Whalesbook
Mundra SPPA Overhang Cleared, Rating Held
Prabhudas Lilladher has reaffirmed its 'HOLD' rating for Tata Power Company, setting a price target of INR 400 per share based on a Sum of the Parts (SoTP) valuation. The brokerage highlighted that future earnings are significantly de-risked now that the critical Mundra SPPA issue is largely resolved. Finalization agreements with Gujarat and other states are in advanced stages, removing a major overhang that had impacted the company's outlook.
Recent Performance and Future Capacity
Tata Power reported adjusted Profit After Tax (PAT) growth of 10% year-on-year in the latest quarter, meeting analyst expectations. Key contributions came from its TP solar business, Independent Power Producer (IPP) operations, and stronger performance from its Delhi and Odisha distribution companies (discoms). Although its current 16.7GW operational capacity is largely thermal, a strategic shift is underway. The company is implementing approximately 5GW of in-house renewable capacity, scheduled for commissioning in FY27 and FY28, which will significantly change its generation mix.
Earnings Outlook and Growth Catalysts
Future earnings growth is expected to be driven by consistent performance from the Odisha discom, new IPP projects, and expansion in its solar manufacturing segment. Prabhudas Lilladher pointed to several key catalysts for future performance. These include meeting the ~2.5GW renewable commissioning target for FY27, fully finalizing SPPA agreements for all Mundra procurer states, scaling up solar manufacturing, and potential upside from its nuclear Small Modular Reactor (SMR) initiative in the medium term.