Geojit Financial Services has upgraded Torrent Power Ltd. to a BUY rating with a 12-month target price of Rs. 1,638, implying an upside potential of nearly 15% from the current market price of Rs. 1,424. The brokerage believes Torrent Power is entering a new growth cycle driven by an expanding renewable energy portfolio, the upcoming consolidation of Nabha Power, and continued strength in its distribution business. While FY26 earnings were impacted by higher taxation and softer power generation, underlying profitability remained resilient. The company is expected to deliver double-digit revenue and earnings growth over the next two years, supported by elevated capital expenditure, renewable commissioning, and improving operational efficiency across its utility assets.

Geojit Upgrades Torrent Power to BUY as Growth Engines Gain Momentum

Geojit Financial Services has upgraded Torrent Power Ltd. to a BUY recommendation, highlighting the company's strong utility franchise, expanding renewable portfolio, and attractive long-term growth outlook.

Torrent Power has evolved into one of India's most diversified power utilities, with operations spanning generation, transmission, and distribution across Gujarat, Maharashtra, Uttar Pradesh, and Karnataka. The company has built a reputation for operational excellence in distribution, a segment that continues to serve as its key earnings driver.

FY26 Performance Reflects Operational Resilience Despite Revenue Pressure

Torrent Power reported FY26 revenue from operations of Rs. 28,966 crore, marginally lower by 0.7% year-on-year due to reduced power generation and subdued distribution company offtake.

However, the quality of earnings improved considerably.

Gross profit increased 9% year-on-year to Rs. 8,374 crore, supported by lower power purchase costs and a significant reduction in fuel expenses. As a result, gross margins expanded by 258 basis points.

Operating performance also remained healthy.

PBDIT rose 5.4% to Rs. 6,125 crore, while operating margins improved to 21.1%, reflecting stronger profitability in the distribution business despite softer performance from renewable and generation operations.

Adjusted Earnings Tell a Stronger Story Than Reported Numbers

Although reported profit after tax declined 19.3% to Rs. 2,469 crore during FY26, the decline was largely driven by a substantially higher tax burden.

On an adjusted basis, excluding one-time items:

• Adjusted PAT increased 14.5% to Rs. 2,560 crore.
• Adjusted EPS climbed to Rs. 51.
• PBT improved 2% to Rs. 3,317 crore.

The adjusted earnings growth indicates that the underlying business remains healthy and continues to generate strong cash flows despite a challenging operating environment.

Renewable Expansion Becomes the Next Major Growth Catalyst

One of the biggest investment themes surrounding Torrent Power is its aggressive renewable energy expansion.

Management has guided for commissioning between 1.2 GW and 1.4 GW of renewable capacity during FY27. Most projects already have grid connectivity approvals in place, although transmission infrastructure timelines remain an execution risk.

The renewable portfolio is expected to become a significant contributor to future earnings, helping diversify revenue streams while aligning the company with India's clean-energy transition.

Nabha Power Acquisition Could Strengthen Earnings Visibility

Another important catalyst is the planned acquisition of Nabha Power, which management expects to complete during Q1FY27.

The asset operates under a two-part tariff structure backed by a 25-year power purchase agreement with Punjab State Power Corporation. Such long-duration contracts typically provide predictable cash flows and stable returns, improving earnings visibility for investors.

The acquisition is expected to contribute meaningfully to consolidated revenue and profit growth beginning FY27.

Management Addresses Fuel Supply Concerns

The company also provided reassurance regarding gas availability.

Torrent Power has already secured LNG cargoes required for summer demand and noted that all contracted supplies originate outside the Strait of Hormuz, reducing geopolitical supply risks.

Additional long-term supply arrangements through BP and JERA are expected to become available from calendar year 2027 onward, further strengthening fuel security.

Financial Outlook Remains Encouraging Through FY28

Geojit expects Torrent Power to maintain strong growth momentum over the next two financial years.

The brokerage forecasts revenue CAGR of approximately 10.6% and earnings CAGR of 12.8% between FY26 and FY28, supported by renewable capacity additions and the integration of Nabha Power.

Valuation Supports Further Upside

Geojit values Torrent Power using a Sum-of-the-Parts (SOTP) methodology.

The valuation attributes meaningful value across:

• Generation business.
• Distribution operations.
• Renewable energy assets.
• Pumped storage projects.
• Transmission joint ventures.
• Upcoming thermal power developments.

The brokerage arrives at an equity valuation of approximately Rs. 82,535 crore, translating into a target price of Rs. 1,638 per share.

Investment Levels for Investors

Current Market Price (CMP): Rs. 1,424

Target Price: Rs. 1,638

Expected Upside: 15%

Rating: BUY

Time Horizon: 12 Months

Potential support levels may emerge near the Rs. 1,350–1,380 zone, while a decisive move above Rs. 1,500 could improve momentum toward the brokerage's target valuation.

Conclusion

Torrent Power appears well-positioned to capitalize on India's growing electricity demand and renewable energy transition. While FY27 is expected to be capital-intensive and leverage levels may rise due to aggressive project execution, the company's robust distribution franchise, improving operating margins, renewable capacity additions, and Nabha Power acquisition provide a compelling growth framework.

Geojit's upgrade to BUY reflects confidence in Torrent Power's ability to compound earnings over the medium term. For investors seeking exposure to a high-quality integrated utility with expanding renewable capabilities, the stock offers an attractive risk-reward profile at current levels.