- You may have overlooked the 156% PAT jump in Tata Power's renewable arm – a catalyst that could rewrite the stock’s trajectory.
- While total revenue slipped 4% YoY, EBITDA surged 12% and the company crossed the 10 GW renewable EPC milestone.
- Peers like Adani Energy are accelerating similar projects; Tata’s positioning could deliver a valuation premium.
- Historical turnarounds in India’s power sector suggest that a revenue dip followed by renewable acceleration often precedes multi‑year outperformance.
- Technical gauges (EBITDA margin expansion, higher utilization) point to upside, but financing of large hydro projects adds execution risk.
You missed the renewable wave that’s reshaping Tata Power’s outlook.
Tata Power reported a mixed Q3 FY26 picture: consolidated revenue fell 4% YoY to ₹14,485 cr, yet profit after tax (PAT) ticked up 1% to ₹1,194 cr. The headline numbers mask a dramatic shift in the company’s profit engine – the renewable segment. Renewable PAT exploded 156% YoY to ₹547 cr, while segment EBITDA jumped 66% to ₹1,637 cr. This divergence between top‑line pressure and bottom‑line strength is the story investors need to unpack.
Why Tata Power's Revenue Dip Masks a Renewable Upswing
The modest revenue decline reflects a softer performance in legacy thermal and distribution businesses, which faced tariff pressures and lower demand growth. However, the renewable portfolio is now the primary growth driver. Executing 1.3 GW of new renewable projects pushed cumulative EPC (Engineering‑Procurement‑Construction) execution past the 10 GW threshold, cementing Tata Power’s status as a leading clean‑energy contractor in India. The 16.3 GW total installed capacity now includes a sizable share of solar, wind, and pumped‑storage assets, positioning the firm to benefit from the nation’s aggressive renewable targets.
Renewable Segment Explosion: Numbers That Matter
Beyond headline PAT, the renewable business delivered a 78% revenue surge to ₹3,785 cr in Q3. Solar cell and module manufacturing PAT surged 124% YoY to ₹251 cr, while rooftop solar PAT grew 85% YoY to ₹111 cr. Cumulatively, rooftop installations topped 3 lakh customers and 4 GW of capacity, a testament to high utilisation (962 MW cells, 990 MW modules). The Bhivpuri 1,000 MW pumped‑storage project and the $500 m World Bank‑backed Dorjilung 1,125 MW hydro venture illustrate Tata’s push for round‑the‑clock renewable supply, adding a “dispatchable” component that many peers lack.
How Tata Power Stacks Up Against Peers Like Adani and Reliance
Adani Energy has accelerated its renewable pipeline, targeting 30 GW by 2030, while Reliance’s Green Energy arm is still nascent. Tata Power’s 10 GW EPC milestone and strong solar manufacturing base give it a cost‑advantage and quicker project execution timeline. Moreover, Tata’s integrated model – spanning generation, transmission, distribution, and retail – provides cross‑selling opportunities that pure‑play developers cannot replicate. Investors should watch the margin spread: Tata’s EBITDA margin rose from roughly 24% to 27% YoY, outpacing Adani’s 22% average in the same period.
Historical Patterns: What Past Turnarounds Tell Us
India’s power sector has seen similar dynamics. In FY19‑20, a major utility’s revenue fell 5% while renewable earnings rose >150%. Within two years, the stock outperformed the Nifty Power Index by 30% as renewable capacity scaled and policy incentives kicked in. The pattern suggests that a short‑term revenue dip, when paired with robust renewable growth and disciplined capital allocation, can be a pre‑cursor to a multi‑year earnings acceleration.
Technical Indicators: EBITDA Momentum and Valuation Implications
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a key proxy for operating cash flow. Tata Power’s EBITDA grew 12% YoY to ₹3,913 cr, lifting the EBITDA margin to ~27% – the highest in its 5‑year history. A rising margin, coupled with a stable or improving debt‑to‑EBITDA ratio (currently ~2.5x), signals healthier leverage and capacity to fund future projects without dilutive equity issuance. From a chart perspective, the stock broke above its 200‑day moving average after the results, a bullish signal that often precedes sustained upside.
Investor Playbook: Bull and Bear Cases for Tata Power
Bull Case:
- Renewable earnings continue to outpace the rest of the business, driving a 20‑25% PAT CAGR over the next 3‑5 years.
- Successful financing of the Bhivpuri pumped‑storage and Dorjilung hydro projects adds dispatchable renewable capacity, reducing reliance on fossil fuels.
- Margin expansion and improved cash conversion boost free cash flow, enabling dividend growth and share buybacks.
- Policy tailwinds – higher renewable purchase obligations and tax incentives – accelerate project pipelines.
Bear Case:
- Execution risk on large hydro and pumped‑storage projects could delay cash flow and increase debt servicing pressure.
- Continued tariff caps on thermal and distribution segments may suppress overall revenue growth.
- Competitive bidding wars in solar EPC could erode profit margins if pricing pressure intensifies.
- Potential regulatory changes in renewable subsidies could affect project economics.
Bottom line: The Q3 numbers reveal a company at a strategic inflection point. If you’re comfortable with the execution risk tied to mega‑hydro financing, the renewable upside offers a compelling growth story that could reward patient capital.