Tata Power has been in the limelight of late, on hopes of passage of the much-awaited Electricity Bill in Parliament.

From a recent low of Rs 106.10 touched on 8 January 2003, the stock has risen by 12.06% on steady buying support. Interestingly, the average daily volumes on the counter on the BSE are less than 50,000 shares in the same period.

Like a number of other power (generation and distribution) stocks like BSES, CESC, Gujarat Industries Power etc., the rise on the Tata Power counter is largely attributed to the hopes of clearance to the Electricity Bill.

Power Minister Anant Geete said on Friday that the Electricity Bill, aimed at reforming the power sector, will be considered in the forthcoming Budget session of Parliament beginning on 17 February 2003.

The Standing Committee has cleared the Bill with a few suggestions, and it will be taken up with the Union Cabinet on 11 February 2003.

The long-standing hurdles to improvement of the power sector will be removed once the Electricity Bill becomes an Act.

The passage of the Electricity Bill will be followed by a National Tariff Policy in order to bring about uniformity in the tariff fixation procedure by state regulatory commissions.

According to power sector analysts, the Electricity Bill seeks to abolish the current restrictions on power generators and aims at reforming the sector. It will also improve the health of State Electricity Boards.

In December 2002, a parliamentary panel had cleared the Electricity Bill, that proposes to rationalise electricity tariff. The passage of the Bill in Parliament, in fact, will give power companies access to transmission and distribution and they may even be made eligible to supply power directly to consumers.

Apart from the emphasis on private participation in the Bill, competition and efficiency, introduction of anti-theft laws at the state level, open access to the transmission and distribution network and time-bound restructuring of the SEBs has also given a serious thought.

The reforms in the power sector is expected to help the power (generation, transmission and distribution) companies like Tata Power, according to players.

Meanwhile, the financial performance of Tata Power has been impressive. For the quarter ended 31 December 2002, the company posted a 34% rise in net profit to Rs 145.97 crore (Rs 1.45 billion) on net sales of Rs 1,147.91 crore (Rs 11.47 billion).

Tata Power is engaged in power, energy and telecom businesses. The company is in an integration and expansion mode. It wants to utilise its strong assets and expertise in the expanding market to consolidate and grow further. Its growth strategy also includes diversification in complementary sectors and investment in emerging opportunities.

The company has lined up huge investments in all the areas of its operations. In 2003, it plans to invest another Rs 550 crore (Rs 5.5 billion), which will take the total investments to Rs 1,750 crore (Rs 17.5 billion). In 2004, its cumulative total investment will be close to Rs 2,250 crore (Rs 22.5 billion) out of which Rs 1,250 crore (Rs 12.5 billion) will be in power, Rs 250 crore (Rs 2.5 billion) will be in energy and Rs 750 crore (Rs 7.5 billion) in communication.

Meanwhile, the Tata Group, as part of its plan to re-organise the group's telecom operations, is planning to transfer the broadband infrastructure business of Tata Power to the unlisted Tata Teleservices. The group was earlier looking at transferring the business to VSNL, but it now appears to have changed plans.

Ernst & Young is currently doing the valuation of Tata Power's broadband business. Details of the arrangement have not been announced, as it is yet to be decided by the Tata group as to whether the transfer will be a cash deal or Tata Power will get shares of TTSL.

Tata Power already holds about 49.83% equity stake in TTSL. The transfer of broadband infrastructure business to TTSL by share swap would further increase Tata Power's stake in TTSL.

Meanwhile, the overall market sentiment appears to be cautiously optimistic towards the run-up to the Budget. Players hope that the Budget may go for exemption of dividend tax, as recommended by the Kelkar committee on tax reforms. It will be a major positive development for the market, said players. Market men reckon that dividend yield on a lot of stocks like Tata Power (50% dividend for FY 2002) may become attractive in the event of exemption of dividend tax.

BSE Code: 500400