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Informist, Tuesday, Nov. 4, 2025

 

By Sunil Raghu

 

AHMEDABAD – The government's decision to not extend a specific legal provision that ensured sustained operations of Tata Power Ltd.'s 4,000-megawatt Mundra power plant is likely to weigh on the company's net profit in the September quarter, brokerages tracking the power producer said. However, the company's revenue is expected to rise, led by capacity additions, primarily in the renewable energy segment, the brokerages added.

 

Tata Power's consolidated net profit for the September quarter is expected to fall 6.7% on year to INR 9.9 billion, according to the average of the estimates of five brokerage firms. On a sequential basis, the bottom line is seen declining 6.1%. Among the five brokerages, Sharekhan Ltd. has the highest estimate for Tata Power's net profit at INR 11.1 billion, while JM Financial Institutional Securities Pvt. Ltd. has the lowest estimate of INR 7.6 billion. The net profit will be down mainly due to the company's inability to recover from customers the full fuel cost of the power it generates at the Mundra plant.

 

Tata Power has five supercritical units of 800 MW each at Mundra. The plant accounts for nearly one-fourth of Tata Power's total electricity generation capacity of 16 gigawatts. These plants accounted for INR 112.9 billion of the company's consolidated turnover of INR 645.02 billion in the previous financial year. As per the power purchase agreements, Tata Power supplies electricity from its Mundra plant to Gujarat, Rajasthan, Maharashtra, Haryana, and Punjab. These agreements are based on a fixed tariff and do not allow the company to pass on any increase in the cost of imported coal to buyers of the power it produces. Only if and when the government imposes Section 11 of the Electricity Act, 2003, the power producers are allowed to recover the actual fuel cost from electricity buyers.

 

In May 2022, the Ministry of Power invoked Section 11 of the 2003 Act, directing all power plants in the country using imported coal, including Tata Power's Mundra ultra mega power plant, to operate at full capacity to meet the high demand for electricity. This provision allows the government to ask power producers to keep running their plants to prevent any outages in the times of shortage. The provision was extended several times in the following years. For Tata Power's Mundra plant, the extension was in place till Jun. 30, 2025. With the provision ceasing to be in force since Jul. 1, Tata Power is forced to operate the plant either at a loss, with curtailed margins, or cut generation, as it cannot recover the full fuel costs. This is likely to impact the company's overall earnings and margins, brokerages said.

 

Tata Power's consolidated revenue for the reporting quarter is seen rising nearly 7.5% on year to INR 168.8 billion and is expected to decline 6.4% on a sequential basis. Among the five brokerages, Motilal Oswal Financial Services Ltd. has the highest revenue estimate at INR 183.6 billion, while JM Financial has the lowest estimate of INR 160.4 billion.

 

The company's consolidated earnings before interest, tax, depreciation, and amortisation for the September quarter is seen at INR 36.4 billion, according to the average of four brokerages' estimates. The lowest EBITDA estimate was INR 35 billion and highest was INR 37.9 billion. Its consolidated EBITDA was INR 38.08 billion in the year-ago quarter. Tata Power is slated to announce its September quarter earnings on Nov. 11.

 

Tata Power's EBITDA is expected to negate contribution from additional renewable capacity commissioned over the year and continued strong performance of its solar rooftop segment and Odisha distribution business, Motilal Oswal Financial said in its note. Tata Power operates electricity distribution business in Odisha through four joint ventures with the state government, covering the entire state, and has a total customer base of over 9 million. JM Financial expects Tata Power's depreciation and finance costs to rise due to the commissioning of new renewables projects.

 

The brokerages are expected to continue to closely track the pace of Tata Power's renewable capacity additions. In an analyst call on Aug. 1, following the June quarter earnings, the company's management had said it had a pipeline of 5.4 GW of renewable power projects and aimed to commission 2.0-2.5 GW of green energy projects every year.

 

In 2025-26 (Apr-Mar), the company aims to commission about 1,600 MW of new renewable energy projects. The company had commissioned 652 MW of green power in the June quarter. The brokerages would also monitor the company's performance in the distribution business, and the ramp-up of its 2.5 GW solar cell and nearly 5-GW module manufacturing facilities in Tamil Nadu and Bengaluru.

 

On Tuesday, shares of the company ended down nearly 2% at INR 400.60 on the National Stock Exchange. The stock is up nearly 3% since the company detailed its earnings for the June quarter. 

 

Of the 10 research reports on the company available with Informist, eight have a 'buy' or equivalent rating on the stock, with an average target price of INR 475 per share. Two brokerages have a 'sell' rating on the stock with a target price of INR 349 per share.

 

Following are the Jul-Sept earnings estimates for Tata Power from five brokerages in descending order by the estimate of net profit, in INR million:

 

Brokerage	Net sales	Net profit	EBITDA
Sharekhan Ltd.	161,300	11,100	--
Motilal Oswal Financial Services Ltd.	183,632	10,522	37,344
Nuvama Wealth Management Ltd.	168,895	10,349	35,526
Kotak Securities Ltd.	169,991	10,136	34,951
JM Financial Institutional Securities Pvt. Ltd.	160,351	7,634	37,888
Average	168,815.80	9,948.20	36,427.25

 

End

 

Edited by Tanima Banerjee

 

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