The share price of Torrent Power is in focus today after brokerage house, Motilal Oswal initiated coverage on the stock with a ‘Neutral’ rating and a target price of Rs 1,270 apiece. This implies an upside of around 4% from its current price.
The company is an integrated power utility spanning electricity generation, transmission, and distribution. Motilal Oswal expects Torrent Power to be a key beneficiary of the proposed electricity distribution reforms. The company is set to expand its footprint in both thermal and renewable energy generation.
Motilal Oswal on Torrent Power: Renewable energy boost
Torrent Power aims to expand its total renewable energy portfolio to 6.3 GW by FY29 from 2.1 GW currently operational. Its management had said the company plans to commission 1.2 GW in FY27 and around 1.4 GW to 1.6 GW in FY28. Motilal expects these capacity additions to “materially” enhance scale and earnings visibility.
The company has also executed a power purchase agreement with MP Power Management Co for a 1.6GW coal-based thermal power project in Madhya Pradesh, which is set for commissioning in FY32. “Despite significant capacity expansion, Torrent Power’s balance sheet is robust, and the company is well positioned to continue to bid for new renewable energy projects, targeting mid-to-high-teen equity IRRs,” the brokerage said.
Motilal Oswal on Torrent Power: T&D operations
The company’s transmission and distribution business contributed around 62% of earnings before interest, tax, depreciation, and amortisation (EBITDA), with the licensed distribution business recording a distribution loss of only 2.3% with power availability of 99.9%.
This is significantly lower than that of Tata Power, Adani Energy, and CESC. “Torrent Power’s superior operational track record reflects its focus on rigorous metering, billing and collection practices, targeted loss-reduction investments and enforcement against theft, enabling it to convert a higher share of input energy into billed and collected units vs. competitors,” Motilal said.
The brokerage also expects Torrent Power to benefit from the proposed electricity distribution reforms. The Draft Electricity Amendment Bill 2025 had proposed several changes, including allowing multiple discoms in the same area and the sharing of existing infrastructure.
| What supports Torrent Power | What may limit upside |
|---|---|
| Renewable energy portfolio is set to expand sharply to 6.3 GW by FY29 | Motilal Oswal sees only around 4% upside from current levels |
| Distribution business has strong operating metrics, with low losses and high power availability | Net debt-to-EBITDA is expected to rise as capex picks up |
| Proposed electricity distribution reforms could open new growth opportunities | Rs 37,700 crore capex plan increases execution risk |
| Thermal and pumped storage projects can support long-term earnings growth | Delays or cost overruns in large projects may hurt returns |
| EBITDA is expected to grow at 17% CAGR over FY26-FY29 | Adjusted profit growth is expected to be slower at 7% CAGR |
Motilal Oswal on Torrent Power: Net debt-to-EBITDA to rise
Motilal expects the company to spend Rs 37,700 crores over FY27-FY29, based on its expansion plans. The brokerage expects the net debt-to-EBITDA ratio to rise to 4.4 times from 2.3 times over the same period. This will be due to the operationalisation of its renewable energy capacity, steady capex in distribution, and the commencement of capex for the 3 GW pumped storage plant and thermal plants.
Motilal Oswal on Torrent Power earnings
The brokerage expects Torrent Power’s EBITDA to rise 17% on a compounded annual growth rate basis over FY26 to FY29, and adjusted net profit to increase 7% CAGR over the same period. “As per our estimates, 37% of FY29E EBITDA will be attributable to the RE business, in which contracted generation capacity is set to grow from 1.8GW as of 1QFY27 end to 4.5GW by FY29 end,” it said.
Torrent Power’s licensed and franchise distribution businesses should continue to grow in mid-teens. The 1.4 GW Nabha thermal power plant acquisition, a 1.6 GW thermal project set for commissioning in FY32, and a 3 GW pumped storage project set for commissioning in FY30 will support longer-term earnings growth.
Motilal Oswal on Torrent Power: Key risks
Volatility in gas prices due to forex fluctuations and geopolitical headwinds pose a challenge to the company’s performance. Any changes in government policies could also affect the company’s financials, and there is also a higher execution risk due to large capex commitments across projects.
Any delays or cost overruns in the planned greenfield thermal plant and brownfield thermal acquisition from L&T could also adversely impact cash flows and returns.
Conclusion
Torrent Power remains a key player in the power utility business with potential due to renewable energy and thermal energy expansion. However, the planned capex for these expansions and any delays could adversely affect the company. A rise in the net debt-to-EBITDA level also remains a key factor to monitor.
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