Tata Power Revs Up Renewable Energy Expansion in H2 FY26, Targets Significant Scale-Up from FY27

Tata Power experienced a slowdown in its renewable energy capacity additions during the first half of fiscal year 2026, managing to add only 205 MW. This was attributed to site inundation after heavy rains, which restricted access, particularly at wind project sites requiring the movement of heavy wind turbines.

Consequently, the company has revised its target for fiscal year 2026. It now anticipates adding 1.3 GW of renewable capacity in the second half of FY26, a more than sixfold increase over the first half, bringing the total for the year to 1.5 GW. This is a reduction from the initial target of 2.5 GW for FY26.

The company plans to significantly scale up its renewable energy capacity addition from the next financial year, FY27. Tata Power aims to achieve a green energy capacity of 33 GW by FY30. However, the additions in the latter half of FY26 will depend on the availability of land and transmission lines. Management stated that any targets missed in the current financial year will be pursued in the next, with a commitment to achieve set targets by the end of FY27.

Analysts suggest that the company's renewable targets have also been impacted by its focus on completing third-party EPC (engineering, procurement, and construction) contracts and rooftop solar EPC projects, which may not be immediately reflected on its books.

Financially, Tata Power's renewables business showed strong growth in the second quarter of FY26, with profits rising by 70% to Rs 511 crore, EBITDA increasing by 57% to Rs 1,575 crore, and revenue surging by 89% to Rs 3,613 crore. This performance is attributed to strategic investments in solar manufacturing and the rooftop business.

However, the overall company performance in Q2 FY26 saw a marginal 0.8% fall in profit to Rs 919 crore and a 1% dip in revenue to Rs 15,545 crore compared to the previous year. The company expects future quarters to improve, particularly once the 'Mundra issue' at its power plant is resolved and with increased capacity additions.

Capital expenditure for H1 FY26 stood at Rs 7,500 crore, and the company is on track to incur a total capex of Rs 25,000 crore for FY26.

Impact

This news indicates a temporary setback in Tata Power's renewable energy expansion pace for FY26, which could affect investor sentiment regarding the speed of its green transition. However, the strong rebound expected in H2 FY26 and the ambitious plans for FY27 onwards, supported by robust growth in the renewables business segment's profitability, suggest a positive long-term outlook. The company's ability to secure land and transmission lines will be crucial. The overall financial performance dip in Q2 FY26 is a point of caution, but management expects improvement. The resolution of the Mundra issue is also a key factor for future performance. Rating: 7/10

Difficult terms

FY26: Fiscal Year 2025-2026, covering the period from April 1, 2025, to March 31, 2026.

MW (Megawatt): A unit of electric power, equal to one million watts.

GW (Gigawatt): A unit of electric power, equal to one billion watts or 1,000 megawatts.

EPC (engineering, procurement, and construction): A contracting approach where a single company is responsible for all aspects of a project from design through to construction and commissioning.

Rooftop solar EPC: Engineering, procurement, and construction services specifically for solar power systems installed on building rooftops.

EBITDA (earnings before interest, taxes, depreciation, and amortization): A measure of a company's operating performance before accounting for non-cash expenses and financing costs.

PAT (Profit After Tax): The net profit of a company after all expenses, including taxes, have been deducted.

Mundra issue: Refers to operational challenges or contractual disputes concerning Tata Power's power plant in Mundra, Gujarat.

Gujarat government: The executive branch of the government of the Indian state of Gujarat.

Power purchase agreement: A contract between electricity generators and electricity purchasers (usually utilities) that sets out the commercial terms for the sale of electricity.

Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment.