Torrent Power Renewable Pipeline Supports Growth Despite Weak Gas Generation

Investment View and Rating

Elara Securities upgraded its rating on Torrent Power to Reduce from Sell in its August 3, 2026 result update, while retaining its sum-of-the-parts target price of Rs 1,385. The upgrade followed a 20 per cent correction in the share price over the preceding three months. However, Elara continues to see limited further upside at the prevailing valuation and has kept its earnings estimates unchanged.

Q1 FY27 Financial Performance

Torrent Power reported Q1 FY27 revenue from operations of Rs 81,242 million, up 2.8 per cent year on year and 12.9 per cent above Elara's estimate. EBITDA increased 3.7 per cent year on year to Rs 15,379 million, exceeding the estimate by 10.7 per cent, while the EBITDA margin remained steady at 19 per cent.

Reported PAT declined 10.8 per cent year on year to Rs 6,619 million despite exceeding Elara's estimate by 11.8 per cent. The earnings decline reflected a 38.1 per cent increase in interest cost to Rs 2,930 million and a 22.9 per cent fall in other income to Rs 807 million. Adjusted PBT declined by Rs 1,190 million year on year to Rs 9,252 million; the Q1 FY26 comparison included a Rs 590 million foreign-exchange translation loss.

Segment Performance

Strong transmission and distribution and renewable performance cushioned weak generation. T&D revenue increased 11 per cent year on year to Rs 72,000 million, while renewable revenue rose 17.6 per cent to Rs 4,340 million. Generation revenue declined 31 per cent to Rs 17,100 million.

Renewable earnings improved on newly commissioned capacity and better plant-load factors. Excluding the Rs 460 million one-time late-payment surcharge income booked in Q1 FY26, renewable EBITDA increased by Rs 660 million year on year. Wind PLF rose to 33.3 per cent from 31.6 per cent, while solar PLF increased to 25.9 per cent from 22.0 per cent.

Gas generation remained weak amid geopolitical disruptions. Sugen PLF fell to 27.0 per cent from 43.4 per cent, Unosugen PLF declined to 14.0 per cent from 31.9 per cent and DGEN PLF decreased to 13.6 per cent from 20.6 per cent. Overall gas PLF declined to 19.3 per cent from 31.7 per cent, while Amgen coal plant PLF fell to 78.9 per cent from 91.1 per cent.

Capacity Expansion and Renewable Pipeline

Torrent Power has installed generation capacity of 6.6 GW, comprising 2.7 GW of gas, 2.1 GW of renewables and 1.8 GW of coal. Management is targeting installed capacity of 12 GW by FY30.

The company has 4.6 GW of renewable projects under implementation. Of this capacity, 1.2 GW is scheduled for FY27, 1.4-1.6 GW for FY28 and the balance for FY29. Renewable capex was Rs 15,500 million in Q1 FY27, with approximately Rs 100,000 million planned for FY27.

The total renewable-pipeline investment is Rs 296,000 million, of which Rs 88,000 million had been spent by June 2026. Elara considers the growth pipeline visible because most renewable assets are backed by long-term power purchase agreements. Planned capex over FY27-FY32 is Rs 800,000 million.

Nabha Acquisition and Pumped-Storage Project

Management completed the acquisition of the 1,400 MW Nabha thermal plant on June 25, 2026. Nabha contributed Rs 150 million profit in Q1 FY27, reflecting only five to six consolidated operating days. The plant is expected to deliver approximately Rs 10,000 million of annual EBITDA at steady state, with an average PLF of about 85 per cent.

The 3 GW pumped-storage project has received key clearances and awarded packages. It has incurred cumulative capex of Rs 11,300 million and is expected to commission in three to four years.

Gas Generation Economics

Management expects medium-term LNG prices of USD 6-8 per MMBtu. At these prices, gas generation variable cost would be Rs 4-4.5 per unit, compared with an estimated battery-backed renewable cost of Rs 5-5.5 per unit.

Valuation, Constraints and Estimates

Elara's target price uses a sum-of-the-parts approach, valuing regulated businesses at 2 times FY28E price-to-book value and renewable operations at 11 times FY28E EV/EBITDA.

Key factors constraining the thesis are weak gas utilisation, elevated LNG prices that have reduced merchant earnings, higher finance costs and limited valuation upside.