Mundra resolution, renewables portfolio are key drivers for Tata Power

Tata Power's FY30 ambitions hinge on scaling renewables, transmission and distribution, while a long-term Mundra thermal resolution could revive profitability and lift sentiment

Tata Power is the country’s largest private integrated utility and is present across the value chain in generation, transmission and distribution and it has set ambitious growth targets.

 

The company is building up its renewables portfolio with backward integration via in-house solar (engineering procurement and construction (EPC) and module/cell manufacturing.

 

It has also turned around the Odisha discoms it acquired in 2021. It has a substantial execution pipeline of hydro/PSP and transmission projects.

 

To achieve a 15 per cent operating profit over FY25-30, it envisages ₹24,000-25,000 crore annual capital expenditure (capex) during FY26-30.

 

It is targeting a mix of renewables at 60 per cent, transmission at 20 per cent, power distribution at 7 per cent, and pumped hydro storage (10 per cent).

 

Tata Power expects to report an annual operating cash flow (OCF) of ₹15,000 crore and it has the required balance sheet strength with a net-debt-to-equity ratio at 1.1 times.

 

The management targets to sustain project returns in the mid-teens.

 

There are concerns about the Mundra thermal plant where operations continued under a temporary arrangement on a cost-plus basis. This was not extended beyond June, 2025.

 

As a consequence, all five units of the plant remain inoperative.

 

The company is working on setting up a long-term agreement with power purchase agreement (PPA) counterparties and the state government.

 

The resolution of this remains a key monitorable. There is positive news on this front — a long-term resolution with the Gujarat government is in the final stages.

 

The plant is expected to resume operations by January 26, said Tata Power.

 

The new PPA framework will allow pass-through of imported coal costs under a sustainable tariff structure, ending reliance on ad hoc Section 11.

 

Mundra is expected to return to profitability after reporting a ₹300 crore loss in Q2.

 

In Q2FY26, Tata Power registered consolidated revenue of ₹15,800 crore (up 3 per cent year-on-year or Y-o-Y), operating profit of ₹3,530 crore (up 15 per cent) and net profit of ₹920 crore (flat).

 

The operating profit growth was driven by incremental operating profit from solar module and cell manufacturing (₹340 crore), Odisha discoms (₹280 crore) and solar EPC+renewable energy (RE) generation (₹100 crore).

 

Tata Power’s 4.3 Gw solar cell and module capacity is fully ramped up and it is planning backward integration by adding solar wafer and ingot manufacturing capacity of 10 Gw.

 

This is to strengthen its solar value chain with synergies across solar cell/module manufacturing, EPC, rooftop and generation.

 

Final scale and location hinges on production-linked incentive (PLI) and state approvals.

 

Given its technology intensity and capital requirements, the facility will serve captive use and third-party wafer sales.

 

In the RE segment, it plans to add over 3.3 Gw in the next 18 months. It also sees deeper penetration of rooftop solar. There are transmission projects worth ₹12,000 crore and PSP projects of 2.8 Gw on the anvil.

 

In Bhutan, it is developing hydro projects of 1.7 Gw capacity. Tata Power is also looking at more discom privatisation opportunities.

 

On renewables, Tata Power added 205 Mw in H1FY26 and targets another 1.3 Gw in H2, taking the total FY26 additions to ₹1.5 Gw. It is maintaining a run rate of 2.5–2.6 Gw annually. The operational renewable base is on track to cross 7 Gw by FY26-end, backed by a 5.8 Gw pipeline and strong rooftop growth, which achieved ₹1,000 crore plus quarterly revenue.

 

In the long term, Tata Power aims to double operating profit to ₹30,000 crore by FY30, and it has a strategic focus on captive generation projects with the annual target of 2-2.5 Gw from FY27 onwards.

 

The current installed operational capacity stands at 16 Gw, including 7.1 Gw from renewable sources.

 

The company targets scaling up its total capacity to 30 Gw by 2030, with renewables contributing 20 Gw.

 

In transmission, it aims to scale up its transmission portfolio to 10,000 cable kilometres by 2030. In distribution, the company targets expanding its customer base from 12.8 million to 40 million by FY30. In rooftop solar, the management expects revenues to grow at 38 per cent annually over FY25-30. In hydro and pumped storage, it has over 4.5 Gw under construction.

 

Most analysts seem positive on the outlook and Mundra resolution could lead to a boost for the stock.