Tata Power Co. Ltd shares are down around 3% after its consolidated Ebitda for the December quarter (Q3FY26), adjusted for one-off regulatory income, fell by 9% year-on-year, to ₹3,100 crore. Revenue, too, declined by 9% to ₹13,900 crore. The continued shutdown of the Mundra power plant since July has hurt Tata Power’s performance.
Mundra, along with the associated coal and shipping businesses, reported a loss of ₹145 crore at the Ebitda level (including other income) in Q3FY26, against a profit of ₹809 crore in the year ago period. The plant is lying idle as its power purchase agreement (PPA) does not allow fuel cost pass-through, making it commercially unviable at current fuel prices.
Note that the plant was operational last year under the central government’s directive which allowed fuel pass through. Tata Power has been in discussion with the consuming states since July to enter into a supplementary PPA allowing fuel pass-through. The agreement remains elusive till date, even as the company hopes to reach a deal soon.
The good thing is that Tata Power’s other two businesses continue to do well. The renewables business recorded a 66% increase in Ebitda (including other income), to over ₹1,600 crore, driven by the scaling up of the integrated solar cell & module manufacturing plant, which reached full capacity.
Buoyed by the swift ramp-up of the plant, Tata Power is planning to integrate further backwards into ingot wafer manufacturing, and is exploring sites along with state incentives being offered for it.
While the solar engineering, procurement and construction (EPC) division saw an impressive 38% revenue growth, while its Ebitda grew only 7% with a decline of nearly 500 basis points in margin to 11.2%, due to an increase in execution of in-house projects. The margin may remain under pressure in Q4 and FY27 also, with focus on meeting captive needs.
The transmission and distribution (T&D) segment got a push from improving performance of the Odisha distribution segment, leading to robust Ebitda growth of 58% to ₹2,021 crore. The business, taken over by Tata Power in FY21 as a JV partner with the Odisha government, is seeing steady improvement in billing efficiency and a decline in distribution losses, reflecting the gains from discom privatisation. The T&D segment now accounts for over half of Tata Power’s Ebitda, up from 37% a year ago.
Unfortunately for investors, Tata Power’s shares have stayed largely flat over the past year, dragged down by Mundra’s underperformance. The stock trades at an enterprise value of 10.7 times FY27 estimated Ebitda, as per Bloomberg consensus and seems to lack the fire power for a re-rating.
“At current market price, we find most positives priced in while Coastal Gujarat Power Ltd (Mundra) loss may continue despite resolution (expected by Feb-Mar ’26),” says Nuvama Institutional Equities in a 4 February note.
Besides, while the company is investing significantly to raise its generation capacity from the current about 16 GW to 26 GW, about half of the projects are back-ended. “We find Tata Power’s growth story materialising over FY28-30, as the renewable energy/ pumped hydro storage projects come up, to reach ₹10,000 core PAT target by FY30,” adds Nuvama.
