ICICI Securities puts 'hold' on Tata Power
CMP: Rs 752.95
Target price: NA
ICICI Securities has initiated coverage on Tata Power with a ‘hold’ rating while advising investors to consider aspects like loan servicing and project funding capabilities of the company. “Falling coal prices do not augur well for Tata Power as it has a long position on coal. The company’s subsidiaries may face difficulty in servicing loan taken to acquire 30% stake in two Bumi mines, KPC & Arutmin,” states the report. The brokerage also feels that the slowdown in metals in China and the resultant sluggishness in power consumption, long-term coal prices will most likely be at $40-45 per thermal equivalent (TE). “Thus, Tata Power will either refinance
$950-million loan or raise additional loan in India to repay the Bumi debt, which appears difficult given the highly leveraged balance sheet,” says the report. Moreover, Tata Power requires at least Rs 1,000 crore to fund its ongoing projects, notes the report.
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