For the 12th straight quarter, Tata Power posted an increase in its consolidated net profit. Chief executive Praveer Sinha tells Kalpana Pathak that he expects this trend to continue as all the existing operations have been doing well and to bring in further efficiency, the company plans to merge all renewable businesses into one. Edited excerpts:
You have been focussing on debt reduction, asset-light strategy, and consumer-facing businesses. How has it panned out so far?
All our existing operations have been doing very well and some of our new businesses, including renewable, rooftop solar and large utility-scale solar pumps, among others, have started showing results as good foundation has been laid for them. We have carried out a lot of changes in the new distribution acquisition in Odisha, in terms of proper billing and metering of the consumers collection. We’ve changed nearly 20 lakh meters out of 90 lakh meters and the provisional billing has reduced drastically and collection has improved. Many of the things that we have done, the benefit of that will come in the subsequent quarters and you will see much better and improved results.
You had plans to reduce debt by hiving off the renewable energy business into an InvIT? Any update?
We did have a plan at one stage but now we are not going ahead with it. We have a debt of nearly Rs 39,000 crore and debt equity which has now actually come down to 1.32, which is very good for an infrastructure company. Similarly, our EV to EBITA has also improved and we are at something like 3.6. Again, this is a very healthy number. Going forward, we expect that better performance and better ebitda that we will have, we’ll be able to serve and service the debt that we have.
Recently your facilities faced cyber-attacks. What are you doing to ensure this does not recur?
This was a very unfortunate incident. Our IT systems, operational technology and power supply system did not get impacted but some of the data they had encrypted we have now taken further steps in terms of consultations with experts in cybersecurity and we are now ensuring that better software better tools, better filters are being provided to ensure that these types of attacks do not happen and does not impact our business. And I think some of the best-in-class solutions that we are implementing will help us to prevent any such incident in the future.
Your company has 61 subsidiaries. Any plans to consolidate?
For our renewable business, we will bring all the renewable business on one single platform and all the renewable companies will start getting merged into the renewable platform which is Tata Power Renewable Energy Ltd (TPREL). However, there will still be some subsidiaries because the nature of the business requires us to have an SPV (special purpose vehicle) for capital projects. But other than that, everyone else will get subsumed in the TPREL. Also, there will be huge efficiency due to this because the extra manpower in each of these companies will all get subsumed in one company. There will be a whole lot of statutory governance issues which you need to create separate votes and all that that all will go away. So, there are synergies that will happen. And I think the benefit will be huge for the funding merged entities.
Your rooftop solar business has seen 100% revenue growth in Q2. How is your company managing this when the segment has not picked up for other players?
You need to have a very retail mindset for this business. Today we have nearly 12 million consumers across the country. It is a package service that we provide. We also give huge amount of consumer conveniences in terms of providing them proper app on which they can see on real time basis, their consumption of energy, the generation, how much they have given to the grid, financial benefits etc. We are today number one is the rooftop solar business.
What is Tata Power’s focus for its international business?
Internationally we have been divesting. We have divested some of our investments in South Africa and in Singapore. We are in the process of divesting our other investments also, depending upon what sort of market appetite is there and what sort of benefit we are getting from that transaction. We will carry out those transactions at the appropriate time. But we are very certain that we will divest. We have huge plans in India as the country plans to add 350 gigawatts of renewable capacity by 2030. No other place in the world offers this sort of opportunity.
Is your company evaluating opportunities in green hydrogen?
Yeah, we are. We are in discussions with many of our partners to see that we can do some pilot projects in India. And once we do the pilot project and get the comfort in terms of the technology, pricing, and the services to offer, we will scale it up. We are also looking for opportunities in offshore wind.
Power consumption has rebounded and is set to increase. How equipped are we to meet this rise in demand?
In the last six months power demand has gone up by 12%. In fact, in the first quarter the demand has gone up by nearly 17%. We are seeing a huge rebound in terms of the power consumption, and this is coming from all sectors including industrial, commercial, and residential. It reflects economic growth. I think the country is poised to meet the future requirement of power. The existing capacity that we have in our coal-based, gas based and hydro and some of the capacity additions in hydro that will come, I think we will be able to meet our future requirement of power there should not be any shortages, per se.
What we saw last October of this April was a sudden demand increase. Besides I think the railways and the coal companies are geared up to have much better stocking of coal, including its transportation and logistics to ensure that we do not have even temporarily shortage or any challenges in terms of operating all plants at full capacity.
Power prices are up. What is your outlook on the same?
Power prices have gone up primarily because coal prices and the transportation costs have gone up. It is all dependent on the price of oil and price of coal. But I do expect that in future when we have a much better supply chain management in the country, in terms of commodity pricing or in terms of coal availability, power prices will be aided. Also, if government takes certain steps to bring power in GST, power costs can come down drastically. Besides, the government must do tariff rationalization wherein the industrial and commercial consumers do not have to pay large cross subsidy for the residential and non-residential agriculture consumer. Then I think that will help us. So, there is a whole lot of opportunities to bring down the power costs especially for industrial and commercial consumers by nearly 30 to 40%.
So, do you think the electricity Amendment Bill will be able to bring in much needed reforms?
I think the Electricity Amendment Bill is a very important step. I think there is certain amount of discipline that will come because of the amendments that are being proposed. And these are very good for the sector because this sector must be commercially viable. It needs to have a certain discipline in terms of procuring power and paying for the power on time. I also don’t think the tariffs will go up due to any amendment but will get rationalized. Today certain segments of consumer end up paying very high tariffs because they cross subsidize other consumers. There should be a uniform tariff and if any consumer must be given certain benefits in terms of reduction of tariffs, or waiver of tariffs, then that should come as a part of the government subsidy program.
