 16.0 14.1 59.2 59.2 59.2 59.2 59.2
HBA 71.7 58.0 50.6 55.5 82.7 62.2 85.0 70.0 70.0 70.0
FOB Revenue (US$/T) $ 55.2 $ 49.1 $ 43.8 $ 43.8 $ 59.4 $ 48.9 $ 61.1 $ 50.3 $ 50.3 $ 50.3
Royalty (US$/T) $ 7.6 $ 6.9 $ 5.9 $ 6.1 $ 8.8 $ 6.9 $ 8.6 $ 7.1 $ 7.1 $ 7.1
Royalty (%) 14% 14% 13% 14% 15% 14% 14% 14% 14% 14%
Net revenue after royalty ($/T) $ 47.5 $ 42.2 $ 37.9 $ 37.7 $ 50.6 $ 42.0 $ 52.4 $ 43.2 $ 43.2 $ 43.2
COGS ($/T) $ 36.9 $ 32.3 $ 30.7 $ 30.6 $ 34.0 $ 31.9 $ 33.5 $ 33.5 $ 33.5 $ 33.5
Gross Profit ($/T) $ 10.7 $ 9.9 $ 7.2 $ 7.1 $ 16.6 $ 10.1 $ 19.0 $ 9.7 $ 9.7 $ 9.7
Table 15: TPWR: Mundra-Coal mine combined profitability (Rsbn)

FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
HBA Index 56.9 69.8 89.8 97 71.7 62.2 85.0 70.0 70.0 70.0
% y/y 22.7 28.7 8.0 -26.1 -13.2
FOB Price $46.7 $49.5 $61.5 $60.3 $50.3 $47.6 $ 61.1 $ 50.3 $ 50.3 $ 50.3
% y/y 5.9 24.2 -2 -16.6 -5.4 28.3 (17.6) - -
Loss in Mundra UMPP (10.0) (8.5) (14.1) (16.5) (8.9) (6.4) (10.4) (3.1) (3.2) (3.5)
Share of profit of Indo coal mine and infra proj. (0.1) 7.9 14.2 10.2 6.3 5.3 9.5 5.6 5.6 5.6
Combined entity (10.1) (0.6) 0.2 (6.3) (2.7) (1.1) (0.9) 2.5 2.3 2.1
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PAT to get ~15% upgrade post Mundra UMPP merger with Standalone entity
In Aug-20, TPWR announced the merger of Mundra UMPP to the parent entity
along with TPWR solar (EPC arm) and Af-taab Investments. At the consolidated
level, TPWR’s tax rate has been 50-70% due mainly to loss-making businesses, i.e.
Mundra Power plant. The accumulated Mundra losses provide a multi-year tax shield
of ~Rs3.5bn p.a. (~Rs17bn PBT p.a. for eleven years offset against accumulated
Mundra plant’s loss of Rs180bn and assuming a 20% tax rate) upon merger with the
parent, i.e. NPV of Rs25bn.
Tata Power has received shareholder and regulatory approvals and the hearings are to
take place in the National Company Law Tribunal (NCLT). Once the merger is
approved, we believe it is likely to result in EPS upgrades due to lower tax liability.
TPWR is no longer merging the solar business with the parent.
Table 16: TPWR: Proforma Consolidated Profit on tax benefits from Mundra merger
Rs in billion
FY21 FY22E FY23E FY24E FY25E
S/A PBT – Adj i.e. with Mundra (2.9) (4.3) 4.3 5.2 6.1
S/A PBT – without merger 3.7 6.3 7.4 8.5 9.6
Tax Adj – with Mundra merger 4.0 8.9 9.7 10.4 11.0
Tax - without merger 6.5 11.6 12.6 13.5 14.3
PAT Adj – with Mundra merger 13.8 17.8 23.8 26.5 28.4
PATAMI - without merger 11.3 15.2 20.9 23.4 25.1
% upside 23% 18% 14% 13% 13%
Tax Benefit 2.6 2.7 2.9 3.1 3.3
Renewable Portfolio
TPWR has 2,693MW of solar and wind assets as of Mar-21; including 871MW of
hydro projects the total renewable portfolio is 3,564MW. The goal to setting up
15GW by FY25 will require execution of 2.8GW p.a. and capex outlay of Rs570bn
(US$7.8bn) over the next four years assuming Rs50mn/MW. Projects will be
executed through in-house EPC, currently 1314MW is under construction, of which
~950MW is to be executed in FY22 and the balance in FY23.
TPWR’s expansion will be in TPREL. Further assets will potentially be merged into
TPREL as well; TPWR has entered into business transfer arrangement for 349 MW
wind and solar assets to TPREL and Tata Power Green Energy Limited (TPGEL)
effective 1st April 2021. We conservatively estimate ~1-1.5GW capacity addition per
annum, with near-term uncertainty due to changes in duty structure and pending
clearance of outstanding PPAs stalling new bids. We assume a sliding scale in tariffs
in TPREL from Rs4.37/kWh to Rs2.9/kWh and an 8% cost of debt, resulting in
sufficient cash profit generation to fund the equity in ~1.5GW of projects per annum.
Figure 17: TPWR: Renewable Portfolio

