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Stock Data
Sector Electric Utilities
Face Value (Rs.) 10.00
52 wk. High/Low (Rs.) 374.00/270.10
Volume (2 wk. Avg.) 100000
BSE Code 532779
Market Cap (Rs.mn.) 136065.60
Financials (Rs. in mn.) FY10
FY11E FY12E
Net Sales 59103.70 71515.48 82242.80
EBIDTA 18386.30 23608.18 27149.41
PAT 8372.60 10997.94 12853.60
EPS 17.72 23.27 27.20
P/E 16.26 12.37 10.59
Torrent Power Ltd
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SYNOPSIS
Torrent Power Limited engages in the generation, transmission, and distribution of electricity in the cities of Ahmedabad, Gandhinagar and Surat, India.
Annually Torrent Power distributes over 10 billion units of power in cities of Ahmedabad, Gandhinagar and Surat and it has a base of over 1.9 million customers in these cities.
The company has signed a turnkey EPC Contracts with Siemens AG, Germany and Siemens, India, for UNOSUGEN.
The company made an investment of Rs. 47.45Crores in equity shares of its subsidiary, Torrent Pipavav Generation Ltd.
Torrent Power is in process of expanding the capacity of its 1,147.50 MW Sugen generation plant to 1,500 MW. The company will soon decide the EPC contractor for adding 375 MW units at its combined cycle power plant.
The company’s net sales and net profit are expected to grow at a CAGR of 23% and 47% over FY09 to FY12E.
1 Year Comparative Graph
V.S.R. Sastry
Equity Research Desk
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
C.M.P: Target Price: Rs.288.00 Rs.330.00
Share Holding Pattern
November 12th, 2010
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Table of Content
Content Page No.
1. Peer Group Comparison 03
2. Investment Highlights 03
3. Company profile 06
4. Financials 08
5. Charts & Graph 10
6. Outlook and Conclusion 12
7. Industry Overview 13
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Torrent Power Ltd 288.00 136065.60 17.72 16.26 3.43 30.00
NTPC 192.15 1584366.00 10.10 19.02 2.49 38.00
Tata Power 1375.85 326499.20 34.54 39.83 3.10 120.00
Reliance Power 181.90 435977.90 1.32 137.80 3.10 0.00 *As on 12/11/2010
Investment Highlights
Results Updates (Q2 FY11) (Consolidated)
For the Second quarter, the top line of the company increased 19%YoY and stood at Rs.17240.10mn against Rs.14508.90mn of the same period of the last year. The Profit After Tax of the company for the quarter stood at Rs.2189.80.mn from Rs.2097.20mn of the corresponding period of the previous year i.e. an increase of 4%YoY.
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EPS of the company for the quarter stood at Rs.4.63 for equity share of Rs.10.00 each.
Expenditure for the quarter stood at Rs.12256.00mn, which is around 24% higher than the corresponding period of the previous year. Cost of Power Purchased of the company for the quarter accounts for 20% of the sales of the company and stood at Rs.3473.00mn from Rs.3106.80mn of the corresponding period of the previous year i.e., an increase of 12%YoY. Fuel Cost increased 25%YoY to Rs.6370.70mn from Rs.5100.60mn. and accounts for 37% of the revenue of the company for the quarter.
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OPM and NPM for the quarter stood at 30% and 13% respectively from 32% and 14% respectively of the same period of the last year.
Torrent got a trunkey EPC Contract
The company has signed a turnkey EPC Contracts with Siemens AG, Germany and Siemens, India, for UNOSUGEN (the 382.5 MW Gas based Combined Cycle Power Project - the capacity expansion at the existing SUGEN Mega Power Project) and for the green field DGEN Project at Dahej SEZ (the 1200 MW Gas based Combined Cycle Power Project). While UNOSUGEN is being established under the aegis of Torrent Power, DGEN is being established under the aegis of Torrent Energy, the wholly-owned subsidiary of the Company.
Thus, approximately 1600 MW power generation capacity would be added in the Torrent fold within the next three years.
Torrent to expand the capacity of sugen plant
Torrent Power is in process of expanding the capacity of its 1,147.50 MW Sugen generation plant to 1,500 MW. The country's first gas-based mega power Sugen plant with three units became operational in September 2009. The company will soon decide the EPC contractor for adding 375 MW units at its combined cycle power plant.
The company is likely to invest about Rs 1,500 crore for the proposed expansion. It is aiming to expand the capacity of Sugen plant by 3,000 MW in phases to make it the country's largest gas-based generation facility with a capacity of 4,500 MW at a single location. Torrent Power has already acquired land needed for the purpose of expansion at Sugen.
