Detailed Narrative
Robust Q3 FY26 Performance Driven by New Businesses
Tata Power reported a strong Q3 FY26, with EBITDA increasing nearly 12% YoY to Rs. 3,913 crores and PAT marginally rising to Rs. 1,194 crores, despite the Mundra plant being non-operational. The growth was significantly bolstered by new businesses, including solar cell and module manufacturing, which saw Q3 PAT jump to Rs. 251 crores from Rs. 112 crores YoY, and rooftop solar, which executed 372 MW in Q3 and reported Q3 PAT of Rs. 111 crores, up from Rs. 60 crores. For the nine-month period, EBITDA grew 12% YoY to Rs. 11,874 crores, and PAT increased 7% to Rs. 3,702 crores.
Mundra Resolution Nearing Completion Amidst Operational Challenges
The company is close to finalizing the arrangement for its Mundra plant with Gujarat, with only one point remaining to be resolved, and management anticipates closing this in 2-3 weeks. Operations are expected to resume by the end of the month. The plant's non-operation during the quarter resulted in a substantial hit to PAT, with approximately Rs. 800 crores in losses booked at the PAT level for the nine-month period due to the plant being shut for six months and not receiving capacity charges.
Aggressive Renewable Capacity Expansion and Pipeline
Tata Power has a substantial renewable capacity pipeline of nearly 5.5 GW to be executed over the next two years. For FY26, the company expects to commission a total of 2.7 GW (including 500 MW in Q4), having already commissioned 2.2 GW. Looking ahead, the company targets 2.5 GW of 100% own capacity additions for FY27 and FY28, with a balanced 50-50 solar-wind split. Execution is being carefully timed with the availability of transmission lines to avoid stranded assets, as connectivity issues have caused delays for some projects.
Strong Performance in Odisha Discoms and Delhi Regulatory True-up
The Odisha Discoms continued their strong performance, with Q3 PAT increasing to Rs. 226 crores from Rs. 86 crores YoY, and generating approximately Rs. 800 crores in cash for the quarter, driven by improved collection and billing efficiencies. Additionally, the Delhi Discom benefited from a one-off📎 regulatory true-up📎 for 2022-23, contributing Rs. 460 crores to Q3 EBITDA. This regulatory impact🌐 at TPDDL for the nine-month period was Rs. 344 crores.
Strategic Focus on Distribution and Nuclear Power Initiatives
Management anticipates significant opportunities in the distribution sector, particularly through public-private partnerships (PPPs) in states with high financial losses, with announcements expected in the next 6-9 months following potential Electricity Act amendments. The company is also in continuous discussions with government bodies, including the Department of Atomic Energy and NPCIL, regarding nuclear power, especially small modular reactors, with projects potentially commencing in 24 months. These initiatives are expected to bring more clarity on technology transfer and fuel sourcing.
Conservative Financial Leverage and Sustainable Margins
Tata Power maintains a conservative financial profile with a net debt to underlying EBITDA ratio of 3.4 and a net debt to equity ratio of 1.2. Despite annual CAPEX plans ranging from Rs. 15,000-25,000 crores, management is committed to maintaining these healthy leverage ratios. The company also expects its EPC PAT margin to be consistently between 5-6% every quarter, with a consolidated PAT margin of approximately 8%, and anticipates that solar cell and module manufacturing margins will continue to improve.