MW FY21 Tariff FY21 RoE
(Rs/kWh) FY21 PAT (%)
TPREL 1,146 4.37 210 0.4
WALWHAN 1,010 7.22 3,210 12.3
Standalone (Tata Power)/Wind Assets 379 4.13 80 3.7
Others 158 - (180) (10.1)
EPC 2,080 33.4
Consol 2,693 5,400 6.2
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Table 17: TPWR solar bids won in auctions by State DISCOMS

Central agency/State DISCOM MW Month Tariff (Rs/kWh)
Gujarat 250 May-19 2.75
Maharashtra 100 Dec-19 2.9
Gujarat 100 Mar-20 2.78
TPWR Mumbai Distribution 225* Jul-20 2.59
NTPC 370 Aug-20 2.43
Kerala 110 Nov-20 2.97
Gujarat 60 Mar-21 2.2
Maharashtra 250 May-21 2.51
Total 1465 2.61**
Source: Mercom, ET, Saur Energy, * hybrid auction, * weighted average of tariffs for auctions listed above
Table 18: TPWR: Renewable portfolio cash profit vs equity requirement

Rs in million
FY21 FY22E FY23E FY24E FY25E
MW 2,693 3,642 4,642 6,142 7,642
PAT 3,320 5,485 5,342 5,588 5,713
+ Depreciation 6420 8220 10120 13020 15920
Cash Profit 9,740 13,705 15,462 18,608 21,633
Equity Requirement
3GW p.a. 30,000 30,000 30,000 30,000 30,000
2GW p.a. 20,000 20,000 20,000 20,000 20,000
1-1.5GW p.a. (JPMe) 2,472 9,750 12,500 15,000 15,000
Source: Company reports and J.P. Morgan estimates. Note: this excludes solar EPC profits.
#4 New Businesses potentially at deep

option value
TPWR’s electric vehicle (EV) charging, micro grids, rooftop solar and solar pumps
businesses have long-term potential. Being at a relatively nascent stage, they are
potentially at a deep discount to fair value and offer optionality for upgrades over the
long term, in our view.
Solar: EPC, Rooftop, Pumps and Microgrids

TPWR’s solar EPC order book grew 25% y/y in FY21 to Rs87bn. A 12-18M execution
timeframe implies a 25% two-year revenue CAGR, on our estimates. EBITDA margins
have been in the 6-8% range over the last few years. Near-term margins could see some
headwinds due to an increase in commodity costs. However, we expect the overall
TPSSL (EPC + Pumps) operating profit contribution to increase from 4% in FY21 to
6% in next two years to Rs5-6bn. We value the solar business at 15x FY23E P/E
amounting to Rs11/share. There is significant growth potential across the three verticals,
i.e. solar EPC incl rooftop, solar pumps and microgrids.
 Solar EPC: Tata Power through its solar arm, Tata Power Solar Systems Limited
(TPSSL), has been manufacturing cells and modules for ~30 years. The company
has in-house production capacity of 530 MW cell line and 580 MW module line
as compared to its peer group – Adani (1.5GW installed and 2GW under
construction), ReNew (2GW under construction) and BHEL (0.33GW installed).
TPSSL has also been India’s top solar rooftop EPC player over the past six years
with a ~20% market share and Rs6bn top line in FY21. The government has set a
target to install 40GW by 2022; of which just ~4GW is complete. TPWR thinks
that its annual installation potential is 4-5GW.
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Table 19: Solar Manufacturing Capacity

MW FY20 FY21
Cell 300 530
Module 400 580
 Solar Pumps: In FY21 TPWR sold ~13k pumps for Rs3.7bn. TPWR thinks that
the countrywide potential is 700-800k pumps per year of which TPWR's 25-30%
market share would imply 150-200k/year and Rs50bn top line. This is a key focus
area for the government as it aligns twin priorities of agriculture and renewable
energy. Through the Pradhan Mantri Kisan Urja Suraksha Evam Utthaan
Mahabhiyan (PM KUSUM) scheme, the government plans to provide solar water
pumps to 3.5 million farmers, i.e. 30GW capacity.
 Microgrids: TPWR is India’s largest Microgrid player with 4.8MW installed and
1.2MW under construction. TP Renewable Microgrid Limited (TPRMG) is the
wholly owned subsidiary executing this business; it is a pioneering effort in
meeting the energy needs of rural villages through a viable business model.
Figure 18: TPSSL order book increases despite strong execution implying order inflows of
Rs68bn in FY21
100,000
87,420
90,000
80,000 70,000
70,000
60,000
50,000
40,000 30,000
30,000
20,000
10,000
0
FY16 FY20 FY21
Figure 19: TPSSL revenue growth Figure 20: TPSSL EBITDA margins
120,000 139.2 111,282 160 18 17.6
96,056 17
140 16
100,000
82,945 120 15
80,000 14
66,752 100 13
60,000 51,190 80 12
60.7 11 9.7
60 10
40,000 30.4 9
21,400 24.3 40 8
13,320 15.8 15.9 6.4 6.2 6.2
20,000 7
20 5.4 5.3
6
0 0 5
FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Revenue (Rs.mn) % Y/Y (RHS) EBITDA margins (%)
Source: Company reports, J.P. Morgan estimates Source: Company reports, J.P. Morgan estimates
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EV Charging Infrastructure
Tata Power is establishing energy efficient charging infrastructure to ensure India is
EV-ready and to support the Government's National Electric Mobility Mission.
TPWR set-up the first EV charging station in Mumbai and has installed 532 public
EV charging points across 92 cities as of Mar-21. TPWR aims to expand the network
to 100k by FY26.
As comparison, ChargePoint (not covered) and Eaton (covered by Ann Duignan) are
among the largest companies operating EV charging stations. ChargePoint has ~60-
70k charging stations and reported US$147mn in revenues as of fiscal year end Jan-
21. The enterprise value is at US$8.1bn, implying trailing EV/sales multiple of 55x.
TPWR has partnerships with Tata Motors and MG Motors for their EV roll out. Also,
being part of the Tata Group enables TPWR to derive synergies from other group
companies; EV charging is available at Tata Motor dealerships and retail outlets of
other Tata Group Companies such as Croma, Star Bazaar and Titan, among others. In
another partnership, TPWR will design, procure, install and manage all charging
infrastructure – which will see installation of about 50 charging stations near Delhi
airport, Gurgaon and North Delhi. TPWR has also signed a MoU for setting up
commercial EV charging stations with HPCL, IOCL and Indraprastha Gas Ltd.
Table 20: EV charging potential in India

Annual running Power consumption
Type EVs on road (mn) (kms/year) (FY25, MU)
Scooter 10-14 10,000 4,600
3Ws 1-1.5 30,000 3,400
PVs 0.6-1 10,000 1,200
Taxis 1-1.2 45,000 7,000
Bus 0.02-0.03 70,000 2,100
Total 15.175 165,000 18,300
Source: TPWR company presentation
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Financial Analysis
Table 21: TPWR: Segment-wise consolidated revenue to EBIT (Rs mn)
FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Consolidated revenue 289,210 294,930 291,364 324,681 413,757 447,351 467,545 495,893
Tata Power (Standalone) 73,010 76,880 70,750 64,800 66,754 68,757 70,820 72,944
Mundra UMPP 64,190 70,240 70,180 69,900 70,313 70,136 69,959 69,705
Maithon Power 22,690 28,350 27,410 25,030 27,735 27,685 27,937 28,117
Tata Power Delhi Distribution Ltd. 72,530 77,790 83,510 76,270 75,899 77,786 79,672 81,558
Tata Power Trading 37,460 42,950 2,380 2,650 2,650 2,650 2,650 2,650
Tata Power Solar 27,340 31,800 21,410 51,190 66,752 82,945 96,056 111,282
Tata Power Renewable 4,920 7,170 9,170 9,600 14,560 20,050 28,202 36,319
Walwhan 11,860 12,720 12,030 11,890 11,964 11,964 11,964 11,964
Coal Logistics 10,860 10,030 10,030 10,030 10,030 10,030
Odisha 0 40,190 100,609 108,857 103,765 104,834
Others 7,500 7,680 7,680 7,680 7,680 7,680
Misc. (24,790) (52,970) (23,836) (44,549) (41,189) (41,189) (41,189) (41,189)
Consolidated EBITDA 59,474 63,570 77,540 75,390 76,879 94,615 106,231 116,852
Mundra UMPP (130) (2,550) 7,950 9,050 (827) 6,689 6,507 6,254
Maithon Power 6,430 7,950 8,670 6,820 8,238 8,568 8,438 8,228
Tata Power Trading 390 700 630 530 530 530 530 530
Tata Power Solar 2,370 2,350 1,890 3,060 3,338 4,147 5,763 6,677
Walwhan 11,100 11,750 10,700 10,480 10,425 10,306 10,186 10,066
Coal SPVs 217 200 200 200 200 200
Coal Logistics 3,950 4,130 4,130 4,130 4,130 4,130
Odisha 0 700 4,118 7,477 9,894 12,221
Others 1,700 1,300 1,300 1,300 1,300 1,300
Eliminations/ inter company (556) 2,370 (897) (1,430) (680) (680) (680) (680)
Depreciation 23,980 23,930 26,340 27,450 29,988 32,611 36,249 39,903

Consolidated EBIT 35,494 39,640 51,200 47,940 46,891 62,004 69,982 76,949
Mundra UMPP (5,300) (7,030) 2,740 3,360 (6,517) 999 817 564
Maithon Power 4,070 5,570 6,230 4,360 5,788 6,118 5,988 5,778
Tata Power Solar 1,620 1,580 1,710 2,810 3,038 3,797 5,363 6,227
Walwhan 8,270 8,890 7,750 7,600 7,645 7,626 7,606 7,586
Odisha 0 0 0 (290) 2,837 5,887 7,986 9,985
Others (1,397) 2,059 3,029 2,819 3,520 3,520 3,520 3,520
Source: Company reports, J.P. Morgan estimates.
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Table 22: TPWR: Segment-wise EBIT to adjusted PAT bridge (Rs mn)
Consolidated EBIT 35,494 39,640 51,200 47,940 46,891 62,004 69,982 76,949
Other income 4,326 3,960 5,630 4,392 6,152 6,302 6,452 6,602
Consolidated PBIT 39,820 43,600 56,830 52,332 53,044 68,307 76,434 83,552
Interest 37,230 41,700 44,940 40,100 34,992 38,895 43,316 47,726
PBT 2,590 1,900 11,890 12,232 18,052 29,412 33,118 35,826

