Torrent Power's Q1 Profit Plunge: Why This 26% Drop Hides a Massive Green Energy Upside
Torrent Power Limited (TORNTPOWER) has just unveiled its Investor Presentation for Q1 FY25-26, and while the headline numbers might initially raise an eyebrow, a closer look reveals a story of resilience, strategic maneuvering, and ambitious long-term growth. As a leading integrated power utility in India, Torrent Power operates at the heart of the nation’s energy transition, making its quarterly performance particularly insightful given the dynamic Indian economic landscape.
The broader Indian market has seen a strong rally in Q1, followed by a July correction driven by cautious guidance and global uncertainty. Sectors like power and infrastructure, benefiting from capex revival and government push, have been outperformers. Inflation has eased, and interest rates remain stable, providing a favorable domestic backdrop. However, global factors, including FPI outflows in July, introduce an element of caution. It’s against this backdrop that we dissect Torrent Power’s latest quarter.
The Quarter at a Glance: Navigating Headwinds 📉
Torrent Power reported a Total Comprehensive Income (TCI) of ₹739 Crore for Q1 FY25-26, marking a 26% decline compared to ₹993 Crore in Q1 FY24-25. This significant drop immediately grabs attention. Digging into the financials, the Revenue from Operations also saw a 12% decrease, coming in at ₹7,906 Crore against ₹9,034 Crore in the prior year’s quarter.
Consolidated Statement of Operations (Q1 FY25-26 vs Q1 FY24-25)
| Rs in Crore | Q1 FY25-26 | Q1 FY24-25 | % Change |
|---|---|---|---|
| Revenue from Operations | 7,906 | 9,034 | (12%) |
| Power Purchase Cost | 5,472 | 6,250 | (12%) |
| Contribution | 2,173 | 2,496 | (13%) |
| PBDIT | 1,588 | 1,934 | (18%) |
| Profit Before Tax | 985 | 1,315 | (25%) |
| Profit After Tax | 742 | 996 | (26%) |
| Total Comprehensive Income (TCI) | 739 | 993 | (26%) |
The primary culprits, as highlighted by management, were:
- Lower Power Demand: An early onset of monsoon appears to have dampened demand.
- Elevated Gas Prices: This impacted the profitability of their gas-based generation, leading to lower “merchant gains” (selling power on the open market).
This is clearly reflected in the Thermal Power Plant Load Factors (PLFs).
Thermal Power PLF % (Q1 FY25-26 vs Q1 FY24-25)
| Plant / Segment | Q1 FY24-25 | Q1 FY25-26 | Change (pp) |
|---|---|---|---|
| SUGEN | 59.7% | 43.4% | (16.3) |
| UNOSUGEN | 58.8% | 31.9% | (26.9) |
| DGEN | 50.7% | 20.6% | (30.1) |
| GAS (Overall) | 55.6% | 31.7% | (23.9) |
| AMGEN | 96.3% | 91.1% | (5.2) |
| THERMAL (Overall) | 60.4% | 38.7% | (21.7) |
The substantial drop in PLFs for gas-based plants paints a clear picture of reduced utilization and hence, lower revenue and earnings from this segment.
A Glimmer of Green: The Renewable & Distribution Resilience 🌱
Despite the challenges faced by the thermal segment, not all news was gloomy. The company’s renewable segment showed improved contributions, a testament to its strategic shift towards green energy. Both wind and solar PLFs improved:
Renewable Power PLF % (on contracted capacity) (Q1 FY25-26 vs Q1 FY24-25)
| Segment | Capacity (MWp) | Q1 FY24-25 | Q1 FY25-26 | Change (pp) |
|---|---|---|---|---|
| WIND | 921 MW | 28.3% | 31.6% | +3.3 |
| SOLAR | 868 MWp | 19.6% | 22.0% | +2.4 |
This improvement, driven by recent solar capacity additions and favorable wind conditions, provided a much-needed offset to the thermal headwinds.
Equally encouraging was the performance of the distribution business. Torrent Power is renowned for its operational excellence in distribution, and Q1 FY25-26 continued this trend with reduced T&D losses across its licensed and franchised areas.
T&D Loss (%) (Q1 FY25-26 vs Q1 FY24-25)
| Area (Licensed) | Q1 FY25-26 | Q1 FY24-25 | Change (pp) |
|---|---|---|---|
| Ahmedabad | 7.9% | 9.9% | (2.0) |
| Surat | 3.1% | 3.4% | (0.3) |
| DDDNH | 1.7% | 1.7% | 0.0 |
| Dahej | 0.4% | 0.6% | (0.2) |
| Area (Franchised) | Q1 FY25-26 | Q1 FY24-25 | Change (pp) |
|---|---|---|---|
| Bhiwandi | 10.1% | 10.6% | (0.5) |
| Agra | 14.4% | 14.6% | (0.2) |
| SMK | 25.9% | 29.9% | (4.0) |
The reduction in T&D losses, particularly the impressive 4 percentage point drop in SMK, signifies enhanced operational efficiency and better revenue realization, compensating partly for the lower demand. Management’s claim that adjusted for a one-time tariff order income in the prior year, the distribution business’s profitability remained comparable, further underscores its underlying strength.
The Long View: A Track Record of Growth and Deleveraging 📊
While Q1 FY25-26 presented some immediate challenges, it’s crucial to look at Torrent Power’s performance in a broader context. Over the last five years, the company has demonstrated a robust growth trajectory, classifying it as a stalwart in the Indian power sector, now actively transitioning into a fast grower in renewables.
