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Tata Power Co
Rupee Depreciation May
Cause a Loss in F2Q12
Quick Comment: Tata Power had forex debt of about
US$2.5 bn at the end of June 2011 which primarily
comprised US$357 mn in the parent company (Euro
bonds and FCCB), US$1.3 bn in Mundra UMPP and
US$790 mn in the coal SPVs. We expect the 10%
Rupee depreciation against the US$ during F2Q12 to
have the following implications:
Impact on standalone results: While the company has
about US$357 mn of dollar liabilities, it also has dollar
assets in the form of loans given to coal SPVs and bank
balances. We believe the company may show some net
forex gains in its standalone results.
Impact on consolidated results: Since the loan given
to coal SPVs will be netted off on consolidation, there
could be a forex loss of about Rs1.4 bn due to
translation of Euro bonds and FCCB. For the coal SPVs,
earnings will be boosted due to a weaker Rupee while
translation of balance sheet items (assets and liabilities)
would not impact as they are all denominated in US$.
The key impact will be from the foreign debt component
in Coastal Gujarat Power Limited (CGPL), the SPV that
houses Mundra UMPP. Tata Power follows an
accounting policy wherein translation gains/losses are
capitalized in CGPL’s standalone results while they are
shown in the P&L in consolidated results. Hence,
assuming CGPL drew another US$200 mn of debt
during F2Q12, resulting in total debt of US$1.5 bn at the
end of Sep 2011, the translation impact could be a forex
loss of about Rs6.1 bn. Hence total forex loss could be
approximately Rs7.6 bn.
Conclusion: Our consolidated earnings estimate for
F2Q12 (pre forex) is Rs5.6 bn. If the company were to
maintain its accounting policy of expensing the forex
impact in the P&L, then consolidated results may turn
into a loss of Rs1.9 bn (not factoring in stronger coal
earnings). However, it is to be seen if the company
decides to route the translation impact through the
balance sheet.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power Co
Rupee Depreciation May
Cause a Loss in F2Q12
Quick Comment: Tata Power had forex debt of about
US$2.5 bn at the end of June 2011 which primarily
comprised US$357 mn in the parent company (Euro
bonds and FCCB), US$1.3 bn in Mundra UMPP and
US$790 mn in the coal SPVs. We expect the 10%
Rupee depreciation against the US$ during F2Q12 to
have the following implications:
Impact on standalone results: While the company has
about US$357 mn of dollar liabilities, it also has dollar
assets in the form of loans given to coal SPVs and bank
balances. We believe the company may show some net
forex gains in its standalone results.
Impact on consolidated results: Since the loan given
to coal SPVs will be netted off on consolidation, there
could be a forex loss of about Rs1.4 bn due to
translation of Euro bonds and FCCB. For the coal SPVs,
earnings will be boosted due to a weaker Rupee while
translation of balance sheet items (assets and liabilities)
would not impact as they are all denominated in US$.
The key impact will be from the foreign debt component
in Coastal Gujarat Power Limited (CGPL), the SPV that
houses Mundra UMPP. Tata Power follows an
accounting policy wherein translation gains/losses are
capitalized in CGPL’s standalone results while they are
shown in the P&L in consolidated results. Hence,
assuming CGPL drew another US$200 mn of debt
during F2Q12, resulting in total debt of US$1.5 bn at the
end of Sep 2011, the translation impact could be a forex
loss of about Rs6.1 bn. Hence total forex loss could be
approximately Rs7.6 bn.
Conclusion: Our consolidated earnings estimate for
F2Q12 (pre forex) is Rs5.6 bn. If the company were to
maintain its accounting policy of expensing the forex
impact in the P&L, then consolidated results may turn
into a loss of Rs1.9 bn (not factoring in stronger coal
earnings). However, it is to be seen if the company
decides to route the translation impact through the
balance sheet.
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