Tata Power (Standalone) [incl. other income] 6,966 6,370 6,370 3,682 6,300 7,355 8,459 9,615
Mundra UMPP (14,370) (17,150) (9,050) (6,550) (10,572) (3,056) (3,238) (3,491)
Maithon Power 2,030 3,520 4,300 3,000 4,428 4,674 4,680 4,680
Tata Power Solar 870 1,240 1,310 2,000 2,307 2,993 4,479 5,254
Tata Power Renewable 1,990 530 (350) (210) 1,056 486 493 346
Walwhan 3,500 4,350 3,280 3,690 4,433 4,574 4,707 4,833
Odisha 0 0 0 (780) 1,498 3,518 4,403 5,188
Others (1,932) (706) 224 2,489 3,210 3,210 3,210 3,210
Tax 1,650 6,560 8,620 6,520 11,614 12,571 13,538 14,271

Tax rate (%) 64 345 72 53 64 43 41 40
PAT (post Mundra tax Benefit) 940 (4,660) 3,270 5,712 9,131 19,726 22,669 24,858
Tata Power (Standalone post tax benefit) 13,590 9,490 5,280 9,270 12,638 13,543 14,497 15,503
Mundra UMPP (14,080) (16,540) (8,910) (6,370) (10,402) (3,056) (3,238) (3,491)
Maithon Power 1,820 2,730 3,380 3,110 3,449 3,633 3,638 3,638
Tata Power Solar 1,000 900 1,230 2,080 1,910 2,425 3,539 4,121
Tata Power Renewable 2,010 930 10 210 1,250 897 977 942
Walwhan 2,330 3,000 2,920 3,200 3,693 3,836 3,973 4,104
Coal SPVs (2,060) (2,320) (3,250) (1,990) (1,710) (1,460) (1,210) (960)
Coal Logistics 1,880 1,680 2,030 2,870 2,272 2,272 2,272 2,272
Odisha 0 0 0 280 3,569 5,084 5,747 6,336
Others 160 1,090 160 (310) 0 0 0 0
Eliminations/inter company (8,480) (9,340) (4,130) (11,248) (12,404) (12,514) (12,794) (13,074)
Add:Share of profit/ (loss) of associates 15,540 12,870 9,526 8,734 13,492 9,720 9,876 10,043
Industrial Energy Ltd (74%) 450 820 1,100 830 1,060 1,060 1,060 1,060
Powerlinks Transmission (51%) 700 570 620 520 525 525 525 525
Indo coal mine & Infrastructure projects 14,240 10,220 6,260 5,260 9,472 5,552 5,552 5,552
Coal Companies 12,340 8,290 4,350 3,300 7,406 3,833 3,833 3,833
Coal Infrastructure Companies 1,900 1,930 1,910 1,960 2,066 1,719 1,719 1,719
Others 150 1,260 1,546 2,124 2,436 2,583 2,739 2,906
Less: Minority interest 2,030 2,495 2,991 3,113 4,777 5,662 6,086 6,473
Maithon Power 437 655 811 746 828 872 873 873
Odisha 0 0 0 137 1,749 2,491 2,816 3,105
Adjusted PATAMI 14,450 5,716 9,805 11,334 17,846 23,784 26,458 28,427
Exceptional items 10,320 16,194 369 (60) 0 0 0 0
Reported PATAMI 24,770 21,909 10,174 11,274 17,846 23,784 26,458 28,427
Shares o/s (mn) 2,705 2,705 2,705 3,196 3,196 3,196 3,196 3,196
Adjusted EPS (Rs) 5.3 2.1 3.6 3.5 5.6 7.4 8.3 8.9
Source: Company reports, J.P. Morgan estimates.
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Table 23: TPWR: Balance Sheet Summary

Rs in million, year end March
ASSETS
PPE 414,316 411,015 446,626 487,489 539,575 596,788 659,863 719,284
CWIP 16,526 25,757 16,115 35,998 35,998 35,998 35,998 35,998
Goodwill 16,416 16,416 16,416 17,946 17,946 17,946 17,946 17,946
Other intangibles 15,831 15,618 13,622 13,459 13,459 13,459 13,459 13,459
Investments 119,928 128,511 138,353 126,495 126,495 126,495 126,495 126,495
Total non-current assets 613,349 626,374 659,934 729,545 781,631 838,844 901,920 961,341
Current assets
Inventories 16,231 17,064 17,524 18,848 24,019 25,969 27,141 28,787
investments 4,362 1,670 6,995 4,995 4,995 4,995 4,995 4,995
Trade receivables 27,889 44,453 44,259 50,010 56,679 61,281 64,047 67,931
Unbilled revenue 8,101 8,379 7,994 15,736 7,868 7,868 7,868 7,868
Cash 10,612 6,455 18,615 37,825 51,179 52,082 51,881 52,882
Bank balances 1,246 1,420 2,327 23,302 23,302 23,302 23,302 23,302
Loans 7,848 1,165 330 307 307 307 307 307
Finance lease receivables 343 379 332 415 415 415 415 415
Other financial assets 4,016 2,416 14,124 3,102 3,102 3,102 3,102 3,102
Other current assets 15,123 18,819 7,704 9,167 9,167 9,167 9,167 9,167
Total current assets 95,918 102,244 120,215 163,711 181,036 188,492 192,230 198,760
Assets classified as held for sale 47,787 55,421 62,531 30,475 30,475 30,475 30,475 30,475
Total current assets 143,705 157,666 182,745 194,185 211,511 218,967 222,704 229,234
Total assets before regulatory
deferral account 757,054 784,039 842,680 923,731 993,142 1,057,811 1,124,624 1,190,575
Regulatory deferr accounts - assets 63,046 57,581 54,802 64,782 59,782 54,782 49,782 44,782
TOTAL ASSETS 820,100 841,620 897,482 988,512 1,052,924 1,112,593 1,174,405 1,235,357
EQUITIES & LIABILITIES

