📉 The Financial Deep Dive
India Ratings and Research has assigned a strong 'IND AA+/Stable' rating to Torrent Power Limited's (TPL) proposed Non-Convertible Debentures (NCDs) worth ₹2000 Crore. The agency also reaffirmed the 'IND AA+/Stable' rating on existing NCDs totaling ₹1875 Crore and affirmed the 'IND A1+' rating on commercial papers.
The Numbers:
- Proposed NCDs: ₹2000 Crore
- Existing NCDs: ₹1875 Crore
- CPs: Affirmed 'IND A1+'
- Post-tax return on regulated equity: 14%-16%
- Distribution business EBITDA contribution: >50%
- Consolidated Net Leverage (1HFY26): 1.6x (down from 1.9x in 1HFY25 and 1.4x in FY25)
- Interest Coverage (1HFY26): 7.0x (up from 5.8x in 1HFY25 and 5.1x in FY25)
- Total Capex (up to FY31-FY32): ₹650 Billion - ₹700 Billion (₹65,000 Cr - ₹70,000 Cr)
- Planned Capex Funding: 75% debt, 25% equity
The ratings are underpinned by TPL's robust business model, driven by its regulated cost-plus distribution licensee (DL) operations and stable generation assets. The distribution business demonstrates strong operating performance, evidenced by low Aggregate Technical and Commercial (AT&C) losses. Financially, the company exhibits healthy credit metrics, with significant improvements in consolidated net leverage and interest coverage in the first half of FY26.
The Grill:
No analyst grilling or management discussion is present in this rating action report.
Risks & Outlook:
Torrent Power is embarking on a substantial expansion phase, with a large under-construction portfolio including renewable energy projects (~3.6 GW), a coal-based thermal plant (1.6 GW), and a pumped storage project (3 GW). While this extensive capex is projected to lead to an interim increase in leverage, the rating agency expects stability to be maintained by the operational ramp-up of new assets and the company's experienced management. Investors should monitor the execution of this large capex pipeline and its impact on leverage ratios.