Shares of Torrent Power soared 5 per cent to Rs 549 on the BSE in Tuesday’s intra-day trade after the company emerged as the lowest (L1) bidder for supply of nearly 1,100 MW of gas-based power supply sought by the Indian government to meet anticipated record demand in the summer.
Since February 1, the stock of the integrated power utilities company has rallied 26 per cent, as compared to 1 per cent rise in the S&P BSE Sensex.
According to a Reuters report, Torrent Power has pipped Reliance Industries to emerge as the lowest bidder for the supply of 1,090 megawatts of gas-based power supply sought by the Indian government to meet anticipated record demand in the summer. READ MORE
Torrent Power quoted 13.70 rupees per unit price to supply 770 megawatts each for 45 days in April and May from two of its gas-based projects in the western state of Gujarat, the news agency reported quoting sources.
The bidding was conducted by NVVN Ltd, the power trading arm of India’s largest power producer NTPC Ltd. NVVN Ltd, acting on the power ministry’s directions, had invited bids for 5,000-megawatt power supply from gas-based power plants.
As per the bid documents, NVVN will buy the power from the selected bidder from April 10 to May 16, 2023. The company will sell the power in the spot markets to increase power availability. The under-recovery will be bridged by the federal power ministry through its Power System Development Fund (PSDF).
Torrent Power, the Rs 14,258 crore integrated power utility of the Rs 23,500 crore Torrent Group, is one of the largest companies in the country’s power sector with presence across the entire power value chain – generation, transmission and distribution.
Given its healthy balance sheet and robust performance from its licensed and franchised distribution segments, along with improvements in PLF for both generation segments, analysts at Geojit Financial Services anticipate Torrent Power’s earnings to improve.
The distribution businesses foresee increased productivity as a result of decreased transmission & distribution (T&D) losses and expansion ambitions to boost the top line. By FY25, the brokerage firm anticipates a 28 per cent rise in renewable capacity, spurred by capacity augmentation.
“With the expected drop in gas prices, we believe that the gas plants’ efficiency will improve, resulting in increased profitability. The company is expected to maintain a debt/equity ratio of 0.7x in FY25, down from 0.9x in FY23, and an ROE of 16 per cent in FY25,” Geojit Financial Services said in a recent coverage initiation report.
The brokerage firm has given Torrent Power an ‘Accumulate’ rating, and a target price of Rs 550 based on a multiple of 1.62x FY25 P/Bk.
