Tata Power’s 2QFY10 consolidated recurring PAT at Rs3.7bn was down 29% YoY, led by: (1) Parent recurring PAT at Rs2.0bn down 26% YoY on higher effective tax rates and lower exchange gains; (2) Lower YoY coal prices in KPC and Arutmin coal mines, leading to Coal EBIT of Rs3.4bn, down 18% YoY; and (3) Increased tax provision of Rs103mn in NDPL on change in MAT rules leading to PAT decline of 32% YoY. 1HFY10 consolidated recurring PAT at Rs7.8bn is flattish YoY
The company had an effective tax rate of 21.5% in FY09 at the parent level and it expects this will go up to ~27% from FY10E onwards on higher MAT rates
A higher tax rate of ~27% in 2010E could lower our parent EPS estimates by ~11%, consolidated EPS estimates by ~6%, and the fair value for the company by ~5%.