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Besides expanding Sugen plant capacity, the company is also planning to set up a 2,000 MW coal based power plant in Saurashtra, a 1,000 MW coal based power plant in Chhattisgarh. Also, it is in the process of commissioning of a gas-based power plant in the Dahej SEZ.
Company Profile Torrent Power (TPL) is engaged in generation, transmission and distribution of power. Torrent forayed into the power segment by acquiring management control of Surat Electricity Company in 1996-97. Later in 1998-99 it acquired management control of Ahmedabad Electricity Company (AEC). In 2002-03 company started setting up 1147.5 MW combined cycle mega power project near Surat. In 2004-05 three companies Torrent Power AEC, Torrent Power SEC and Torrent Power Generation were merged into Torrent Power. Today TPL is part of Rs.45 billion Torrent Group. The company has a generation capacity of 1647.5 MW out of this 500 MW is operational and 1147.5 MW is under implementation. Annually Torrent Power distributes over 10 billion units of power in cities of Ahmedabad, Gandhinagar and Surat. It has a base of over 1.9 million customers in these cities. The company created history by entering into India’s first distribution franchisee agreement with Maharashtra State Electricity Distribution Company for Bhiwandi Circle in December 2006. Power Generation units The company generates 400 MW from its coal-based thermal power station located at Sabarmati. This plant has four thermal generating units with installed capacity of 60 MW, 120 MW, 110MW and 110 MW. This facility was acknowledged as one of the best plants in the country by the ministry of power in May 2004. The balance 100MW is generated from dual-fuel based combined cycle power plant located at Vatva. The station consists of two gas turbines each of 32.5 MW and a steam turbine of 35 MW capacities. Subsidiaries
• Torrent Power Grid Limited • Torrent Energy Limited • Torrent Pipavav Generation Limited • Torrent Power Bhiwandi Limited
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Plant locations
1) Power House, Sabarmati, Ahmedabad-380005 2) Vatva Gas Power Station, Vatva, Ahmedabad-382445 3) SUGEN CCPP, Village Akhakhol, Taluka Kamrej, Surat-394115
Distribution Divisions
1) Electricity House, Lal Darwaja, Ahmedabad-380001 2) Torrent House, Station Road, Surat-395003 3) Old Agra Road, Anjur Phata, Bhiwandi-421302
Business Areas:
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Financials Results 12 Months Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) FY09 FY10 FY11E FY12E
Description 12m 12m 12m 12m
Net Sales 44252.70 59103.70 71515.48 82242.80
Other Income 404.40 472.70 723.23 831.72
Total Income 44657.10 59576.40 72238.71 83074.51
Expenditure -36440.00 -41190.10 -48630.52 -55925.10
Operating Profit 8217.10 18386.30 23608.18 27149.41
Interest -1554.80 -3143.70 -3429.24 -3517.93
Gross profit 6662.30 15242.60 20178.94 23631.48
Depreciation -1831.40 -3365.00 -4239.90 -5003.08
Profit Before Tax 4830.90 11877.60 15939.04 18628.40
Tax -769.20 -3505.00 -4941.10 -5774.80
Profit After Tax 4061.70 8372.60 10997.94 12853.60
Share of P&L of Asso 0.00 -2.50 -2.55 -2.60
Net Profit 4061.70 8370.10 10995.39 12850.99
Equity capital 4724.50 4724.50 4724.50 4724.50
Reserves 27594.70 34894.10 45889.49 58740.48
Face Value 10.00 10.00 10.00 10.00
Total No. of Shares 472.45 472.45 472.45 472.45
EPS 8.60 17.72 23.27 27.20
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Quarterly Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) 31-Mar-10 30-Jun-10 30-Sep-10 31-Dec-10E
Description 3m 3m 3m 3m
Net sales 17169.30 18203.50 17240.10 17929.70
Other income 173.70 192.70 212.10 231.19
Total Income 17343.00 18396.20 17452.20 18160.89
Expenditure -11186.80 -12270.60 -12256.00 -12048.76
Operating profit 6156.20 6125.60 5196.20 6112.13
Interest -903.40 -857.90 -842.00 -867.26
Gross profit 5252.80 5267.70 4354.20 5244.87
Depreciation -1142.90 -978.10 -997.00 -1056.82
Profit Before Tax 4109.90 4289.60 3357.20 4188.05
Tax -1235.10 -1295.00 -1167.40 -1298.30
Profit After Tax 2874.80 2994.60 2189.80 2889.76
Share of P&L of Asso 0.70 -2.20 -2.60 -2.65
Net Profit 2875.50 2992.40 2187.20 2887.10
Equity capital 4724.50 4724.50 4724.50 4724.50
Face Value 10.00 10.00 10.00 10.00
Total No. of Shares 472.45 472.45 472.45 472.45
EPS 6.09 6.33 4.63 6.11
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Key Ratio
Particulars FY09 A FY10 A FY11 E FY12 E
EBIDTA % 19% 31% 33% 33%
PAT % 9% 14% 15% 16%
P/E ratio (x) 33.50 16.26 12.37 10.59
ROE - % 13% 21% 22% 20%
ROCE - % 9% 19% 22% 21%
EV/EBIDITA (x) 18.73 7.40 5.76 5.01
Debt Equity Ratio 1.12 0.95 0.78 0.65
Price/Book Value 1.16 3.43 2.69 2.14 A-Actual E-Expected Charts:
Net sales & PAT
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P/E Ratio (x)
P/BV (X)
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EV/EBITDA(X)
Outlook and Conclusion
At the market price of Rs.288.00, the stock is trading at 12.37 x and 10.59 x for FY11E and FY12E respectively.
