Torrent Power engaged in power generation and distribution has registered 18% growth in sales for the quarter ended Dec 2018 to Rs 3253.50 crore. But with operating profit margin crash by 630 bps to 22.6%, the operating profit was down by 7% to Rs 736.41 crore. After accounting for lower other income, higher interest and depreciation cost, the PBT down by 28% to Rs 253.65 crore. But the PAT was up by 16% to Rs 238.19 crore as the taxation stand lower by sharp 90% to Rs 15.46 crore. Eventually the net profit (total comprehensive income) was up by 15% to Rs 237.19 crore after accounting for higher minority interest and lower other comprehensive income.

• Fall in operating profit margin to the extent of 630 bps to 22.6% was largely due to sharp rise in cost of electricity purchases as well as fuel cost. Fuel cost as proportion to sales was up by 520 bps to 32.9%. Similarly the cost of electricity purchased was up by 270 bps to 33.1%. But the material cost was down by 20 bps to 1.9% and that of staff cost and OE was down by 50 bps and 100 bps respectively to 3.4% and 6.2%.
• According to the press release of the company, the net increase in total comprehensive income for the quarter ended Dec 2018 was due to 1) Improved performance of franchised distribution businesses primarily driven reduction in T&D losses; 2) higher performances from renewable business due to increased capacity of wind power projects; 3)favourable movement of deferred tax charge arising from a change in computation method adopted in the previous year, which resulted in additional charge in the comparative quarter; 4) recognition of regulatory gap balance on accrual basis effective from April 1, 2018 (due to change in accounting policy in compliance with new accounting standard IND-AS 115 revenue from contract with customers) and 5) increase in finance and depreciation cost reflecting additional capex in distribution and renewable projects.

Nine month performance

Consolidated sale was up by 18% to Rs 10226.17 crore. But with OPM contract by 360 bps to 24.3%, the growth at operating profit was restricted at 3% to Rs 2489.68 crore. However the PBT was down by 7% to Rs 1043.20 crore after accounting for lower OI, higher interest and depreciation cost. With taxation stand lower by 58% to Rs 164.17 crore, the PAT was up by 20% to Rs 879.03 crore. Eventually the total comprehensive income was up by 20% to Rs 875.53 crore with minority interest and other comprehensive income stand lower by 27% and 87% respectively to Rs 4.04 crore and Rs 0.54 crore.

Other developments

Indian Accounting Standard (lnd AS) 115 Revenue from Contracts with Customers, replaces, inter alia, the existing Ind AS 18 Revenue and is mandatory for reporting periods beginning on and after 1st April, 2018. The application of lnd AS 115 has impacted the Group's policy with respect to revenue recognition of licensed electricity distribution business. The Group has applied the Modified Retrospective Approach for transition adjustments. Due to the application of lnd AS 115, retained earnings as at 1st April, 2018 are higher by Rs 647.12 Crore, while Revenue from Operations and Profit for the quarter ended & nine months ended December 2018, are higher by Rs 66.49 crore & Rs 196.82 crore respectively.

The Company has been awarded distribution license for Dholera Special Industrial Region (Dholera SIR) of ~920 Sq Kms for 25 years as additional licensee besides UGVCL/PGVCL. Estimated capex in the licensed area is about Rs 500 crore over 5 years, depending on how industries come up in the area. Cost plus business model ensuring atleast post-tax ROE of 14%.

TPL has been awarded the distribution franchise for Shil, Mumbra & Kalwa area by MSEDCL, based on competitive bidding process for 20 years. The 65 Sq Kms area is part of Thane Urban Circle of MSEDCL and is emerging as one of the preferred real estate investment destination with promising growth prospects. Bid Levelised input power purchase Rs. 4.87/kWh (Benchmark Levelised input powerpurchase Rs. 4.82 / kWh). Estimated capex is in the franchised area over the term is about Rs 300 crore, of which Rs 150 crore of capex is estimated to be invested in first 5 years.

Torrent Power : Consolidated Results