Why Tata Power Share Price is Rising

Pick any name from the power stocks lineup and you'll notice an impressive surge in the last one week.

Adani Power is leading the charge with a 19% return, closely followed by Reliance Power at over 13% return, and let's not forget Torrent Power, NTPC, and Power Grid.

But, apart from these, one stock that is stealing the spotlight in the power sector is Tata Power, with a rally of over 17%.

It's clear - power stocks have "powered up".

The BSE Power index has skyrocketed by 12% in just one week, while the Sensex has offered 2% returns. 12% return for an index is a big deal.

Coming back to the star of the show... Tata Power was quietly making its way up. But on Thursday, 7 December 2023, it took a leap soaring by 10% and another 1% on Friday, 8 December 2023.

The Tata group stock is all over the news after becoming the sixth Tata group stock that crossed Rs 1 trillion marketcap.

Let's find out why Tata Power share price is rising.

#1 Tata Power Bags New Transmission Project

On 1 December 2023, Tata Power announced that it has won a bid to acquire a new project called Bikaner-III Neemrana-II Transmission.

Now, this project was originally established as a special purpose vehicle (SPV) by the subsidiary company of Power Finance Corporation, PFC Consulting.

As Tata Power has won a bid, the company can now manage this transmission project. This will enhance its presence in the power sector.

This transmission project will be developed on a build-own-operate-transfer (BOOT) model.

This model is very common in several industries like telecom, infrastructure, and power sector.

As the name suggests, under this model, the contracted company maintains ownership of the project for several years to recoup the costs of building.

In the case of Tata Power, it will maintain and operate the transmission project for 35 years, with an estimated project cost of Rs 15.4 billion (bn).

This project will benefit the country as it is a crucial corridor for achieving the Ministry of Power's ambitious goal of integrating 500 gigawatt (GW) of renewable energy into the national grid by 2030.

It will also benefit the company as this model ensures a steady revenue stream for Tata Power.

#2 Strong Financials

The overall power sector has seen a surge in demand lately. In the recent September 2023 quarter, the power demand went up by 13% compared to the same period last year.

This surge highlights the growing need for power services and hence, top power companies are in focus.

Talking about Tata Power, the company reported robust September 2023 quarterly result.

The consolidated net profit saw a 9% increase, reaching Rs 10.2 bn. This growth is attributed to strong operational performance. This marks consistency in profit growth for 16 consecutive quarters.

The earnings before interest, tax, depreciation and amortisation (EBITDA) increased 51% in this quarter as compared to the previous quarter.

In the investor presentation, Tata Power revealed the termination of projects worth Rs 11.6 bn due to unfavourable economics. Despite this, the company is consistently reporting profits and has a comfortable debt position for sustainable growth.

The debt of the company slipped by 7% in the first half of this year as compared to the previous year.

#3 Focus on EV Growth

We all know how electric vehicles (EVs) are said to be the future. Hence, Tata Power is actively aligning itself with the growing trend of EVs.

The company recently partnered with the Kolkata Airport Authority to install EV chargers with an aim to contribute to the development of effective charging infrastructure. Also, the company joined hands with Zoom Cars to promote the adoption of EVs.

In the quarter under review, Tata Power achieved a milestone by deploying the highest number of e-bus charging points.

Back in June 2023, the management of the company had a very optimistic view to expand its EV charging infrastructure. They have an aim to reach over 25,000 charging points in the next 5 years.

Till June 2023, the Tata Power had successfully installed over 40,000 home chargers, 4,000 public and semi-public charging points, and 250 bus charging points.

Furthermore, Tata Power is already leading EV charging point operations in the country, and commands nearly 60% of the market share.

With an extensive presence of over 550 cities, the company continues to grow in the electric vehicle space across India.

#4 Renewable Energy Focus

Apart from EVs, Tata Power maintains a strong commitment to renewable energy sector as well.

It is aiming to expand its renewable energy portfolio. The company's current renewable portfolio stands at 7 GW, comprising 3.9 GW operational and 2.7 GW under implementation.

The company anticipates increasing its clean and green capacity which is the non-carbon segment from the current 37% to an impressive 70% by 2030.

Tata Power Crosses Rs 1 Trillion Market Cap

The recent rise in Tata Power's share price has caught more attention because it has now entered an elite club - it became the sixth Tata group company to cross a remarkable feat of surpassing Rs 1 trillion in market cap.

Trent, Tata Consultancy Services (TCS), Titan Company, Tata Motors, and Tata Steel were the other five that already achieved this feat over the years.

What's Next for Tata Power?

Going forward, the management of the company has a focus on growth and it is allocating a capex of Rs 600 bn over the next three years.

This time, Tata Power is steering clear of new coal-based thermal power capacity and is instead focusing on renewables.

Nearly half of this capex planned will be directed towards the renewable energy sector.

In the upcoming financial year 2024, the company aims to invest Rs 150 bn. This investment is set to increase to Rs 230 bn by the financial year 2027.

As part of its investment strategy, the company is eyeing two hydel pumped storage projects (PSP) with a combined capacity of 2,800 mega-watt (MW).

Furthermore, Tata Power has identified three additional potential sites that could contribute to a cumulative capacity of up to 9,000 MW.

How Tata Power Share Price has Performed Recently

Tata Power share price has gained over 17% in the last five days and more than 50% in 2023 so far.

The company touched its 52-week high of Rs 336 on 8 December 2023 and its 52-week low of Rs 182 on 28 March 2023.

About Tata Power

Tata Power is primarily involved in the business of power generation, transmission and distribution.

In the first half of the financial year 2024, the company generated 54% of revenue from distribution, 32% from thermal, coal and hydro segment, 14% from transmission.

For more details about the company, you can have a look at the Tata Power fact sheet and quarterly results on our website.

You can also compare the company with its peers.

Tata Power vs Adani Power

Tata Power vs NTPC

Tata Power vs Power Grid

Tata Power vs Reliance Power

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