On the basis of EV/EBDITA, the stock trades at 5.76 x for FY11E and 5.01 x for FY12E.
Price to book value of the company is expected to be at 2.69 x for FY11E and 2.14 x for FY12E respectively.
EPS of the company is expected to be at Rs.23.27 and Rs.27.20 for the earnings of FY11E and FY12E respectively.
The company made an investment of Rs. 47.45Crores in equity shares of its subsidiary, Torrent Pipavav Generation Ltd and disinvested equity shares of Rs. 0.05crores of Torrent power Bhiwandi Limited during the quarter.
The company has signed a turnkey EPC Contracts with Siemens AG, Germany and Siemens, India, for UNOSUGEN.
Torrent Power is in process of expanding the capacity of its 1,147.50 MW Sugen generation plant to 1,500 MW. The country's first gas-based mega power Sugen plant with three units became operational in September 2009. The company will soon decide the EPC contractor for adding 375 MW units at its combined cycle power plant.
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The company’s net sales and net profit are expected to grow at a CAGR of 23% and 47% over FY09 to FY12E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.330.00 for Medium to Long term investment.
Industry Overview Sector structure As the Indian economy continues to surge ahead, its power sector has been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope for the growth of this sector is immense. India's total installed capacity of electricity generation has expanded from 105,045.96 MW at the end of 2001–02 to 155,859.23 MW at the end of November 2009. In fact, India ranks sixth globally in terms of total electricity generation. Source-wise, at the end of November 2009, thermal power plants accounted for an overwhelming 63.92 per cent of the total installed capacity, producing 99628.48 MW. Hydel power plants come next with an installed capacity of 36,885.40 MW, accounting for 23.67 per cent of the total installed electricity generation capacity. Besides thermal and hydel power, renewable energy sources contribute 9.77 per cent to the total power generation in the country producing 15,225.35 MW. Nuclear energy makes up the balance 2.64 per cent, contributing 41,200 MW. According to the latest data obtained from the Central Electricity Authority (CEA), while power demand increased marginally from 108,911 Mw in the first seven months of the financial year 2007-08 to 109,304 Mw in the same period of 2008-09, it jumped to 116,281 Mw in the first seven months of 2009-10, as industrial activity improved due to the recovery. Factories accounted for around 30-40 per cent of the total power consumed in the country.
Powering Up Power demand versus deficit in Apr-Oct of last five years
Year Demand % increase in demand
Availability Deficit (%)
2005-06 88,667 NA 80,631 9.10
2006-07 98,520 11.11 84,468 12.20
2007-08 108,911 10.54 92,976 14.60
2008-09 109,304 0.36 94,566 13.50
2009-10 116,281 6.38 101,609 12.60
Source: CEA (Figures in Mw)
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Growth Potential According to a report by KPMG and CII, released in December 2007, India's energy sector will require an investment of around US$ 120 billion- US$ 150 billion over the next five years. The government has revised its target of power capacity addition to 92,700 MW in the 11th Five Year Plan (2007-12), from the earlier estimate of 78,577 MW (as of June 2007) to sustain the growth momentum of the economy. Further, according to Planning Commission estimates, renewable energy (RE) projects worth US$ 16.50 billion, for the generation of 15,000 MW power, would come up in the 11th Plan. Moreover, the government has earmarked a total capital subsidy of US$ 6.88 billion for providing electricity connections and for the distribution of infrastructure to rural households. Nuclear Power Generation Subsequent to the Indo-US nuclear deal and India getting clearance from the Nuclear Suppliers Group (NSG), nuclear power generation is likely to provide an opportunity of US$ 10 billion in the next five years, according to a JP Morgan estimate. Since the Indo-US nuclear deal, India has signed a crucial civil nuclear agreement with Mongolia for supply of uranium to New Delhi. In November 2009, the Indo-French civil nuclear agreement was unanimously adopted by the French Parliament, paving way for companies to build nuclear power plants in India. India has also signed a civil nuclear pact with Argentina and has reached an agreement on civil nuclear cooperation with Canada. In December 2009, Russia and India signed an agreement to expand nuclear cooperation. Hindustan Construction Company (HCC) has signed a memorandum of understanding (MoU) with the international engineering and project management company AMEC plc, to jointly explore the application of consulting and EPC services for the establishment of nuclear power plants in India.