Equity
(a) Equity share capital 2,705 2,705 2,705 3,196 3,196 3,196 3,196 3,196
(c] Unsecured perpetual
securities 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
(d) Other equity 146,294 164,507 177,955 205,027 214,842 227,923 242,476 258,111
Total equity 163,999 182,212 195,660 223,223 233,038 246,119 260,671 276,306
Minority interest 20,153 21,667 23,320 29,273 34,050 39,712 45,799 52,272
LIABILITIES
(i) Borrowings 485,892 485,060 483,759 431,700 469,834 511,552 557,191 598,264
(ii) Lease Liability 31,805 31,425 31,425 31,425 31,425 31,425
(iii) Trade payables 210 228 0 174 174 174 174 174
(iv) Other financial liabilities 6,473 6,873 7,215 13,910 13,910 13,910 13,910 13,910
(b) Provisions 3,000 3,336 4,074 8,396 8,396 8,396 8,396 8,396
(c] Deferred tax liabilities (net) 5,166 10,568 11,740 9,762 9,762 9,762 9,762 9,762
(d) Non-current tax liability (net) 37 37 30 30 30 30 30 30
Other non-current liabilities 18,415 18,738 20,845 62,180 62,180 62,180 62,180 62,180
Total non-current liabilities 519,193 524,840 559,469 557,575 595,709 637,427 683,066 724,140
Liabilities classified as held for sale 9,038 9,925 10,625 1,398 1,398 1,398 1,398 1,398
Total current liabilities 111,905 112,902 119,032 177,829 189,514 188,722 184,257 182,027
Regulatory deferral account- liability 4,850 0 0 612 612 612 612 612
TOTAL EQUITY & LIABILITIES 820,100 841,620 897,482 988,512 1,052,924 1,112,593 1,174,405 1,235,357
D/E (x) 2.6 2.4 2.2 1.7 1.8 1.8 1.8 1.8
BPS (Rs) 61 67 72 70 73 77 82 86
net-D/E (x) 2.53 2.19 1.99 1.42 1.44 1.49 1.54 1.56
Net Debt / EBITDA 6.4 6.0 5.2 4.4 4.5 4.3 4.3 4.2
RoE (%) 9.7 3.3 5.2 5.4 7.8 9.9 10.4 10.6
RoCE (%) 5.6 6.1 7.5 6.6 6.3 7.6 8.0 8.2
RoIC (%) 1.9 (14.1) 2.0 3.0 2.2 4.4 4.7 4.9
Inventories (days) 20 21 22 21 21 21 21 21
Trade receivables (days) 35 55 55 56 50 50 50 50
Trade payables (days) 71 68 64 80 80 80 80 80
Other current liabilities (days) 23 19 18 23 20 20 20 20
Net WC days sales (33.9) (49.6) (45.3) (95.5) (81.3) (69.2) (59.6) (50.5)
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Table 24: TPWR: Cash Flow Statement

Rs in million, year end March
EBITDA 59,474 63,570 77,540 75,390 76,879 94,615 106,231 116,852
Share of associate
income less minority
interest 13,510 10,376 6,535 5,621 8,715 4,058 3,790 3,569
Less tax (1,650) (6,560) (8,620) (6,520) (8,921) (9,686) (10,449) (10,968)
Add Other income 4,326 3,960 5,630 4,392 6,152 6,302 6,452 6,602
Change in working
capital (3,798) 13,214 (3,921) 48,799 7,180 (7,344) (8,404) (7,759)
Operating Cash Flow 71,862 84,559 77,164 127,682 90,005 87,945 97,620 108,297
Capex (35,604) (35,762) (22,258) (33,358) (82,074) (89,824) (99,324) (99,324)

