Torrent Power surges as govt to provide subsidy directly to power firms

The stock rallied 5% to Rs 170 as the government approved pooling of imported gas and domestic gas for gas based power plants.

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Shares of Torrent Power has surged 5% to Rs 170 on the National Stock Exchange (NSE) in otherwise weak market after the government approved pooling of imported gas and domestic gas for gas based power plants.

Torrent Power has a generation capacity of 3202 MW and distributes power to 2.87 million customers annually in Ahmedabad, Gandhinagar, Surat, Bhiwandi and Agra. Recently the company implemented a 1200 MW gas based power project at Dahej in South Gujarat.

According to media reports, gas based power producers have agreed to forgo return on equity as government would help them by arranging for buyers of the power. Government will provide subsidy directly to the distribution companies for purchasing gas based power.

“This will help the gas based power plants to operate at a capacity utilization of about 30% and generate cash on their idle assets. This is critical because it will help them service their debt thereby, helping both power companies and banking sector”, said Piyush Jain, Equity Research Analyst, Morningstar Investment Adviser.

The stock opened at Rs 173 and hit a high of Rs 176 on the NSE. The trading volumes on the counter more than doubled with a combined 1.91 million shares changed hands till 1047 hours on the NSE and BSE.