- Net profit climbs 34% YoY to ₹655 cr, driven by gas and renewables.
- Revenue up 4.3% to ₹6,778 cr; EBITDA jumps 15% to ₹1,472 cr.
- New 10‑year LNG deal with Japan’s JERA secures 0.27 MMTPA from 2027.
- Board approves up to ₹7,000 cr of non‑convertible debentures – a potential leverage catalyst.
- Interim dividend of ₹15 per share announced, signalling cash confidence.
You missed the fine print on Torrent Power’s latest earnings – and that mistake could cost you.
Why Torrent Power's Margin Jump Beats Sector Trends
Torrent Power reported a consolidated net profit of ₹655 cr for Q3FY26, a 34% increase over the same quarter last year. The profit lift outpaces the 4.3% revenue growth, translating into a higher profit‑to‑revenue ratio. In a sector where many utilities wrestle with thin margins due to regulated tariffs, this margin expansion is noteworthy.
Key drivers:
- Gas‑based generation: Higher dispatch of its 2,730 MW gas fleet, now backed by a secured LNG supply.
- Renewable performance: Better output from solar and wind assets offsets higher fuel costs.
- Distribution efficiency: Licensed and franchised distribution businesses trimmed losses and improved collection.
Higher interest and depreciation costs ate into earnings, but the net effect remained positive. The company also booked gains from the sale of non‑current investments, a one‑off boost that analysts will normalize in forward forecasts.
Impact of the JERA LNG Deal on the Indian Power Landscape
The 10‑year sale‑and‑purchase agreement with JERA secures up to 0.27 million tonnes per annum (MMTPA) of LNG starting 2027. For context, each tonne of LNG can generate roughly 13.9 MWh of electricity, meaning Torrent can potentially add 3.7 GW‑hrs of firm capacity annually – enough to power over 500,000 Indian households.
This contract does three things for the sector:
- Fuel security: Reduces exposure to volatile domestic gas pricing and supply bottlenecks.
- Peak‑load flexibility: Enables the gas fleet to complement intermittent renewables during demand spikes.
- Exportable expertise: Positions Torrent as a template for other Indian generators seeking long‑term LNG contracts.
Competitors such as Tata Power and Adani Green are also pursuing LNG or hybrid gas‑renewable assets, but none have announced a deal of this tenor and volume. If the LNG market remains price‑stable, Torrent’s cost of generation could stay below the average of coal‑based peers, sharpening its competitive edge.
Historical Lens: What Past Profit Surges Taught Indian Utilities
Indian power utilities that posted double‑digit profit jumps in the past decade often faced a “reversion risk” once one‑off items faded. For example, in FY2018, a leading hydro‑centric utility reported a 40% profit surge thanks to unusually high monsoon inflows. The following year, revenues fell 12% when water levels normalized, compressing margins.
Torrent’s current surge, however, is underpinned by structural changes – a longer‑term LNG contract, expanding renewable capacity, and an operational turnaround in its distribution arm. While the non‑current investment sale is a one‑off, the operational tailwinds are expected to persist, reducing the likelihood of a sharp earnings reversal.
Debt Strategy: The ₹7,000 cr NCD Issue – Growth Fuel or Leverage Hazard?
The board’s approval to raise up to ₹7,000 cr via non‑convertible debentures (NCDs) will likely be executed in private placements. NCDs are unsecured debt instruments that pay fixed coupons and mature at a set date, typically 5‑10 years. For investors, the key questions are:
- Coupon level: If the coupon is set near prevailing market rates (≈7‑8% for Indian corporates), the cost of capital remains modest.
- Use of proceeds: The company has hinted at funding renewable expansion and debt refinancing, which could improve the balance‑sheet profile.
- Leverage impact: Adding ₹7,000 cr will push total debt higher, but the debt‑to‑EBITDA ratio, currently around 2.5x, may stay within acceptable thresholds if EBITDA continues its 15% upward trajectory.
Analysts will watch the issuance timing closely. A staggered rollout aligned with project cash‑flows would mitigate refinancing risk, while a lump‑sum raise could strain cash if capital expenditures accelerate.
Sector‑Wide Ripple Effects: How the Power Play Influences Your Portfolio
Torrent Power sits at the nexus of generation, transmission, and distribution – a rare end‑to‑end presence in India’s fragmented power market. Its performance therefore serves as a proxy for three broader themes:
- Renewable integration: Strong renewable output signals that India’s clean‑energy transition is gaining operational momentum.
- Gas as a bridge fuel: The LNG pact underscores a market shift from coal to gas to balance intermittency.
- Infrastructure financing: The NCD plan reflects a growing appetite among institutional investors for long‑dated, stable‑cash‑flow assets.
Investors with exposure to the broader Indian utility space (e.g., Power Grid Corp, NTPC) may see valuation compression if Torrent’s growth narrative re‑prices sector expectations.
Investor Playbook: Bull vs. Bear Cases
Bull Case:
- Consistent EBITDA growth (15% YoY) supports debt servicing for the upcoming NCD issue.
- Long‑term LNG supply reduces fuel cost volatility and enhances dispatchability.
- Renewable capacity scaling aligns with India’s 450 GW clean‑energy target, offering upside on policy tailwinds.
- Interim dividend of ₹15 per share signals cash confidence and may attract income‑focused investors.
Bear Case:
- Higher interest expense and depreciation could erode margins if EBITDA growth stalls.
- Execution risk on the NCD raise – if market conditions tighten, pricing may worsen.
- Potential regulatory tariff pressures on gas‑based generation could compress earnings.
- Dependence on a single LNG supplier introduces counter‑party concentration risk.
Bottom line: Torrent Power’s Q3 results showcase a compelling blend of operational improvement and strategic positioning, but the upcoming debt raise and regulatory landscape warrant close monitoring. Align your exposure based on your risk tolerance and the weight you assign to renewable versus gas‑centric growth.