Acquisitions/divestments 2,069 25,500 6,143
Change in
investments/assets held
for sale (24,274) (12,639) (21,577) 36,686 0 0 0 0
Investing Cash Flow (57,808) (22,901) (37,692) 3,329 (82,074) (89,824) (99,324) (99,324)
Free Cash Flow 14,054 61,659 39,471 131,011 7,931 (1,879) (1,704) 8,973
Change in equity 0 0 0 0 0 0 0 0
Change in debt (2,300) (830) (1,290) (52,070) 38,134 41,718 45,639 41,073
Interest expenses (37,230) (41,700) (44,940) (40,100) (34,992) (38,895) (43,316) (47,726)
Dividend (4,114) (4,114) (4,906) (4,953) (8,031) (10,703) (11,906) (12,792)
Change in other non-
current assets 6,002 6,741 3,034 (29,337) 5,000 5,000 5,000 5,000
Change in other non-
current liabilities (25,403) 1,629 35,930 50,778 0 0 0 0
Exceptional items 10,320 16,194 369 (60) 0 0 0 0
Others 40,987 (43,561) (14,602) (15,084) 5,311 5,662 6,086 6,473
Financing Cash Flow (11,739) (65,642) (26,404) (90,826) 5,422 2,783 1,502 (7,972)
Change in cash 2,315 (3,983) 13,067 40,185 13,353 904 (202) 1,001
Opening Cash Balance 9,543 11,858 7,875 20,942 61,127 74,480 75,384 75,182
Closing Cash Balance 11,858 7,875 20,942 61,127 74,480 75,384 75,182 76,184
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Investment Thesis, Valuation and Risks

Tata Power Ltd. (Overweight; Price Target: Rs150.00)
Investment Thesis
TPWR’s well-defined ESG framework/goals and execution are on track. The
company’s growth focus is rooted in solar/wind generation capacity, regulated
electricity transmission/distribution and new ESG-positive businesses such as EV
charging, solar micro grids, rooftop solar and solar EPC. Regulated businesses in
particular provide steady earnings and cash flow. TPWR is putting a pause to its coal
capex and retiring coal plants in-line with PPA expiry. Non-fossil-fuel-based
capacity will be 60% of total by FY25 and 80% by FY30.
Regulated businesses in particular provide steady earnings and cash flow. The steady
improvement in operating cash flow is likely to fund the equity requirement for
growth capex along with potential asset monetization, i.e. both non-core and value
unlocking in renewables.
Valuation
Our Mar-22 PT (20x FY23E P/E and 1.9x P/B) of Rs150 includes Rs54 for regulated
assets at 1.7-2.5x equity, -Rs18 for Mundra post-tax benefit, Rs29 for coal mines,
Rs40 for domestic renewables, Rs35 for EPC businesses and cash and balance Rs10
for overseas RE and domestic thermal assets. New ESG-positive businesses, i.e. EV
charging, micro grid, rooftop solar and solar pumps, are at early cycle, hence at deep
option value.
Risks to Rating and Price Target

Downside risks to our rating and price target include: Delays in debt reduction and
subsequently interest costs as non-core asset sales are pushed out, unfavourable
Mundra tariff resolution, a slowdown in renewable aspirations and monetization,
delays in value unlocking and a moderation of growth potential in new ESG-positive
businesses.
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(91-22) 6157-3582 03 July 2021
Tata Power Ltd.: Summary of Financials

