Torrent Power Ltd continues to scale its coal-based portfolio. The recent acquisition of Nabha Power Ltd, a subsidiary of Larsen & Toubro Ltd, comes at a time when other power producers are also increasing their coal-based capacities to meet rising electricity demand.
The transaction was at an enterprise value of ₹6,889 crore and included ₹2,733 crore of net debt.
The deal should help Torrent expand its geographical reach to North India. Nabha Power operates a 1.4 gigawatt (GW) coal-based power plant in Punjab, which can be expanded by 0.8 GW with the available infrastructure.
It has a power purchase agreement (PPA) with the Punjab State Power Corporation for sale of its power, valid till 2039, providing earnings visibility. The plant is based on supercritical technology, which provides better heat efficiency, placing it high on ‘merit order dispatch’. Under merit order dispatch, the electricity regulator prioritises the purchase of power from plants with lower variable costs.
Plant load factor, or the capacity utilization, of Nabha plant stood at 84% in H1FY26, against 70.5% for NTPC’s thermal plants. Also, the plant had an availability factor of 99% in H1FY26 and FY25, significantly higher than the regulatory requirement of 85%, making it eligible for full fixed-cost recovery and incentives from the discom.
On the flipside, Nabha plant’s Ebitda is projected to come down from FY26, due to provisioning of lower fixed charge recovery in PPA.
For H1FY26, Ebitda adjusted for the impact of lease accounting, stood at ₹480 crore, against ₹1,153 crore in FY25. ICICI Securities projects Nabha to generate sustainable Ebitda of ₹1,050 crore, and expects the asset to be value accretive at 6.5x EV/Ebitda.
“We assign a value of ₹68 per share to the acquisition,” it said in a note on 16 February. Torrent is currently trading at 11x on FY27 Ebitda estimates, as per Bloomberg consensus.
Torrent has an existing power generation portfolio of 5 GW, with another 5.6 GW of under-construction projects. This includes 1.6 GW of thermal plant in Madhya Pradesh, which it won under competitive bidding in August, entailing an investment of ₹22,000 crore.
Its balance sheet also remains healthy with a net debt-to-equity of 0.6x, providing a sufficient cushion for funding the deal. This deal is subject to clearance from the Competition Commission of India and is expected to close by June-end.
Meanwhile, the Torrent Power stock has gained around 21% in the last one year; sentiment is aided by the large Madhya Pradesh project, but valuation looks demanding. Going ahead, the integration of Nabha, along with earnings accretion from other projects, would determine the stock’s course.
