Negatives priced in
Jan 16 2012, 01:42 IST
further review. However, any dividend received from the overseas subsidiaries will attract tax (FY12 at MAT—minimum alternate tax-rate), and thus leads to valuation impairment.
Options to improve the viability of Mundra UMPP and possibly salvage profitability include operating the project at contractual norms, which entails 100% recovery of fixed charges at 80% plant availability (PLF of 72-78%), usage of low grade coal, possible capacity expansion by 1.6GW (brownfield) and leveraging tax benefits on losses. Any regulatory concessions can lead to improvements in project economics.
We have not factored a large part of these upside possibilities in our estimates. We believe that Tata Power is still relatively better placed amongst other private IPPs and stock correction helps build an LT investment case.
—Motilal Oswal
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