Tata Power, one of India’s largest integrated power companies with operations across the entire value chain, has become the sixth stock from the Tata Group stable to hit a market capitalisation of ₹1 lakh crore on Thursday, December 7, when the stock price rose 7% to ₹315. The stock has delivered returns of 51.7% in 2023 (stock closed at ₹207.7 on Dec 30, 2022) and 72.7% from the 52-week low of ₹182.45 in March 2023. The stock has seen a stellar rally since the company's recent analyst meeting where the management shared its targets for the coming years. In the meeting, Tata Power announced a capex of ₹60,000 crore by FY27; 45% of which would be deployed in the renewables sector. The company said it would be investing around ₹13,000 crore in two pumped hydro storage projects of 2.8GW, which will help Tata Power provide blended 24*7 renewable power to consumers.
Tata Power currently has a clean energy portfolio of 5.5 GW, which the company is aiming to take to 20 GW by 2030. Almost 3.7 GW of the capacity is already under construction.
The management has given a guidance of doubling the revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization) and profit after tax (PAT) by FY27 on the back of strong growth across large-scale RE (renewables) portfolio, higher profitability from transmission & distribution assets and robust opportunities in group captive and solar rooftop
In a recent report, JM Financial upgraded Tata Power to ‘Buy’ from ‘Hold’ raising the
target price to
₹350 from
₹220. “Tata Power's recalibrated strategy involves tapping high-margin group captive RE opportunities, exiting low-value businesses, venturing into brownfield pumped hydro storage, and expanding transmission business beyond distribution. This, coupled with the visible resolution of the Mundra issue, positions the company for accelerated growth,” it said.
Here are the 10 key takeaways from the analyst meeting:
1. FY27 target: The company plans to double its FY23 revenue, EBITDA and PAT by FY27. The share of clean and green EBITDA is expected to increase from 70% in FY23 to 79% by FY27.
PARAMETER | FY23 IN CR | FY27 TARGET IN CR |
REVENUES | 56,000 | 1,12,000 |
EBITDA | 10,100 | 20,200 |
PAT | 3810 | 7620 |
2. Tata Power expects to incur ₹60,000 crore capex over FY24-27. Here is a break-up of the capex:
Renewable Energy | 45% |
Pumped Hydro | 15% |
T&D | 17% |
Optional growth in T&D | 17% |
Conventional Generation- Coal, Shipping | 5% |
Others | 1% |
3. Tata Power aspires to offer 24x7 RE power by FY28 with a sizeable portfolio of renewables and storage to be added. FY27, and FY30 targets aided by rising share from captive projects.
FY23 | FY27 | FY30 |
10,600CR | 17,000CR | 20,000CR |
4. Pumped Hydro Storage (PSP) Projects: Tata Power is foraying into 2,800 MW of two brownfield PSP projects:
1,000 MW Bhivpuri PSP
1,800 MW Shirawta PSP
5. Renewable capacity: Current green capacity of 5.5 GW, targets to reach 15 GW+ by 2027 and 20 GW+ by 2030. By 2045 aspires to be 100% clean and green.
6. Transmission opportunity: Opportunities of 50,890 Ckt. Km (circuit kilometre) of transmission lines. 4.3 lakh MVA (Mega Volt Ampere) of sub-station in the next five years.
7. Solar EPC business: Third-party solar EPC business will be scaled down over a period. Existing order backlog of ₹18,700 crore executable over a 6-24-month timeframe. EPC's focus henceforth will be on its utility-scale, group captive and rooftop projects.
8. Solar pumps: The company is going slow on solar pumps ambition – cites the risk of lower returns and slow progress on the government’s Kusum scheme or Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan.
9. Mundra thermal plant: The company feels that repeated extensions of Section 11 are not a good idea.
10. Charging business: Four types of charging are being provided: home charging, public charging, fleet charging and bus charging. The company targets 10k public chargers and 200k home charges by FY28.
