Torrent Power Limited, one of the leading brands in the Indian power sector, with a market cap of Rs 57,798 crore, has shown outstanding growth in recent times. 

From its beginnings as a textile unit in Gujarat, Torrent Power has transformed into a diversified energy conglomerate, illuminating millions of homes and powering countless industries across the country. 

This article delves into the intricacies of Torrent Power’s operations, its business overview, segment analysis, financial performance, recent orders, and prospects. 

Torrent Power Limited

Business Overview

Founded in 1956, Torrent Power has come a long way from its textile roots. Today, it boasts a diverse portfolio encompassing power generation, transmission, and distribution. 

The company entered into the power sector in 2011-12, by taking over Mahendra Electricals renaming it Torrent Cables Limited, now me­r­ged with Torrent Power Limited. 

With an installed capacity exceeding 4.4 GW across thermal, gas, and renewable sources, Torrent Power caters to over 5.2 million consumers in six states – Gujarat, Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, and Dadra & Nagar Haveli, as a pioneer in power distribution reforms.

Segment Analysis

Torrent Power’s operations are categorized into these major segments:

Thermal Power

Torrent Power has a thermal power generation capacity of 3,092 MW comprising state-of-art gas-based plants of 2,730 MW capacity situated at Sabarmati, Dahej, and Surat; along with a 362 MW coal-based power plant at Sabarmati. 

High fuel availability, infrastructure facilities, and long-term PPAs with distribution utilities ensure optimal utilization. Gas-fired plants allow rapid startup supporting flexible operation.

Solar Power

The company has built a solar generation portfolio of 263 MW across sites in Gujarat, Maharashtra, and Telangana through JVs specializing in renewable energy. An additional 350 MW capacity is under development targeting over 600 MW by 2025. Focus on scaling solar share aligns with national renewable expansion plans.

Wind Power

Torrent has operational wind power plants with an aggregate capacity of 920 MW spread across Gujarat, Maharashtra, Madhya Pradesh, Karnataka, and Rajasthan. Another 425 MW wind project is under development taking total portfolio to 1,345 MW soon. Wind assets have become the second-highest electricity source demonstrating rapid build-up.

Transmission Infrastructure

Torrent owns and operates 355 circuit km of 400 KV 128 km of 220 KV transmission lines and 6 substations forming critical links for power evacuation from their gas-based generation plants. The company has execution strengths for thermal power integration, establishing key private networks, and intra-state transmission schemes.

Distribution Business

As the largest segment, Torrent Power distributes over 19 billion units to more than 3.6 million customers in its distribution license areas covering prominent pockets of Gujarat besides Dahej SEZ, and franchises like Agra, Bhiwandi, and Shil-Mumbra-Kalwa. Loss reduction and high retail supply uptime have enabled superior operational parameters.

Torrent Power – Financials

In FY23, the company reported a healthy revenue of Rs. 25,694 crore. Its profit before tax stood at Rs. 3,051 crore in FY23 as compared to Rs 567 crore in FY22, showcasing a growth of 438%.Torrent Power has a debt-to-equity ratio of 0.86, in FY23 from 0.76 in FY22. 

The company saw a massive increase in its return on equity in FY23 by 392.56% from 3.89% in FY22 to 19.17% in FY23. As per the company’s reports, this was due to the increase in sales of RLNG during the year.  The ROCE of the company also increased by 38.51% from 13.06% in FY23 to 18.09% in FY22.

Recent projects and orders: A Promising Vista

Torrent Power’s share reached an all-time high in January 2024, with the announcement of Torrent Power’s major commitments to renewable energy and ecological programs in Gujarat. The corporation has inked four non-binding memorandums of understanding with the state government, offering a total investment of Rs 47,350 crore. 

Torrent Power secured three hydropower projects from the Maharashtra government on 7th June 2023, with a total investment of Rs. 27,000 crores, expected to generate 1,320 MW of electricity. In July 2023, the company announced the construction of a 1 GW solar power plant in Maharashtra with an investment of Rs. 4,500 crore.

In August 2023, the company won a contract from Gujarat Gas Ltd. for the supply of 1.2 million metric tonnes of liquefied natural gas (LNG) over five years. This robust orderbook not only ensures revenue visibility for the coming years but also underscores Torrent Power’s dedication to expanding its footprint and solidifying its position as a leading player in the Indian power sector.

Risks and Concerns the company faces

Torrent Power faces several risks and concerns across its diverse business segments. In gas-based power generation, a substantial portion of the company’s capacity relies on short-term power contracts, exposing it to fluctuations in gas prices and geopolitical uncertainties. The fuel contracts come with take or pay obligations, and the volatility in the LNG market may lead to potential liabilities.

Efforts are underway to secure Power Purchase Agreements (PPAs) for unutilized gas power capacity, but competition from coal-based capacities and the government’s push for renewable energy poses challenges.

In the distribution business, regulatory stipulations may lead to delays in recovering costs, and increased competition in the sector is anticipated due to government initiatives allowing multiple distribution licensees in the same area.

The renewable energy business faces challenges such as rising commodity prices and delays in project timelines due to land acquisition issues. Operational projects in renewables are affected by stringent scheduling guidelines and extended receivable cycles from state departments.

Torrent Power -Future Prospects

Torrent Power’s primary focus lies in the renewable energy sector, particularly in utility-scale projects such as Solar, Wind, Hybrid, and Pump Storage Hydro. Additionally, Torrent Power aims to supply clean energy to commercial and industrial customers, aligning with its dedication to environmental responsibility.

In the distribution segment, the company is resolute in expanding and enhancing its networks, reducing distribution losses, and exploring avenues such as privatization and franchise opportunities.  Simultaneously, selective involvement in transmission projects and a dedication to operational excellence bolster the company’s overall prospects. Torrent Power intends to make strategic capital investments in these areas to fortify its capacity to meet evolving customer needs and ensure sustainable growth.

Conclusion

From its beginnings to its current stature as a leading energy player, the company has carved a niche for itself through operational excellence, customer focus, and a dedication to sustainable practices. With a promising order book and rising net profits and revenue, the company has showcased tremendous growth this year. 

However, the company faces multiple challenges with the increased fluctuations of gas prices and geopolitical uncertainties. The company is making efforts to overcome these challenges and adapt to the dynamic landscape of the energy sector.

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Written by Akshita Maloo

The stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make a well-informed investment.