Given its strong track record of operating the distribution business, Torretn Power remains a key beneficiary of 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.
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Motilal Oswal Report
Domestic brokerage firm Motilal Oswal has initiated coverage on Torrent Power Ltd. with a Neutral rating and an SoTP-based target price of Rs 1,270, implying a modest upside of 4% from the reports current market price of Rs 1,220.
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Torrent Pharma is an integrated power utility spanning electricity generation, transmission, and distribution. It boasts a diversified installed capacity of 6.6GWp, representing 4.5GW of thermal and ~2.1GWp of renewable (RE) capacity (including ~1.8GW contracted).
The brokerge highlights the following factor for its initiation:
Torrent Pharma's valuation is segmented across various business units:
- Licensed distribution business is valued at two times Sep'28E regulated equity; franchisee distribution business is valued at 12x Sep'28E EBITDA; transmission business is valued at 2x invested equity;
- conventional generation business (regulated - thermal + gas) is valued at 2.5x Sep'28E regulated equity; DGEN plant (merchant) is valued at 12x Sep'28E EBITDA;
- Nabha is valued at 10x Sep'28E EBITDA; RE generation is valued at 12x Sep'28E EBITDA, and cash and investments add Rs 64/share.
Torrent Pharma is currently trading at FY27E EV/EBITDA of 13.6x vs its historical 1-year forward average of 8.4x EV/EBITDA.
The company's EBITDA CAGR of 18% over FY26-28E compares with 25% for JSW Energy and 27% for Tata Power.
Key risks
- Untied 1.6GW gas plants struggle against cheap coal/RE;
- volatility in gas prices due to forex fluctuations and geopolitical headwinds;
- changes in government policies (tariffs and regulations) could affect the company's financial outcomes; and
- elevated execution risk due to large capex commitments across RE, pumped storage projects, planned greenfield thermal plant and brownfield thermal acquisition from L&T, where any delays or cost overruns could adversely impact cash flows and returns.
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