Why Torrent Power’s Stock Jumped To A Record High
Shares of Torrent Power Ltd. jumped to a record high after the electricity generator and transmitter emerged as the highest bidder for the sale of a 51% stake in power distribution companies in Dadra & Nagar Haveli, and Daman & Diu.
The bidding for the distribution business of the union territories was undertaken as part of the government’s initiative to privatise distribution utilities to usher in efficiency, according to an exchange filing.
Torrent Power currently distributes nearly 16.66 billion units to more than 3.65 million customers in Ahmedabad, Gandhinagar, Surat, Dahej SEZ and Dholera SIR in Gujarat; Bhiwandi, Shil, Mumbra and Kalwa in Maharashtra, along with Agra in Uttar Pradesh. “With the addition of Dadra & Nagar Haveli, and Daman & Diu, Torrent will distribute nearly 25 billion units to over 3.8 million customers and cater to a peak demand of more than 5,000 megawatts,” the filing said.
This acquisition will significantly strengthen Torrent Power’s position as a leading distributor in the country, Torrent Group Chairman Samir Mehta was quoted as saying in the filing. “It is well poised to participate in new opportunities coming up in the sector in renewable generation, transmission and privatisation of state-owned distribution circles.”
Torrent Power has an aggregate installed generation capacity of 3,879 MW, comprising 2,730 MW of gas-based capacity, 787 MW of renewable capacity and 362 MW of coal-based capacity.
“Torrent Power is set to register 10% profit after tax growth annually, reinforced by its existing portfolio of regulated distribution operations, franchising circles, IPP and RE projects,” IIFL said in a note. “Its cashflows clocking well ahead of capex, make a strong case for a pick-up in payouts.” The brokerage expects higher payouts to improve the company’s return on equity and rerate valuations.
Shares of Torrent Power gained as much as 3.7% in early trade on Monday to Rs 379 apiece. Seven of the 10 analysts tracking the company recommend a ‘buy’, while three suggest a ‘hold’, according to Bloomberg data. The stock crossed its 12-month consensus price target of Rs 374.7 on Monday.