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Higher sales, operational efficiency to drive CESC’s revenue growth in FY23: Emkay Global

With a 210 MW medium-term power purchase agreement (PPA) from CESC’s 600 MW Dhariwal unit, expectation of lower loss in Kota distribution licensee area, and demand growth in Noida distribution area, CESC is likely to see a double-digit growth in its earnings in FY23 with reduction in T&D losses contributing to growth.

According to an Emkay Global Financial Service report, CESC has been able to achieve breakeven in those distribution areas where it has been able to contain T&D losses. While the Kolkata-based private sector power major has already been able to reduce T&D losses in three of its four distribution franchisees outside Kolkata, showcasing major operational efficiencies, Malegaon distribution circle has a lot of room left to bring about operational efficiencies, which can drive CESC’s earning growth.

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CESC, in the past few years, has secured distribution franchisees of Bikaner, Bharatpur, Kota and Malegaon, though these franchisees still remain a drag on the company’s performances due to various reasons, including Covid-19. According to the report in Bharatpur, sales growth remained muted at 4%, with profit after tax of Rs 2.2 crore in FY22. This circle has reported breakeven since FY19 with T&D loss coming down from 32% to about 13% in the past six years. Since FY20, T&D loss has remained at 12-14%. Therefore, unless significant improvement in demand is seen, substantial uptick in PAT will not be reported.

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In case of Bikaner, sales growth remained muted at 2% with PAT of 8.9 crore in FY22. This circle has reported breakeven since FY20 after T&D loss came down from 28% to around 14% in the past six years. Since FY20, T&D loss has remained at 14-15%. In Kota sales growth stood at 11%,in FY22 but this growth happened after a sharp decline of of sales by 17% in FY21. Sales at800 crore in FY22, though, remained below the FY20 level at Rs 870 crore but things turning around in the operational front drove the growth in FY22.

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