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With the overhang of West Bengal elections now over, we expect the West Bengal Electricity Regulatory Commission to expedite the issuance of tariff order for CESC Ltd.’s Kolkata discom, which has been pending for the past three years (Ministry of Power’s recent directive on timely tariff determination and full cost reflectiveness of tariff will help).
Although, on consolidated basis, the company’s earnings have improved on better performance by subsidiaries, profits from the Kolkata business have remained stagnant as regulated equity growth has not been approved.
With the expected issue of tariff order, approval of capex incurred in the past three years and future capex, we expect the ambiguity in earnings and valuation to diminish and the company may be the next utility stock to rerate.
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ICICI Securities CESC Company Update.pdf
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