The major contributors for the increase in net profit attributable to owners for the quarter are: 1) Increase in contribution from merchant power sales during the quarter; 2) Higher profits from Renewables business; 3) Improved performance of licensed and franchised distribution businesses on back of reduction in T&D losses, higher regulated ROE in licensed distribution business & favourable resolution of a regulatory dispute and 4) Reduction in tax expenses due to improved recoverability of past MAT credits and lower deferred tax liabilities. However the Decrease in contribution from long term PPA of gas based generation plant due to new CERC tariff regulations as well as the increase in finance and depreciation costs, reflecting additional capex in distribution and renewable projects has moderated the gain to an extent.

Expansion in OPM to the extent of 60 bps to 22.3% was largely due to lower cost of electricity purchased and lower material cost (including cost of traded goods). Cost of electricity purchased as proportion to sales (net of stocks) was down by 330 bps to 31.5%. Similarly the material cost was down by 160 bps to 2.6%. Though fuel cost, staff cost and OE stood higher by 340 bps (to 33.6%), 20 bps (to 3.3%) and 50 bps (to 6.6%) that could not fully offset the gain in cost of electricity purchased and material cost.

Other developments

During Q1FY20 the regulator approved a long term power procurement arrangement for 278 MW between the Company's Licensed Distribution Business and UNOSUGEN Power Plant (capacity of 382.5 MW). The approval, for the balance life of the plant of 19 years, will enable steady base load operations for UNOSUGEN plant, resulting in recovery of project loan interest and depreciation thereon.