Corporate Development

Published: Feb 28, 2022
Updated: Feb 28, 2022

Torrent Power - A ‘torrent’ of green power

Torrent Power (TPL), a power arm of the diversified Ahmedabad-based Torrent group, has aggressively started expanding its renewable energy portfolio in general and solar power portfolio in particular. The company is a significant player in the country’s power scenario, with a presence in the entire value chain of generation, transmission and distribution.

Very recently, TPL completed the acquisition of 100% equity share capital of Visual Percept Solar Projects Pvt Ltd (VPSPPL), earlier owned by Blue Diamond Properties Pvt Ltd (55%) and publicly listed leading sugar company Balrampur Chini Mills Ltd (45%),

VPSPPL is the SPV which operates a 25 MW solar power plant in Gujarat and has a long-term power purchase agreement of 25 years with Gujarat Urja Vikas Nigam. The enterprise value, estimated at Rs 163 crore for this acquisition, gives a costing of Rs 6.52 crore per MW.

ACQUISITION SPREE

Likewise, TPL has entered into two more securities purchase agreements with Lightsource India Ltd and Lightsource Renewable Energy (India) for the acquisition of 100% share capital and securities of LREHL Renewables India SPV1 Private Limited, which operates a 50 MW solar power plant in Maharashtra. The enterprise value estimated for this acquisition is approximately Rs 317 crore, giving a per MW cost of Rs 6.34 crore.

Another share purchase agreement has been signed with the publicly listed CESC Ltd, Haldia Energy Ltd and other nominee shareholders for the acquisition of 100% share capital of Surya Vidyut Ltd, which operates 156 MW wind power plants in Gujarat, Rajasthan and Madhya Pradesh. The enterprise value estimated for this acquisition is approximately Rs 790 crore, giving a per MW cost of Rs 5.06 crore.

The company’s financial results do not reflect the performance of the 50 MW solar plant and the 156 MW wind power plants so far, because the conditions mentioned in the share purchase agreements are yet to be complied with.

Currently, TPL has an aggregate installed power generation capacity of about 3.9 GW, which largely consists of clean energy such as gas (2.7 GW) and renewables (0.8 GW). Another 0.7 GW of renewable energy plants are under an advanced stage of acquisition or under development, which will increase its renewable energy portfolio to over 1.5 GW and reach a total capacity of about 4.6 GW.

DISTRIBUTION GIANT

The company is also one of the largest players in power distribution, wherein it distributes nearly 14.5 billion units to over 3.7 million customers in the cities of Ahmedabad, Gandhinagar, Surat, Dahej SEZ and Dholera SIR in Gujarat, Bhiwandi, Shil, Mumbra and Kalwa in Maharashtra, and Agra in Uttar Pradesh. It is also in the process of taking over electricity distribution operations in the Union Territories of Dadra, Nagar Haveli, Daman and Diu.

The company has been issued a letter of intent (LoI) in this regard, pursuant to its bid to purchase 51% shares in the government-owned company for distribution and retail supply of electricity, and shall hold the distribution licence in the UTs of Dadra, Nagar Haveli, Daman and Diu. This development augurs well for TPL and it appears that this particular operation will start contributing to its revenue and profits from the next financial year onwards.

In FY21, TPL achieved a consolidated revenue of Rs 12,314 crore and PAT of Rs 1,295.87 crore, translating into an EPS of Rs 26.98 on its equity capital share of Rs 480.62 crore of Rs 10 face value for each share. The consolidated book value per share remains at Rs 212. In the first three quarters of the current fiscal 2022, the company has reported PAT of Rs 946.07 crore on a revenue of Rs 10,652 crore. Due to its debt reduction as a result of good cash flow and well- managed working capital cycle, the finance cost has come down by Rs 135 crore (22%) to Rs 477 crore from Rs 612 crore during the same period in the previous year. TPL has approved an interim dividend of Rs 9 per equity share.

The OPM and NPM have been 24.73% and 9% respectively in the first nine months, against 28.47% and 10.65% for the full year in FY21. The debt-equity ratio at 0.66 and interest service coverage ratio at 5.66 are also very favourable vis-à-vis 0.73 and 4.59 respectively as at March 2021. The promoter group holds 53.57% of the equity capital and the balance 46.43% is distributed amongst 1,25,963 public shareholders.

BRITISH HONOUR

During the quarter gone by, the company’s Ahmedabad and Surat distribution units have won the British Safety Council’s prestigious ‘Sword of Honour’ award for achieving excellence in the field of health and safety and the ‘Globe of Honour’ award in the field of environmental sustainability. TPL’s licensed areas in Gujarat have the distinction of having the lowest T&C losses and the best reliability indices in the country.

CRISIL UPGRADE

In a recent and important development, CRISIL has upgraded the long-term credit rating of TPL’s non-convertible debentures and long-term bank facilities from ‘CRISIL AA/ Positive’ to ‘CRISIL AA+/Stable’. Similarly, CRISIL has also reaffirmed its ‘CRISILA1+’ rating on the short-term bank facilities and commercial paper programme of the company, citing TPL’s continued strong profitability and sustained improvement in the leverage levels, apart from other factors.

At its current market price of Rs 477 per share, TPL’s market capitalization comes to Rs 22,957 crore.