Detailed Narrative
Strong PBT Growth Driven by Thermal and Distribution
Torrent Power reported a significant 52.4% year-on-year increase in adjusted PBT, reaching INR 948 crores in Q2 FY26, up from INR 622 crores in the prior year. This growth was primarily fueled by a substantial INR 293 crore increase in contribution from the thermal generation business, largely due to merchant power sales and INR 304 crores from LNG. The distribution business also contributed positively, with an INR 11 crore increase, benefiting from improved T&D losses in franchise units and enhanced ROE/ROCE from asset capitalization.
Strategic Capacity Expansion and Project Pipeline
The company secured new Letters of Award (LOAs) for a 1.6 gigawatt coal-based power plant from MP Power Management Company Limited, with a tariff of INR 5.83 per kWh, and a 250 MW Firm and Dispatchable Renewable Energy (FDRE) generation project. These additions bolster an already robust pipeline, which includes 3.6 GW of renewable capacity, 3 GW of pump storage, and 1.6 GW of coal plant projects, alongside two transmission projects. The total installed generation capacity reached nearly 5 GW as of September 30, 2025, comprising 2.7 GW gas-based, 1.9 GW renewable, and 362 MW coal-based.
Renewable Energy Development and Operational Challenges
Torrent Power continued its renewable energy expansion, progressively commissioning 367 MWp of the MSEDCL project, contributing to the 1.9 GW renewable capacity. The newly awarded 500 MW FDRE project is a hybrid of 350 MW solar, 150 MW wind, and 100 MW battery storage (450 MWh) with a tariff of 4.87. However, the renewable generation business saw a INR 20 crore reduction in contribution during the quarter, mainly due to lower Plant Load Factor (PLF) from existing wind power plants, impacted by extended monsoon and the Asana cyclone in Gujarat.
Capital Expenditure for H1 FY26
For the first half of FY26, Torrent Power incurred a consolidated capital expenditure of INR 3700 crores. This includes approximately INR 780 crores in the license distribution business, INR 100 crores in franchisee operations, INR 275 crores in transmission projects, and a significant INR 2500 crores allocated to renewable energy projects. This substantial investment reflects the company's commitment to expanding its generation and distribution infrastructure across various segments.
Outlook on Merchant Sales and Fuel Costs
Management indicated that the majority of the merchant power sales, which significantly boosted Q2 thermal generation contribution, were supplied during Q2, with only an immaterial portion remaining for Q3. Future merchant sales will depend on market conditions and peak demand. The company noted that the landed cost of LNG, if assumed at $10 per MMBtu, would result in a pass-through variable cost, suggesting flexibility in managing fuel expenses for merchant power generation.
Long-term Project Timelines
The 1.6 GW MP Power thermal project is expected to be commissioned in two units, with the first unit in approximately 66 months and the second in 72 months from the PPA signing date. The PPA is anticipated to be signed within the next two months, initiating the nearly six-year commissioning timeline. For the broader project pipeline, including renewable and pump storage capacities, management expects commissioning to occur progressively through FY27 and the first half of FY28.