Income Statement FY20A FY21A FY22E FY23E Cash Flow Statement FY20A FY21A FY22E FY23E
Revenue 291,364 324,681 413,757 447,351 Cash flow from operating activities 77,164 127,682 90,005 87,945
COGS - - - - o/w Depreciation & amortization 26,340 27,450 29,988 32,611
Gross profit - - - - o/w Changes in working capital (3,921) 48,799 7,180 (7,344)
SG&A (213,824) (249,291) (336,878) (352,736)
Adj. EBITDA 77,540 75,390 76,879 94,615 Cash flow from investing activities (37,692) 3,329 (82,074) (89,824)
D&A (26,340) (27,450) (29,988) (32,611) o/w Capital expenditure (22,258) (33,358) (82,074) (89,824)
Adj. EBIT 51,200 47,940 46,891 62,004 as % of sales 7.6% 10.3% 19.8% 20.1%
Net Interest (44,940) (40,100) (34,992) (38,895)
Adj. PBT 11,890 12,232 18,052 29,412 Cash flow from financing activities (26,404) (90,826) 5,422 2,783
Tax (8,620) (6,520) (11,614) (12,571) o/w Dividends paid (4,906) (4,953) (8,031) (10,703)
Minority Interest (2,991) (3,113) (4,777) (5,662) o/w Shares issued/(repurchased) 0 0 0 0
Adj. Net Income 9,805 11,334 17,846 23,784 o/w Net debt issued/(repaid) (1,290) (52,070) 38,134 41,718
Reported EPS 3.76 3.53 5.58 7.44 Net change in cash 13,067 40,185 13,353 904
Adj. EPS 3.62 3.55 5.58 7.44
Adj. Free cash flow to firm 39,471 131,011 7,931 (1,879)
DPS 1.55 1.55 2.51 3.35 y/y Growth (36.0%) 231.9% (93.9%) (123.7%)
Payout ratio 41.2% 43.9% 45.0% 45.0%
Shares outstanding 2,705 3,196 3,196 3,196
Balance Sheet FY20A FY21A FY22E FY23E Ratio Analysis FY20A FY21A FY22E FY23E
Cash and cash equivalents 20,942 61,127 74,480 75,384 Gross margin - - - -
Accounts receivable 44,259 50,010 56,679 61,281 EBITDA margin 26.6% 23.2% 18.6% 21.2%
Inventories 17,524 18,848 24,019 25,969 EBIT margin 17.6% 14.8% 11.3% 13.9%
Other current assets 37,491 33,726 25,858 25,858 Net profit margin 3.4% 3.5% 4.3% 5.3%
Current assets 120,215 163,711 181,036 188,492
PP&E 476,664 518,893 570,979 628,192 ROE 5.2% 5.4% 7.8% 9.9%
LT investments 138,353 126,495 126,495 126,495 ROA 1.1% 1.2% 1.7% 2.2%
Other non current assets 162,250 179,414 174,414 169,414 ROCE 2.1% 3.4% 2.5% 4.9%
Total assets 897,482 988,512 1,052,924 1,112,593 SG&A/Sales 73.4% 76.8% 81.4% 78.8%
Net debt/Equity 2.1 1.5 1.5 1.5
Short term borrowings 156,808 131,250 148,991 126,970 Net debt/EBITDA 6.0 4.9 5.1 4.6
Payables 50,954 71,201 90,735 98,102
Other short term liabilities 68,077 106,628 98,780 90,620 Sales/Assets (x) 0.3 0.3 0.4 0.4
Current liabilities 275,840 309,079 338,505 315,692 Assets/Equity (x) 4.6 4.5 4.5 4.5
Long-term debt 326,951 300,450 320,843 384,582 Interest cover (x) 1.7 1.9 2.2 2.4
Other long term liabilities 75,710 126,488 126,488 126,488 Operating leverage (2411.7%) (55.7%) (8.0%) 397.0%
Total liabilities 678,501 736,017 785,836 826,762 Tax rate 72.5% 53.3% 64.3% 42.7%
Shareholders' equity 195,660 223,223 233,038 246,119 Revenue y/y Growth (1.2%) 11.4% 27.4% 8.1%
Minority interests 23,320 29,273 34,050 39,712 EBITDA y/y Growth 22.0% (2.8%) 2.0% 23.1%
Total liabilities & equity 897,482 988,512 1,052,924 1,112,593 EPS y/y Growth 71.5% (2.2%) 57.5% 33.3%
BVPS 72.33 69.85 72.92 77.02 Valuation FY20A FY21A FY22E FY23E
y/y Growth 7.4% (3.4%) 4.4% 5.6% P/E (x) 33.4 34.1 21.7 16.3
P/BV (x) 1.7 1.7 1.7 1.6
Net debt/(cash) 462,818 370,573 395,354 436,168 EV/EBITDA (x) 9.9 9.2 9.3 8.0
Dividend Yield 1.3% 1.3% 2.1% 2.8%
Source: Company reports and J.P. Morgan estimates. Note: FY16 financials are in I-GAAP and are not like-to-like with IND-AS financials and estimates starting FY17.
Note: Rs in millions (except per-share data).Fiscal year ends Mar. o/w - out of which
27
(91-22) 6157-3582 03 July 2021
Other Companies Discussed in This Report (all prices in this report as of market close on 30 June 2021)
NTPC Ltd.(NTPC.BO/Rs116.40/N)
Analyst Certification: The Research Analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple Research
Analysts are primarily responsible for this report, the Research Analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect the Research Analyst’s personal views about any and all of the subject securities or issuers; and
(2) no part of any of the Research Analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations
or views expressed by the Research Analyst(s) in this report. For all Korea-based Research Analysts listed on the front cover, if
applicable, they also certify, as per KOFIA requirements, that the Research Analyst’s analysis was made in good faith and that the views
reflect the Research Analyst’s own opinion, without undue influence or intervention.
All authors named within this report are Research Analysts unless otherwise specified. In Europe, Sector Specialists (Sales and Trading)
may be shown on this report as contacts but are not authors of the report or part of the Research Department.
Important Disclosures
 Market Maker/ Liquidity Provider: J.P. Morgan is a market maker and/or liquidity provider in the financial instruments of/related to
Tata Power Ltd., NTPC Ltd..
 Analyst Position: The covering analyst, member of the coverage team, non-fundamental analyst who may produce trade
recommendations, or a member of their respective household(s) has a financial interest in the debt or equity securities of NTPC Ltd..
 Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Tata Power Ltd..
 Debt Position: J.P. Morgan may hold a position in the debt securities of Tata Power Ltd., NTPC Ltd., if any.
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Tata Power Ltd. (TTPW.NS, TPWR IN) Price Chart Date Rating Price (Rs) Price Target
(Rs)
216 27-Jul-18 N 70.85 82

