Torrent Power (BOM:532779)

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Equitymaster India

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Torrent Power Ltd.

Torrent Power Ltd. (TPL) promoted by Torrent Group was incorporated in April 2005 by amalgamating the power companies like Torrent Power AEC Ltd., Torrent Power SEC Ltd. and Torrent Power Generation Ltd. TPL is an integrated power company primarily engaged in the generation, transmission and distribution of electricity with operations in the states of Gujarat and Maharashtra. The Ahmedabad and Surat licensed area operations in Gujarat contributed about 82% of the power business revenues and Bhiwandi Franchise (it has a franchisee agreement with Maharashtra State Electricity Distribution Co. Ltd.) in Maharashtra contributed about 18% in FY09.

TPL grew its volume sales of electricity by 5% during FY09. Growth in major centres like Surat and Ahmedabad took a hit given that the consumption of electricity there slowed down owing to recessionary trends witnessed in key consumers like chemical and textile industries. In terms of its financial performance, TPL grew its sales by 19% YoY during FY09. Its operating margins improved to 15.5%, from 13.2% in FY08. The profit after tax surged by almost 90% YoY.

During FY09, TPL also commissioned its most ambitious 1147.5 MW gas based power project at SUGEN near Surat. The company's business growth is mainly driven by the industrial and commercial activities, which depend on economic growth. High dependence on domestic coal, however, exposes the company to potential availability risks, which does not bode well for it in a scenario of high shortages of fuel and volatility in price.