Tata Power Co. Ltd’s consolidated Ebitda growth of 15% year-on-year to ₹3,600 crore in the June quarter (Q1FY26) failed to impress investors amid looming uncertainties regarding the restart of its Mundra plant operations. The strong performance of the renewable energy (RE) business and lower losses in Odisha aided Ebitda growth.
While RE could sustain momentum, Tata Power’s finances need closer tracking, given the construction of several high-gestation, capital-intensive projects across hydro and pumped hydro storage.
RE Ebitda (including other income) grew 64% to ₹1,600 crore, thanks to a robust show across all sub-segments: cell & module manufacturing; solar & wind generation, and engineering, procurement & construction (EPC) projects.
The integrated solar cell and module manufacturing plant’s capacity utilization exceeded 90% in Q1, with its Ebitda margin jumping 800 basis points (bps) to 19%. Capacity utilization is projected to remain at this level in FY26, as per the management.
The EPC Ebitda margin rose 780 bps to 11.5%, aided by higher third-party projects and a rise in the household solar rooftop business.
Thus, RE’s share in consolidated Ebitda rose to 40% in Q1 from 28% a year ago with a corresponding fall in the other two businesses – thermal generation, coal and hydro; and transmission and distribution. These businesses were hurt due to lower power demand given the early monsoon and a fall in utilization of its coal plants.
Tata Power commissioned 0.1 GW of RE capacity in Q1 but aims to achieve 1.6 GW in the remaining nine months of FY26—a tall order. It plans capital expenditure of ₹25,000 crore in FY26 and spent ₹3,700 crore in Q1. It is also bidding for Uttar Pradesh’s distribution companies.
Mundra hurdle
Yet, a big challenge is the 4.2 GW imported coal-based Mundra plant, which was shut down for maintenance after the government-mandated Section 11 provision was discontinued from 30 June.
The provision allowed fuel costs to be passed on to customers, not included in its original power purchase agreement (PPA). While the company is confident of reaching a supplementary PPA with the consuming states, an early resolution is crucial.
“.. the likely signing of a PPA for Mundra will drive the company’s future performance,” JM Financial Institutional Securities said.
Tata Power’s shares trade at an enterprise value of 12x FY26 estimated Ebitda, Bloomberg data shows, which is not cheap.
“We find most positives priced in, while any delays in CGPL (Mundra) resolution and/or RE commissioning could impact growth, particularly given the rich valuations,” Nuvama Institutional Equities said in a report.