Five-Year Financial Performance (₹ Crore)
| FY | Revenues from Operations | EBITDA | Total Comprehensive Income (TCI)* | Net Worth^ |
|---|---|---|---|---|
| 2020-21 | 12,173 | 3,607 | 1,291 | 10,724 |
| 2021-22 | 14,257 | 3,826 | 454 | 10,289 |
| 2022-23 | 25,694 | 5,141 | 2,117 | 11,979 |
| 2023-24 | 27,183 | 4,903 | 1,833 | 13,295 |
| 2024-25 | 29,165 | 5,795 | 2,989 | 18,968 |
CAGR (2020-21 to 2024-25): Revenues +19%, EBITDA +13%, TCI +23% (despite FY22 impairment).
The consistent growth in revenues and profitability (excluding the FY22 impairment) showcases the management’s capability to deliver. More impressively, the company has made significant strides in strengthening its balance sheet and reducing leverage, which is a key indicator of financial health and future funding capacity.
Comfortable Leverage and Returns (FY24-25)
| Metric | FY20-21 | FY21-22 | FY22-23 | FY23-24 | FY24-25 |
|---|---|---|---|---|---|
| Net Debt / EBITDA | 1.98 | 2.24 | 1.97 | 2.25 | 1.41 |
| Net Debt Equity Ratio | 0.64 | 0.80 | 0.82 | 0.80 | 0.40 |
| ROCE | 10.0% | 10.3% | 14.0% | 11.6% | 12.7% |
| RONW | 12.4% | 14.2% | 19.1% | 14.5% | 18.4% |
The sharp reduction in Net Debt/EBITDA to 1.41x and Net Debt to Equity to 0.40x in FY24-25 is a powerful statement. This deleveraging, combined with healthy return ratios, provides significant financial flexibility and is a strong base for funding future growth. This is particularly important for a capital-intensive sector like power, especially with large-scale renewable projects.
Powering Ahead: Ambitious Green Energy Ambitions 🚀
Perhaps the most exciting aspect of Torrent Power’s future earnings prospects lies in its robust pipeline of renewable energy and pumped storage hydro (PSP) projects. This is essentially its “order book” for future growth, translating directly into revenue and earnings visibility.
The company has an impressive ~3.3 GW (DC for Solar / AC for Wind) of renewable capacity under installation, with an expected project cost of ~₹21,380 Crore.
Renewable Energy Projects in Pipeline (as on June 30, 2025)
| Project Name | Technology | Capacity Under Installation (MWp/MW) | Expected Project Cost (₹ Cr) | SCOD (Expected Commissioning) |
|---|---|---|---|---|
| MSEDCL | Solar | 367* | 1,342 | Sep 2025 |
| SECI XII | Wind | 300 | 2,500 | Jan 2026 |
| SECI XVI | Wind | 122 | 925 | Jun 2026 |
| SECI XVIII | Wind | 300 | 2,910 | 24 months from PPA |
| TPL-D | Solar | 825 | 5,500 | Sep 2026 |
| REMCL | Solar | 411 | 3,039 | Dec 2026 |
| Merchant | Solar | 131.8 | 774 | Progressively by Jul 2027 |
| C&I Projects | Solar | 826 | ~4,390 | Progressively |
| Total | ~3.3 GW | ~21,380 |
This significantly expands their renewable portfolio from ~1.8 GW operational currently.
Beyond this, Torrent Power is aggressively pursuing Pumped Storage Hydro (PSP) projects, with ~8.4 GW under planning across Maharashtra and Uttar Pradesh, including a 2,000 MW/16,000 MWh agreement with MSEDCL. These projects typically have longer gestation periods but offer crucial grid stability and energy storage solutions, aligning perfectly with India’s renewable energy targets. The company’s comfortable leverage position means it is well-equipped to fund these massive CapEx plans, largely through a combination of internal accruals and judicious external financing.
Key Takeaways: Resilient Now, Geared for Future Growth ✨
Torrent Power’s Q1 FY25-26 results offer a classic case study of distinguishing between transient headwinds and underlying strategic strength. While the 26% decline in TCI and reduced thermal PLFs reflect the immediate impact of lower power demand and elevated gas prices – a situation faced by many in the sector during this period – the performance of the renewable and distribution segments showcased inherent resilience and operational prowess.
The company’s significant deleveraging in FY24-25 positions it exceptionally well to capitalize on the substantial pipeline of renewable and PSP projects. These projects provide strong earnings visibility for the coming years and align perfectly with the broader domestic-growth themes favored by the Indian market. Torrent Power’s diversified business model and commitment to operational excellence suggest it can navigate cyclical variations.
In summary:
- Current Quarter: Faced temporary macro headwinds (lower demand, high gas prices) impacting thermal generation.
- Positive Changes: Strong operational efficiency in distribution (reduced T&D losses) and improved PLFs in the growing renewable segment provided offsets.
- Future Impact: The robust pipeline of green energy projects (~3.3 GW under installation, 8.4 GW PSP under planning) coupled with a significantly deleveraged balance sheet positions the company for substantial long-term revenue and earnings growth.
Torrent Power remains a stalwart with a clear roadmap to becoming a significant player in India’s green energy transition, making its long-term investment narrative compelling despite short-term fluctuations.
Join our Telegram for instant updates!