Fundamental analysis of the power of torrents: The energy sector is likely to benefit from India's economic growth. As the world transitions from fossil fuels to renewable energy, electricity plays an increasingly important role in driving economic growth. As technology advances, the regulatory framework becomes increasingly important.
Most industries rely on electricity and this is likely to increase as more businesses open. In this article, we will look at the fundamental analysis of Torrent Power, including its financials, future plans, and more...
Fundamental analysis of the power of torrents
Company Overview
torrent power was established in 2004 and is one of the power companies operating in the Indian power sector. The company is part of the Torrent Group, which also has a health and energy portfolio. Its operations include power generation, transmission and distribution, as well as the manufacturing and supply of electrical cables.
The company acquired and successfully rebranded Mahendra Electricals, a struggling power cables company, as 'Torrent Cables Ltd.' (now merged with Torrent Power Limited effective April 1, 2014). Torrent's foray into power was highlighted by the acquisitions of two of India's oldest utilities, The Surat Electricity Company Ltd and The Ahmedabad Electricity Company Ltd.
Torrent transformed them into first-class electricity companies in terms of operational efficiency and reliability of the electricity supply. Its portfolio includes coal, gas and renewable energy plants with a combined generating capacity of 3,879 megawatts.
Every year, the company supplies power to over 3.8 million customers in its distribution areas of Ahmedabad, Gandhinagar, Surat and Dahej SEZ and Dholera SIR (Gujarat), Bhiwandi, Shil, Mumbra and Kalwa (Maharashtra), Agra ( Uttar Pradesh). ., and the Union Territories of Dadra and Nagar Haveli, Daman and Diu.
The company has one of the lowest T&D losses in its license areas. It made history in December 2006 by signing the country's first distribution franchise agreement with Maharashtra State Electricity Distribution Company Limited for Bhiwandi Circle.
Segment analysis
The company only operates in one segment: power generation, transmission and distribution in India. However, the company's revenue came from power supply, which accounted for 86.63%, and cable product sales, which accounted for the remaining 13.36% of total revenue from operations.
Industry analysis
India's energy industry is shifting from thermal energy to renewable energy and is expanding due to increased commercial activity. Thermal power plant load is estimated to improve by 63% in FY24, driven by strong demand growth along with moderate capacity addition in the sector.
100% FDI is allowed through the automatic route in the energy and renewable energy segment. The power generation industry in India will require a total investment of Rs. 33 crore ($400 billion) and 3.78 million energy professionals by 2032 to meet the growing demand for energy, according to the National Electricity Plan 2022-32.
Renewable energy remains a key priority for India, with an ambitious goal of replacing 50% of total installed capacity with non-fossil fuel-based power plants by 2030.
Also readโฆ
Fundamental analysis of the power of torrents - Finance
Revenue and net profit
torrent power Revenue from operations amounted to Rs. 25,694.12 crore as compared to Rs. 14,257.61 crore in FY22, an increase of 80.21%. Net profits increased by 371.91% in FY23 to Rs. Rs 2,164.67 crore. 458.70 crore in FY22.
The four-year CAGR for revenue and net profit was 18.23% and 24.40%, respectively. Revenue was stable from FY19 to FY22, but increased dramatically in FY23. Net earnings followed a similar trend in FY23, but fluctuated between FY19 and FY22.
The fluctuation in profit in FY20 and FY22 was due to impaired cost of Rs. 1,000 crore in FY20 and Rs. 1,300 crore in FY22, both for DGEN power plants, which had an impact on its finances during those years.
In FY23, growth was driven by an increase in newly acquired licensed distribution business, new renewable energy businesses, expansion of distribution unit and sale of RLNG.
Profit margins
The company's OPM stood at 19% in FY23 compared to 25% in FY22. NPM was 8.42% in FY23 compared to 3.21% in FY22.
The company's OPMs were consistent from FY19 to FY22, but the margin in FY23 narrowed due to an increase in electric power costs. NPM has fluctuated over the last five years, averaging 7.55%, and has a decent margin in FY23.
Return Ratios
In FY23, the company's RoE and RoCE were 19.23% and 16.79%, respectively. In five years, the averages were 11.86% and 13.08%.
RoE is higher than RoCE, indicating higher returns to shareholders. Better debt performance and higher interest costs are two factors that can influence higher RoE. Interest costs increased in FY23, which could be one of the reasons why RoCE is lower than RoE.
Debt analysis
He torrent power Debt-to-equity ratio in FY23 was 0.95, compared to 0.92 in FY22. Interest coverage ratio was 6.28 times, compared to 6.09 times in FY22. FY22.
The D/E ratio in FY23 is close to FY2019 levels and has been increasing since FY21. However, the interest coverage ratio has improved and is increasing from FY2019 to FY 23. Any company with a coverage ratio greater than three times its earnings is better able to cover its interest expenses and is in a comfortable position.
Fundamental analysis of the power of torrents โ Metric wrenches
These are some of the key metrics of torrent power
Fundamental analysis of the power of torrents - Future plans
- The company has signed four MoUs with the Gujarat government for renewable energy, green hydrogen and electricity distribution, totaling Rs 47,000 crore in investments in Gujarat.
- Torrent plans to invest Rs. 27,000 crore in pumped storage hydropower projects in Maharashtra.
Conclusion
As we near the end of the article, we will take a quick look at the company. The company has emerged as a leader in the energy industry and is poised to expand in tandem with India's growing dynamics.
Its financial performance in FY23 demonstrated a significant turnaround and The power of the torrent The ability will be tested based on its consistency in maintaining margins or staying within certain parameters. The company intends to make investments in renewable energy and hopes to improve its margins in the future.
What do you think about the company's potential? Let us know your thoughts in the comments section below.
Written by Santhosh
When using the stock screener, stock heat map, backtesting portfolioand compare stocks tool on the Trade Brains portal, investors get access to comprehensive tools that allow them to identify the best stocks and also get updated with stock market newsand make well-informed investments.
Start your stock market journey today!
Do you want to learn how to operate and invest in the stock market? Be sure to see exclusive Stock market courses by FinGrad, the learning initiative of Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and advance your trading career. Join now!!
