Shares of Tata Power Company continued gaining streak for the third straight session on Tuesday, in an otherwise weak broader market, with the share price rising 3% to touch a 10-month high of ₹243.90 in intraday trade on the BSE. The Tata Group stock witnessed a surge in buying activities as volume more than doubled to nearly 21 lakh crore as compared to two-week average of 9.14 lakh stocks. Investors rushed to buy the power stock ahead of its first quarter earnings report slated to be released on August 9.

In the last three sessions, Tata Power shares have risen 10%, while it rebounded nearly 34% in the past four months, from its 52-week low of ₹182.45 hit on March 28, 2023. The recent rally in share price can be attributed to positive credit ratings and stable outlook for the power sector.  

Extending its uptrend, Tata Power shares opened marginally higher at ₹237.05 against the previous closing price of ₹236.70 on the BSE. During the session so far, the stock jumped as much as 3.04% to ₹243.90, while the market capitalisation increased to ₹77,552 crore. At the current level, the stock trades nearly 3% lower than its 52-week high of ₹251 touched on September 7, 2022.

Tata Power has outperformed the S&P BSE Power index in terms of returns in the last 12 months. The index heavyweight has delivered 9.3% returns in the last one year and 16.8% in the calendar year 2023. In contrast, the BSE Power index has given negative returns of 4.2% and 0.4% in one year and the current calendar year, respectively.

In the last 3 months, Tata Power share price has risen 20.6%, while it added 9.3% in a month. In comparison, Power index registered a growth of 16.6% and 8.8%, respectively, during the same periods.

Tata Power closed the financial year 2022-23 with strong growth in its top and bottom line, aided by better performance across all business clusters. The consolidated revenue rose 32% at ₹56,033 crore against ₹42,576 crore in FY22, while consolidated PAT increased by 77% at ₹3,810 crore compared to ₹2,156 crore in FY22. The Consolidated EBITDA grew by 23% at ₹10,068 crore compared to ₹8,192 crore in FY22.

On May 29, 2023, the board of Tata Power had approved a proposal to raise up to ₹3,000 crore through the issuance of NCDs on a private placement basis.

ICRA, in a recent report, reaffirmed positive rating on Tata Power and revised outlook to ‘positive’ from ‘stable’, citing improvement in its operating and financial performance across the generation and distribution businesses. The agency has assigned ‘[ICRA]AA (Positive)’ rating to the company’s non-convertible debentures (NCDs) worth ₹118 crore.

CARE Ratings also revised the outlook assigned to Tata Power’s NCDs and upgraded outlook to ‘positive’ from ‘stable’. The ratings factors in the improvement in overall leverage profile of the company on account of co-investor’s equity infusion in renewable business, higher profitability of the Mundra plant on account of extended period of operation under extraordinary provisions invoked by the Ministry of Power, it said in a report released on June 29, 2023.

CRISIL Ratings also assigned its 'CRISIL AA/Stable' rating to the non-convertible debentures of Tata Power and reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities and existing debt instruments. The rating continues to reflect Tata Power's stable cash accrual from the regulated businesses, which account for about 40-45% of total EBITDA; the diversified business risk profile and strong financial flexibility, being a part of the Tata group. These strengths, however, are partially offset by losses in CGPL (now merged with Tata Power) on account of unviable project economics, and moderate debt protection metrics, it said in a report released on June 21, 2023.

Among others, India Ratings also affirmed the rating with stable outlook for the company’s debt securities. 

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