A news came and there was a huge drop in the shares of this company of Tata Group, know what happened?

News Topical, Digital Desk : Shares of Tata Power Company Limited witnessed a decline on Tuesday, 22 July. The main reason for this decline is the central government's refusal to extend Section 11 for imported coal-based power plants beyond June 30, 2025. Due to this, all five units of Mundra Power Plant in Gujarat have been closed from July 1 during maintenance.

According to brokerage firm IIFL, there are two main reasons behind the shutdown:

no peak power shortage in the financial year and the central government's willingness to find a long-term solution to the Mundra tariff issue. Tata Power's profit after tax (PAT) estimate for this financial year is estimated to be 5% to 8% due to the plant shutdown. The company is likely to lose revenue of about ₹100 crore to ₹150 crore for every month the plant is shut. However, the loss due to the Mundra shutdown will be partially compensated by increased revenue from cell-module sales and rooftop solar installations. Axis Capital said that Tata Power's management hopes to find a permanent solution to the problem related to the Mundra power purchase agreement (PPA) in the near future. If the current shutdown lasts less than one to one and a half months, the company can charge plant availability factor (PAF) charges. JM Financial estimates that Tata Power will finalise PPAs with five beneficiary states including Gujarat, Maharashtra, Rajasthan, Punjab and Haryana. The Mundra plant has performed 25%, 32%, 56% and 65% in plant load factor (PLF) in the past business years, respectively. It has registered a gain of 11.44% in the last 6 months. According to analysts, the non-renewability of Section 11 has increased uncertainty in the operation of power plants based on imported coal, which has affected Tata Power's business plans. Nevertheless, the company's growing investment in the renewable energy sector and improvement in other sectors give it dividend prospects. Despite the closure of the Mundra power plant, hopes remain for the long-term growth of Tata Power.

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