Tata Power Co. (TATAPOWER)

FairStock Score: 44/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• 5-year revenue CAGR of 14.90% demonstrates strong historical expansion
• Latest quarterly net margin of ~8.6% (₹1,194 Cr profit on ₹13,948 Cr sales) shows operational viability
• Promoter holding of 46.86% aligns management with minority shareholders
• ROE of 10.59% and ROCE of 10.81% are respectable for a capital-intensive power utility

Concerns

• Valuation far exceeds intrinsic value: Graham Number ₹173.15 implies -118.04% margin of safety
• High leverage: Debt/Equity 1.86 and Altman Z-Score 1.38 indicate financial stress
• Deteriorating recent trends: profit growth -13.07%, sales growth only 0.62%, and free cash flow at ₹-2,756 Cr
• Extremely rich metrics: P/E 31.90, P/B 3.84, EV/EBITDA 296.86, with a dividend yield of just 0.60%

AI Analysis

Tata Power is a name I know, but numbers matter more than reputations. At ₹430.30, the market is paying ₹1.21 lakh crore for a company earning just over 10% on equity. That's not unreasonable for a utility, but the price-to-earnings of 31.9 and price-to-book of 3.84 suggest investors are paying for a future that may not appear. Graham would demand a margin of safety; here we have negative 118% against the Graham number of ₹173.15. Simply put, you are paying more than twice the conservative intrinsic value. The business is real: latest quarter sales ₹13,948 Cr, net profit ₹1,194 Cr, and a 5-year revenue CAGR of 14.9% shows it was a good growth story. But the last year is concerning: sales growth a mere 0.62%, profit down 13.07%. Free cash flow is negative ₹2,756 Cr, and debt/equity stands at 1.86. Altman Z-score of 1.38 is in the danger zone. High leverage in a capital-intensive industry with shrinking profitability is a recipe for trouble. I see no moat wide enough to justify such a premium. The 0.60% dividend is inadequate, and EV/EBITDA at 296 is absurd. Promoter holding of 46.86% is a plus, but it doesn't make the price right. As Ben Graham said, "Price is what you pay; value is what you get." Here you would overpay for mediocre returns. A quality utility? Maybe. A bargain? No. I'd keep this on my watchlist but not touch it at this price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer