Torrent Power Concall Summary: Key Highlights and Q3 FY26 Results

Guidance & Outlook

• Renewables Commissioning: Management expects FY26 to be a relatively weak year for renewable additions, but guided for ~1.2–1.5 GW of commissioning in FY27 and a similar pace thereafter, on a DC basis.
• Execution Constraints: Management said land is not a key bottleneck, but transmission connectivity and right-of-way issues remain the main risks to renewable commissioning timelines.
• Capex Run-rate: The higher capex pace seen in Q3 is expected to continue, with management indicating a similar run-rate going forward, though it did not provide a full-year capex target.
• Demand Outlook: Management described the recent demand weakness as an aberration caused by a high base and extended monsoon, and believes power demand should normalize in line with 6.5–7.0% GDP growth.
• Distribution Profitability Framework: Management reiterated that licensed distribution profitability is not linked to unit demand growth, but instead to asset capitalization, regulatory returns, and efficiency-linked incentives.
• PSP Timeline Risk: For the pumped storage project, management acknowledged that while contracts are in place, delays remain possible if external dependencies such as transmission infrastructure are not ready.
• Bhiwandi Renewal: Discussions are ongoing for extension of the Bhiwandi distribution franchise beyond January 2027, with management clarifying there is no automatic extension clause.

Capex & New Projects

• 9M Capex: Total capex in 9M FY26 was concentrated in renewables (INR 3,100 cr), followed by licensed and franchise distribution (INR 1,100 cr), coal project (INR 400 cr), pumped storage (INR 300 cr), and transmission (INR 240 cr).
• Q3 Renewables Spend: Renewable capex accelerated sharply in Q3 to around INR 1,700–1,750 cr, highlighting a meaningful ramp in project execution.
• Installed Capacity: Total installed generation capacity reached 5 GW as of December 31, 2025, including 2.7 GW gas-based, ~2.0 GW renewable, and 362 MW coal-based capacity.
• Pipeline Visibility: The company’s development pipeline includes 4 GW of renewables, 3 GW of pumped storage, 1.6 GW of coal-based expansion, and 2 transmission projects at Khavda and Solapur.
• Coal Expansion: For the 1.6 GW thermal project, the company has executed a PSA/PPA with MP Power Management Company Limited, and the BoP contract has already been awarded.
• PSP Progress: For the pumped storage project, management said all key contracts have been awarded, with the scheduled commercial operation date around October 2028.
• LNG Supply Security: The company signed a 10-year LNG agreement with JERA for 0.27 MMTPA from 2027 to 2037, covering roughly 25% of gas requirement and linked to Brent pricing.

Financial Performance

• Reported PBT: Q3 FY26 PBT rose to INR 805 cr from INR 630 cr, up 28% YoY.
• Adjusted PBT Growth: Excluding the prior-year INR 77 cr one-off gain from cable business sale, adjusted PBT grew from INR 553 cr to INR 805 cr, a 46% YoY increase.
• Tax Impact: Tax expense was lower in Q3 due to favorable regulatory orders qualifying for tax exemption, supporting reported earnings.
• Thermal Regulatory Boost: A one-time regulatory benefit of ~INR 270 cr related to the UNOSUGEN gas-based project was the single largest swing factor in quarterly profitability.
• Distribution Profit Support: Distribution contribution improved by INR 106 cr, helped by INR 41 cr of favorable regulatory orders, improved franchise losses, and higher regulated returns from asset capitalization.
• Corporate Costs: Higher miscellaneous expenses and depreciation were partly offset by lower finance costs following prepayment in Q4 FY25.
• Quality of Earnings: Management acknowledged that Q3 earnings were materially shaped by regulatory outcomes and capitalization-linked return mechanics, rather than underlying demand or volume growth.

Operational Highlights

• Thermal Business: The thermal segment saw a large one-time regulatory gain, while merchant/LNG contribution was actually lower by ~INR 75 cr YoY, underscoring that the beat was not driven by core gas operations.
• Distribution Performance: Improvement in franchise profitability was driven by lower T&D losses, while the licensed business benefited from higher ROE/ROCE under the new tariff framework and capitalization of assets.
• Regulatory Assets: Ahmedabad and Surat together carry regulatory assets of around INR 3,000 cr, with carrying-cost-related regulatory orders continuing to support distribution profitability.
• Renewables Contribution: Renewable earnings improved by INR 24 cr, supported by higher wind PLF and commissioning of 285 MW of new solar capacity.
• Ahmedabad Demand: Demand in Ahmedabad remained softer due to extended monsoon and weaker winter demand, reflecting the city’s residential-heavy consumption mix.
• Surat / D&H Trends: Surat was impacted by weakness in the diamond and textile industries, while D&H still grew, albeit below its usual historical trend.
• SMK Franchise: AT&C losses in the Shil, Mumbra & Kalwa franchise have reduced to around 20%, and management expects the business to reach breakeven in FY27.

Business & Strategy Updates

• UNOSUGEN One-off: Management confirmed the ~INR 270 cr UNOSUGEN benefit relates to prior periods and is non-recurring, though it declined to explain the underlying case details during the call.
• Return Framework Shift: In distribution, the regulatory methodology has shifted from ROE to ROCE, with incentive-linked returns now reaching up to 15.5% based on annual operating KPIs such as AT&C loss, SAIDI, and SAIFI.
• Licensed Distribution Economics: Management explicitly stated that profitability in licensed distribution is capex and regulation led, not volume led, making capitalization the key driver of earnings growth.
• Renewable Execution Discipline: The company is calibrating project execution to expected transmission readiness in order to avoid stranded assets and unreimbursed indirect costs.
• Parallel Licensing: Management said there is no update yet on parallel licensing opportunities and that any capex implication would depend on the eventual service area.
• Bhiwandi Optionality: The Bhiwandi franchise remains a material medium-term variable, with extension discussions underway and the current agreement valid until January 2027.
• Strategic Earnings Mix: The quarter reinforced that the company’s earnings are increasingly driven by a combination of regulatory outcomes, distribution asset base growth, and renewable commissioning, rather than simple volume growth in core demand.