Tag - Debt reduction

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08 May

Company sticks to its debt reduction initiative- Mr Naveen Jindal

Excerpts from an interview of Mr.Naveen Jindal, Chairman, Jindal Steel & Power Limited (JSPL) with ET Now on 5th May 2020:

Update on the Indian Equity Market:

On Thursday Nifty closed -0.8% lower at 9,199. Among the sectoral indices FIN Services (-1.6%), FMCG (-1.4%) and Bank (-1.0%) closed lower. NIFTY PSU Bank (+0.1%), NIFTY Media (+0.1%) closed on a positive side. Bharti Infratel (7.1%), Indusind Bank (6.6%) and Adani ports (4.4%) closed on a positive note. NTPC (-4.3%), BPCL (-4.2%) and ONGC (-4.2%) were among the top losers.

  • Jindal Steel & Power (JSPL) is looking for a strategic partner to offload part of its stake in its subsidiary in Oman, marking a significant shift from its earlier plan for an IPO as the Covid-19 pandemic impacts industries.
  • The company plans to stick to its debt reduction initiative by reducing overall debt to Rs. 25,000 crore in two years.
  • The pandemic has impacted functioning and production of steel industry, JSPL’s plants at Raigarh and Angul are fully operational since the start of the lockdown.
  • As domestic demand is impacted, the company is looking for exports. The company is exporting 80% of production these days.
  • The company is exporting steel to China, Malaysia, Europe, the USA, export order of rail blooms from France. In the domestic market the company had received supply orders from Rail Vikas Nigam for Kolkata Metro.
  • Domestic steel demand has seen a major fall post-March, due to complete lockdown. Demand will pick up up before the monsoon season, post lockdown, as infrastructure projects and construction activities will resume.
  • A stimulus is necessary and the government should frontload its $250 billion spending plan under the National Infrastructure Pipeline. The government should also announce a sizeable package to compensate loss of income suffered by Indian industry.
  • JSPL is looking to raise money but not considering equity.
  • On overseas front plants and mines are doing well for the company.
  • The company had applied for a moratorium, like many other corporate.

 

Consensus Estimate: (Source: market screener and Investing.com websites)

  • The closing price of JSPL was ₹ 90/- as of 7-May-2020.  It traded at -20.5x/-20.3x/11.7x the consensus earnings per share estimate of ₹ -4.39/-4.43/7.65 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price for JSPL is ₹179/- which implies a PE multiple of 23.3x on FY22E EPS of ₹7.65/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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05 Mar

Debt reduction plan on track – Praveer Sinha, Tata Power

Update on the Indian Equity Market:

After a small jump yesterday, NIFTY continued the declining trend on Wednesday by closing 0.4% lower at 11,254. In addition to the global markets’ anxiety, fresh coronavirus cases reported in India led to the selling pressure.  Leading the losses were YESBANK (-6.1%), EICHERMOT (-4.0%) and BAJFINANCE (-3.9%). CIPLA (+4.8%), DRREDDY (+4.1%) and SUNPHARMA (+2.8%) were among the top gainers. Among sectors, NIFTY MEDIA (-2.0%), NIFTY BANK (-1.7%), NIFTY PVT BANK (-1.7%) were the worst hit. NIFTY PHARMA (+2.0%) and NIFTY IT (+1.0%) were the only sectors to close on a positive note.

Debt reduction plan on track – Praveer Sinha, Tata Power

Excerpts from an interview of Mr. Praveer Sinha, Managing Director, and Chief Executive Officer, Tata Power published in Mint dated 4th March 2020