The Central government has finalised six 1,000 MW nuclear power units at Mithivirdi in Gujarat, involving an investment of US$ 12.8 billion.
Indian Oil Corporation (IOC) has signed a memorandum of understanding (MoU) with the Nuclear Power Corp of India (NPCIL) for setting up of a US$ 2.2 billion nuclear power plant.
Larsen & Toubro (L&T) is entering a joint venture with the Nuclear Power Corporation of India (NPCIL) to explore co-operation in the setting up of nuclear power plants.
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Investments According to research by Venture Intelligence, India’s power sector is set to emerge as a key destination for private equity (PE) players to make investments, with close to US$ 1.64 billion worth of infrastructure funds, mainly in power, awaiting their launch.
National Hydroelectric Power Corporation (NHPC), the country’s largest hydel power producer, will develop the 1,500-MW Tipaimukh hydropower project in the north-eastern state of Manipur at an investment of US$ 1.7 billion.
Bhushan Power and Steel (BPSL) plans to invest US$ 629.1 million to add 250 MW capacities to its existing power plant and to increase production of value-added steel at its Orissa facility over the next one year.
More than US$ 15.4 billion worth of investments have been lined up for various power projects in Maharashtra; it was announced by Mr Subrat Ratho, Maharashtra Power Secretary.
A loan agreement of US$ 330 million for the Haryana Power System Improvement Project has been signed by representatives from the Government of India, the Government of Haryana and the World Bank.
The Orissa government has approved two bio-mass based power projects with a combined generating capacity of 39 MW of power, in an effort to exploit the available potential in the bio-mass sector.
Torrent Power Limited, has dedicated the country's biggest gas-based power project of 1,147 MW capacity near Surat and is further scaling up generation capacity of its plant by adding another 3,400 MW in the next five years.
The joint venture between Toshiba of Japan and the JSW Group, which is setting up a US$ 215 million power plant equipment manufacturing unit in Chennai, plans to start work on the project by December 2009.
Larsen & Toubro has reached a milestone in the Indian power sector by establishing the country’s largest transmission line research and testing centre at Kanchipuram, near Chennai.
Government Initiatives The government has taken several proactive steps to open the sector for the private players and realize the full potential of the country in the power sector.
Introduction of the Electricity Act 2003 and the notification of the National Electricity and Tariff policies.
Constitution of Independent State Electricity Regulatory Commissions in the states.
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Allowing the private sector to set up coal, gas or liquid-based thermal projects, hydel projects and wind or solar projects of any size.
Allowing foreign equity participation up to 100 per cent in the power sector under the automatic route.
Allowing 100 per cent foreign direct investment (FDI) in the Indian power sector (except nuclear).
Allowing 100 per cent foreign direct investment (FDI) in the renewable energy sector.
Providing income tax holiday for a block of 10 years in the first 15 years of operation and waiver of capital goods' import duties on mega power projects (above 1,000 MW generation capacity).
The government has also taken up some ambitious programmes like the Ultra Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY), Accelerated Rural Electrification Programme and the goal of Power for All by 2012 among others, to rapidly increase the installed capacity.
Looking ahead A study by consultancy major McKinsey estimates, India's power demand to increase to 315 GW–335 GW by 2017, if India continues to grow at an average of 8 per cent in that time This would require a five- to ten-fold rise in power production, entailing investments worth US$ 600 billion. To fuel its rapidly growing economy, India is planning to get an additional 60,000 MW of electricity from various hydro-power projects by the end of 2025. The government targets providing electricity for all by 2012. Under the Rajiv Gandhi Grameen Vidyutikaran Yojna, the Ministry of Power plans to electrify 120,000 villages in the current Five Year Plan (2007–12)
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