N Rs80 OW Rs50 30-Oct-18 N 77.60 90
180 31-Jan-19 N 68.15 80
N Rs90 N Rs71 N Rs64 OW Rs65 13-Jun-19 N 66.25 74
02-Aug-19 N 59.75 71
144 N Rs82 N Rs74 N Rs68 OW Rs56
10-Nov-19 N 59.55 68
Price(Rs)
108
30-Jan-20 N 60.90 64
09-Apr-20 OW 35.65 50
72
15-Jun-20 OW 41.70 56
13-Aug-20 OW 52.95 65
36
0
Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
18 18 19 19 19 19 20 20 20 20 21 21 21
Source: Bloomberg Finance L.P. and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Sep 24, 2002. All share prices are as of market close on the previous business day.
Break in coverage Oct 22, 2020 - Jul 02, 2021.
28
(91-22) 6157-3582 03 July 2021
NTPC Ltd. (NTPC.BO, NTPC IN) Price Chart Date Rating Price (Rs) Price Target
(Rs)
02-Nov-18 OW 130.83 152.5
224 OW Rs154 31-Jan-19 OW 115.58 145
27-Mar-19 OW 140.80 154
192 OW Rs145 OW Rs152
05-Jun-19 OW 135.05 156
160 21-Aug-19 OW 117.95 152
OW Rs152.5 OW Rs156 OW Rs120
09-Apr-20 OW 85.20 120
Price(Rs) 128
96
64
32
0
Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
18 18 19 19 19 19 20 20 20 20 21 21 21
Source: Bloomberg Finance L.P. and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Aug 08, 2005. All share prices are as of market close on the previous business day.
Break in coverage Oct 22, 2020 - Jul 02, 2021.
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
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J.P. Morgan Equity Research Ratings Distribution, as of April 03, 2021

Overweight Neutral Underweight
(buy) (hold) (sell)
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IB clients** 54% 48% 38%
JPMS Equity Research Coverage* 46% 39% 14%
IB clients** 78% 70% 55%
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(91-22) 6157-3582 03 July 2021
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Asia Pacific Equity Research

Price Performance Summary Investment Thesis and Valuation

Premium multiples – potential to sustain. We model an FY21-25E 26% earnings

TPWR is trading at 1.6x one-year Figure 2: P/B (x)

TPWR is trading at 20x one-year Figure 3: P/E (x)

TPWR is trading at 9.6x one-year Figure 4: EV/EBITDA (x)

Table 2: TPWR – SOTP valuation

# 1 De-leveraging to drive earnings and

Source: Company reports, J.P. Morgan.

Rs27bn of non-core assets were Table 3: TPWR: FY21 Asset Monetization

Management aspires to reduce leverage further to 1.1x by FY25 via asset

TPWR has Rs30bn as held-for-sale Table 4: TPWR: Planned Divestments

Assuming no asset monetization, Figure 6: TPWR: FY21-25E Net Debt movement

FY25E Net Debt

Assets held for sale

Tata Projects stake

FY25E Bull case

at 20x FY23E P/E

Source: Company reports and J.P. Morgan estimates.

Figure 7: TPWR: Net D/E and Debt/EBITDA Figure 8: TPWR: EBITDA/Interest

Renewable multiples are attractive

Initially, a 51% stake in the operational renewable portfolio was targeted to be

Table 5: India Renewables: EV/MW for recent transactions

CY22E EV/EBITDA Median

Source: Bloomberg Finance L.P. estimates.

Earnings upside from de-leveraging

#2 Carbon neutral by 2050

1. Investment in renewables: By FY25, the company aims to lower the carbon

3. Emission reduction: The company is targeting a 33% reduction in GHG

#3 FCFE positive: Strong operating cash

Capex (22,258) (33,358) (82,074) (89,824) (99,324) (99,324)

Change in cash 13,067 40,185 13,353 904 (202) 1,001

Table 8: TPWR: PAT breakdown (Rsbn)

Figure 13: TPWR: Net working capital and receivable days

Regulated Return businesses

Table 9: TPWR: Regulated business vs consolidated (Rs bn)

Odisha DISCOMs: From loss-making to cash cows

 Incentive on arrears: The four circles have ~Rs103bn of receivables outstanding.

Table 10: TPWR: AT&C Loss trajectory for Odisha DISCOMs

Table 11: Tata Power Delhi Distribution progress on operational parameters

Table 12: TPWR: AT&C losses across Distribution circles

Pending monetization of receivables in Mumbai and Delhi distribution

Figure 16: TPWR: Regulatory assets in Mumbai and Delhi Distribution

Source: Company reports.

Mundra UMPP, Coal Mines and Tax benefit of merger

Table 13: TPWR: CGPL P&L

Mundra-Coal mine hedge

Fuel under-recovery reduced sharply in FY20 at Rs0.46/kWh vs Rs0.78/kWh in

Table 14: TPWR: Coal mine P&L

Table 15: TPWR: Mundra-Coal mine combined profitability (Rsbn)

Figure 17: TPWR: Renewable Portfolio

Table 17: TPWR solar bids won in auctions by State DISCOMS

Table 18: TPWR: Renewable portfolio cash profit vs equity requirement

#4 New Businesses potentially at deep

Solar: EPC, Rooftop, Pumps and Microgrids

Table 19: Solar Manufacturing Capacity

Table 20: EV charging potential in India

Depreciation 23,980 23,930 26,340 27,450 29,988 32,611 36,249 39,903

Interest 37,230 41,700 44,940 40,100 34,992 38,895 43,316 47,726

PBT 2,590 1,900 11,890 12,232 18,052 29,412 33,118 35,826

Tax 1,650 6,560 8,620 6,520 11,614 12,571 13,538 14,271

Table 23: TPWR: Balance Sheet Summary

EQUITIES & LIABILITIES

Table 24: TPWR: Cash Flow Statement