  • India is very dependent on China and Taiwan for sourcing solar panels. India imports 90% of its solar panels from China.  As a result, the renewable energy business in India is getting impacted by the Covid-19 outbreak. Many projects are getting delayed and the delay will last for another 2-3 months.
  • On supply of power to states, Tata Power has been waiting for more than a year for the states to resolve the issues related to tariff hike.  Tata Power will be constrained to close the units around 10th March 2020, if the issues are not resolved quickly. The issues mainly pertain to 5 states- Gujarat, Maharashtra, Punjab, Rajasthan and Haryana.
  • Out of the 5 states, Gujarat is ready to revise the power purchase agreement (PPA) with Tata Power. Maharashtra also seems to have moved forward and the new government is making a decision. Punjab, Haryana, and Rajasthan are yet to take any decision and this is where the delay in signing a revised PPA is coming in.
  • Tata Power has an accumulated loss of Rs 110 bn as of December 2019. Loses have come down drastically due to lower coal prices and better sourcing of coal as well as better blending. But the issues still need to be resolved in order to have continued supply from the Mundra plant, which is one of the lowest cost plants even with revised tariff.
  • Tata Power has concluded a deal for the synergy plant in South Africa and money will come in by March 2020. Management expects discussions for Zambia plant and shipping business to both conclude by 2QFY21E. Management also expects to divest Baramulti Suksessarana Tbk (BSSR) and Antang Gunung Meratus (AGM) by 3QFY21E. In the last 1 year, Tata Power also has been able to get more than $ 100 mn from Arutmin. Everything is on track in terms of the debt reduction plan. It is just a question of getting the right buyer and the right price. Considering all these plans, management expects Rs 60 bn of debt reduction by end of FY21E.
  • Tata Power does incremental capex for their regulated business such as transmission and distribution in Mumbai or Delhi distribution as well as some capex in generation business, especially Flue-gas desulphurization (FGD). These generate RoE of 15.5%. This capex has been helping Tata Power in improving EBITDA. Since last year, the average EBITDA has increased in the range of 22-24%. Whatever Investments the company is doing is generating good cash which is useful for growth.
  • Tata Power is also looking at monetizing some other businesses. They have great opportunities especially in renewables where they can leverage the growth they have. Tata Power already has 2,700 MW of operating renewable assets and another 700 MW is getting commissioned.
  • There is no impact on the shipping of coal. The shipping to China has actually increased as their coal mines are not operating. Tata Power is also getting all their coal shipments as they have firm contracts with all coal companies and shipping companies.

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Power Company was ₹ 44.4/- as of 04-March-2020.  It traded at 10.8x/8.2x/ 7.3x the consensus earnings estimate of ₹ 4.1 / 5.4 / 6.1 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Tata Power Company is ₹ 72.3/- which implies a PE multiple of 11.9x on FY22E EPS of ₹ 6.1/-.
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10 Feb

Reducing non-core debt to pare debt: Tata Motors

Update on the Indian Equity Market:

After a week-long rally, investors booked profits which led to a fall of 52 points in Nifty to close at 12,087. This follows the weak Asian markets following the rising death toll from a virus spreading from China. Apart from result season, there was no major catalyst to move the markets on Friday. Within the sectoral indices, Media (1.7%), Pharma (0.6%) and IT (0.5%) closed the day higher while REALTY (-1.8%), AUTO (-1.0%) and PVT BANKS (-0.5%) were the highest losers. Among the index stocks, ZEEL (5.5%), NTPC (3.2%) and COALINDIA (2.8%) led the gainers whereas EICHERMOT (-3.1%), TATAMOTORS (-3.0%) and INDUSINDBK (-2.7%) brought the index lower.

Reducing non-core debt to pare debt: Tata Motors

Excerpts from an interview with Mr Guenter Butschek, MD & CEO – Tata Motors published in Livemint on 7th February 2020.

  • Mr Butschek said that the company has invested sufficiently in its product library that includes common vehicle architectures, powertrains, transmissions, and other shared technologies to reduce overall product development cost.
  • He is confident that in the coming two years, the company will see strong growth as far as modularity is concerned across commercial and passenger vehicles. He said that the company has done homework on its turnaround plans, investing in new technology platforms such as CESS (connected, electric, shared and safe mobility) and tapping into the Tata Group companies’ strengths to build an electric vehicle (EV) ecosystem.
  • Referring to the company’s efforts to strengthen its financials, he said Tata Motors has turned cash accretive despite the collapse of the medium and heavy commercial vehicle (MHCV) segment, which contributes 47% of total commercial vehicle revenue that accounts for 65% of total domestic revenue.
  • The product portfolio of company is much better than what it was when the economic slowdown began two years ago. He is confident that once the economy revives, the significantly upgraded products would do much better in terms of cost-based contribution to company’s margin base.
  • Butschek said that customers would take a while to absorb the higher cost of purchases under BS-VI emission norms, which would entail a product price increase of 10-15%.
  • The company had ₹ 233,365 mn worth of debt in its India business as of 30th September 2019. The consolidated debt including Jaguar Land Rover (JLR) stood at ₹954,650 mn. He said that the company is planning to reduce non-core assets to reduce the debt.
  • The company is focusing on reducing costs, including material costs and working to enhance productivity.
  • As part of its turnaround plan, Tata Motors plans to launch 12-14 passenger vehicles over the next three to five years, besides at least four new electric vehicles over the next 18-24 months.

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Motors was ₹5/- as of 07-February-2020. It traded at 109x/ 11x/ 7x the consensus earnings estimate of ₹1.6/ 15.4/ 24.7 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 201 /- implies a PE multiple of 8x on FY22E EPS of ₹ 24.7 /-
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