Navigating the rapids of India’s power sector

torrent power Limited, one of the leading brands in the Indian power sector, has a market capitalization of Rs 57,798 crore and has shown remarkable growth in recent times.

Torrent Power, which started as a textile division in Gujarat, has transformed into a diversified energy conglomerate, providing lighting to millions of homes and powering numerous industries across the country.

This article takes a closer look at the intricacies of Torrent Power’s operations, business overview, sector analysis, financial performance, recent orders, and outlook.

Torrent Power Limited

business overview

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

The company entered the power sector in 2011-12 with the acquisition of Mahendra Electricals and renamed it as Torrent Cables Limited. It has now merged with Torrent Power Limited.

With an installed capacity of over 4.4 GW across heat, gas and renewable energy sources, Torrent Power operates 520 GW across six states – Gujarat, Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh and Dadra & Nagar Haveli. We serve over 10,000 consumers. Distribution reform.

segment analysis

Torrent Power’s operations are categorized into the following major segments:

fire power

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

Long-term PPAs with high fuel availability, infrastructure facilities and distribution utilities ensure optimal utilization. Gas-fired power plants support flexible operation through rapid start-up.

solar power

The company has built a solar power portfolio of 263 MW across Gujarat, Maharashtra and Telangana through its JV specializing in renewable energy. A further 350 MW of capacity is under development, with a target of over 600 MW by 2025. The focus on expanding the share of solar is consistent with the National Renewable Expansion Plan.

wind power

Torrent operates wind farms with a total capacity of 920 MW across Gujarat, Maharashtra, Madhya Pradesh, Karnataka and Rajasthan. Another 425 MW wind projects are in development, bringing the total portfolio soon to 1,345 MW. Wind assets have become the second highest source of electricity showing rapid accumulation.

transport infrastructure

Torrent owns and operates 355 km of 400 KV circuit km, 128 km of 220 KV transmission lines and six substations that form a critical link for power evacuation from gas-based power plants. The company has execution strengths in thermal power integration, construction of major civil networks and intrastate transmission systems.

Distribution business

Torrent Power, the largest segment, distributes over 19 billion units to over 3.6 million customers across its distribution license area covering major districts of Gujarat and franchises such as Agra, Bhiwandi and Shil-Mumbra-Kalwa, besides Dahej SEZ. Reduced losses and high retail supply uptime have enabled excellent operating parameters.

Torrent Power – Finance

In FY23, the company reported a healthy revenue of Rs. 2,569.4 billion won. Pre-tax profit reached 10 billion won. 3,051 crore in FY23 compared to Rs 567 crore in FY22, showing a growth of 438%. Torrent Power’s debt to equity ratio was 0.86 in FY23 from 0.76 in FY22.

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

Recent Projects and Orders: Promising Vista

Torrent Power’s share hit an all-time high in January 2024 with the announcement of Torrent Power’s major commitments to renewable energy and ecology programs in Gujarat. The company has signed four non-binding memorandums of understanding with the state government, proposing to invest a total of Rs 47,350 crore.

Torrent Power had secured three hydropower projects from the Maharashtra government on June 7, 2023, with a total investment of Rs. It is expected to generate 1,320 MW of electricity at a cost of $2700 billion. In July 2023, the company announced that it would build a 1 GW solar power plant in Maharashtra with an investment of Rs. 450 billion.

In August 2023, the company signed a contract to supply 1.2 million tonnes of liquefied natural gas (LNG) for five years from Gujarat Gas Ltd. This robust order book not only ensures revenue visibility in the coming years, but also highlights Torrent Power’s commitment to expand its presence and solidify its position as a leader in the Indian power sector.

Risks and concerns facing the company

Torrent Power faces a number of risks and concerns across its various business segments. For gas-fired power generation, a significant portion of the company’s capacity relies on short-term power contracts, exposing it to gas price fluctuations and geopolitical uncertainty. Fuel contracts carry take-or-pay obligations, and volatility in the LNG market could lead to potential liabilities.

Efforts are underway to secure power purchase agreements (PPAs) for unutilized gas-fired power capacity, but are posed by competition from coal-based capacity and the government’s push for renewable energy.

For the distribution business, regulatory regulations may delay cost recovery, and government plans to allow multiple distribution licenses in the same region are expected to increase competition in the sector.

Renewable energy projects are facing difficulties such as rising raw material prices and project schedule delays due to land acquisition issues. Renewable energy operating projects are subject to strict scheduling guidelines and extended receivables cycles from state departments.

Torrent Power – Future Outlook

Torrent Power’s primary focus is on the renewable energy sector, particularly utility-scale projects such as solar, wind, hybrid and pumped storage hydro. Torrent Power also aims to supply clean energy to commercial and industrial customers in line with its commitment to environmental responsibility.

In the distribution segment, the company is committed to expanding and strengthening its network, reducing distribution losses and exploring avenues such as privatization and franchise opportunities. At the same time, selective participation in transmission projects and commitment to operational excellence strengthens the company’s overall prospects. Torrent Power plans to make strategic capital investments in these areas to strengthen its capabilities to meet evolving customer requirements and ensure sustainable growth.

conclusion

From its inception to its current status as a leading energy company, the company has carved a niche for itself through its commitment to operational excellence, customer focus, and sustainable practices. With a promising order book and increased net profit and revenue, the company has shown tremendous growth this year.

However, the company faces several challenges due to increased volatility in gasoline prices and geopolitical uncertainty. The company is working to overcome these challenges and adapt to the dynamic environment of the energy sector.

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Written by Akshita Malu

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