Basic Analysis of Torrent Power
Basic analysis of torrent power: The power sector is likely to benefit from India’s economic growth. As the world transitions from fossil fuels to renewable energy, electricity is playing an increasingly important role in driving economic growth. As technology advances, regulatory frameworks become increasingly important.
Most industries rely on electricity, and this is likely to increase as more businesses open. In this article, we will look at Torrent Power’s fundamental analysis, including its financials, future plans, and more.
Basic Analysis of Torrent Power
Company Overview
torrent power Established in 2004, it is one of the power companies operating in the Indian power sector. The company is part of the Torrent Group, which also owns the Healthcare and Power portfolio. Its business includes power generation, transmission and distribution, as well as the manufacturing and supply of power cables.
The company acquired Mahendra Electricals, an insolvent power cable company, and successfully rebranded it as ‘Torrent Cables Ltd.’ (Now merged with Torrent Power Limited as of April 1, 2014) Torrent’s foray into power was highlighted by the acquisition of The Surat Electricity Company Ltd and The Ahmedabad Electricity Company Ltd, two of India’s oldest power companies.
Torrent has transformed it into a leading power utility in terms of operational efficiency and power supply reliability. The portfolio includes coal, gas and renewable power plants, with a total generating capacity of 3,879 megawatts.
Every year, the company supplies power to more than 3.8 million customers across distribution areas of Ahmedabad, Gandhinagar, Surat, Dahej SEZ and Dholera SIR (Gujarat), Bhiwandi, Shil, Mumbra and Kalwa (Maharashtra) and Agra (Uttar Pradesh). , and the union territories of Dadra & Nagar Haveli, Daman and Diu.
The company has one of the lowest T&D losses in the licensing space. In December 2006, we created history by signing the country’s first distribution franchise agreement with Maharashtra State Electricity Distribution Company Limited for Bhiwandi Circle.
segment analysis
The company operates only in one segment – electricity generation, transmission and distribution in India. However, the company’s revenue came from the sale of power supplies, which accounted for 86.63% of total operating revenue, and cable products, which accounted for the remaining 13.36%.
industry analysis
India’s power industry is expanding and shifting from thermal energy to renewable energy due to increased business activity. Thermal power plant load is expected to improve by 63% in FY24, driven by slowing capacity additions in the sector and strong demand growth.
100% FDI is allowed under automatic route in power sector and renewable energy sector. The power generation industry in India requires a total investment of Rs. The National Electricity Plan 2022-32 calls for ₹33 billion (US$400 billion) and 3.78 million electricity professionals by 2032 to meet growing energy demand.
Renewable energy remains a top priority for India, with an ambitious target of replacing 50% of total installed capacity with non-fossil fuel-based power plants by 2030.
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Basic Analysis of Torrent Power – finance
Sales and Net Profit
Torrent Power operating revenue was Rs. 25,694.12 crore compared to Rs. It increased by 80.21% to ₹14,257.61 crore in FY22. Net profit in fiscal 2023 increased 371.91% to 1.3 trillion won. 2,164.67 crore from Rs. In fiscal year 22, it was $4587 billion.
The four-year CAGR of sales and net profit was 18.23% and 24.40%, respectively. Sales were stable from FY19 to FY22, but increased sharply in FY23. Net profit followed a similar trend in FY23 but fluctuated significantly between FY19 and FY22.
The change in profit in FY20 and FY22 was due to impaired expenses of Rs. 1,000 crores in FY20 and Rs. $130 billion was spent on DGEN power plants in FY22, which impacted its finances for the period.
In FY23, growth was driven by expansion of newly acquired distribution business, increase in new and renewable energy business, expansion of distribution division, and sale of RLNG.
profit
The company’s OPM stood at 19% in FY23 compared to 25% in FY22. NPM was 8.42% in FY23 compared to 3.21% in FY22.
The company’s OPM was consistent from FY19 to FY22, but margins declined in FY23 due to increased electrical energy costs. NPM has fluctuated at an average of 7.55% over the last five years and showed decent margins in FY23.
rate of return
In FY23, the company’s RoE and RoCE were 19.23% and 16.79%, respectively. The average for 5 years was 11.86% and 13.08%.
RoE is higher than RoCE, which indicates higher returns to shareholders. Better return on debt and increased interest expenses are two factors that can contribute to a higher RoE. Interest expenses increased in FY23, which could be one of the reasons why RoCE is lower than RoE.
debt analysis
Torrent Power’s debt to equity ratio in FY23 was 0.95 compared to 0.92 in FY22. The interest coverage ratio is 6.28x, compared to 6.09x in FY22.
The D/E ratio in FY23 is close to FY19 levels and has been increasing since FY21. However, the interest coverage ratio has improved and is rising from fiscal 2019 to fiscal 23. Companies with an interest coverage ratio of more than three times their revenue are better able to cover their interest expenses and are in a comfortable position.
Basic Analysis of Torrent Power – key indicators
The main indicators of Torrent Power are:
Basic Analysis of Torrent Power – Future Plans
- The company has signed four MoUs with the Gujarat government for renewable energy, green hydrogen and power distribution, which will result in a total investment of $47,000 crore in Gujarat.
- Torrent plans to invest Rs. 27,000 crore for pumped storage hydropower projects in Maharashtra.
conclusion
We’ll take a quick look at the company towards the end of the article. The company has emerged as a leader in the power industry and is poised to grow with India’s growing dynamism.
Financial performance in FY23 showed significant changes, and Torrent Power’s ability is tested based on its consistency in maintaining margins or keeping them within certain parameters. The company plans to invest in renewable energy and expects margins to improve in the future.
What do you think about the company’s potential? Let us know your thoughts in the comments section below.
Written by Santosh
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