Torrent Power Gets Buy Rating From Jefferies On High ROE, Low Leverage — Check Target Price

Jefferies has initiated coverage on Torrent Power Ltd. with a Buy rating and a target price of Rs 1,485, highlighting the company’s strong positioning as a niche play in both power distribution and generation.

The brokerage argues that Torrent Power stands out among listed Indian utilities for its consistent growth, high return ratios and conservative balance sheet.

Around 60% of Torrent Power’s Ebitda is derived from distribution, a segment growing at a steady 8% CAGR with a return on equity above 16%, helped by regulated ROE structures and incentives. The remaining 40% comes from power generation, which Jefferies expects to expand 1.6 times between fiscal year 2026 and financial year 2030, driven largely by new renewable energy projects. This balanced business mix, along with Torrent Power’s disciplined approach, forms the crux of the brokerage’s bullish view.

The company achieved a dramatic turnaround by reducing aggregate technical and commercial losses from 58% in fiscal 2007 to below 10% in just 16 years, despite the operational complexities of the region. Similar performance across its regulated ROE circles in Gujarat has helped the company maintain an elevated return profile.

Jefferies expects Torrent Power’s renewable energy portfolio to accelerate meaningfully. The company has outlined an ambitious goal of reaching 10 GW of renewable capacity by 2030, compared with 2 GW in FY25/26. The brokerage has taken a more conservative stance, building in 6 GW by FY30, noting that 3 GW has already been awarded to the company.

Torrent Power only needs to secure an additional 1.7 GW over the next three years to meet Jefferies’ estimates. The analysis excludes the potential contribution from 0.8 GW of commercial and industrial projects and 3 GW of pumped storage ventures, both of which could offer further upside once plans are finalised.

On the merchant power side, Jefferies has rationalised its expectations. Financial year 2025 was an exceptional year, with merchant sales and LNG-linked gains rising 4.5 times to Rs 7.5 billion, supported by contracted gas allocations amid strong demand forecasts.

While some of these contracts continue into fiscal 2026, the brokerage has normalised its projections, expecting a 15% decline in financial year 2026 and a further 38% drop in fiscal 2027. It adds that if demand outperforms its baseline estimate of 6% CAGR over FY25–30, there could be meaningful upside to merchant Ebitda.

Torrent Power’s balance sheet remains a key comfort factor. With net debt-to-equity under 1x and net debt-to-Ebitda at just 1.4x, the company is significantly below the leverage thresholds typically tolerated by rating agencies for utilities. This conservative financial posture offers additional flexibility to scale generation capacity without putting strain on the balance sheet.