If you have been looking for a solid investment in the power sector, you might want to pay attention to what market experts are saying about Tata Power.
Despite some recent ups and downs in the market, analysts at Motilal Oswal remain confident about the long-term value of this Tata stock.
In a recent report, the domestic brokerage firm maintained a ‘Buy’ rating on the stock with a price target of ₹500 per share. This suggests a significant potential upside for investors who are willing to hold the stock for the long haul.
But does its economics hold up to the hype?
Big Ambitions for 2030
The top management of Tata Power recently met with analysts in Bhubaneswar to outline their roadmap for the next few years.
According to the takeaways from the meeting, Tata Power has set some very ambitious financial targets for the financial year 2030 (FY30).
- Doubling Profits: The company plans to double its EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) to a massive ₹30,000 crore by FY30.
- Profit Surge: They are also targeting a Profit After Tax (PAT) of ₹10,000 crore.
To put this in perspective, both these figures represent more than a two-fold increase compared to the levels recorded in the current financial year (FY25). For investors, this signals strong earnings visibility and financial health in the coming years.
(Source: CNBC-TV-18, Moneycontrol)
Revised Renewable Energy Targets
While the overall vision remains aggressive, the company has made some practical adjustments to its capacity targets. Motilal Oswal noted that the operational renewable capacity target for FY30 has been revised slightly downwards from 33 gigawatts (GW) previously to 30 GW.
Specifically, the target for renewable energy capacity has been reduced from 23 GW to 20 GW. However, even with this revision, the growth trajectory remains impressive. Currently, the company has an installed capacity of about 16 GW, with 7.1 GW coming from green sources. Scaling this up to 30 GW is still a massive undertaking that promises substantial growth.
(Source: CNBC-TV-18)
The Mundra Power Plant Boost
One of the most exciting developments highlighted by Motilal Oswal is the Mundra power plant.
The brokerage revealed that Tata Power is in advanced discussions to finalise a new special power purchase agreement (SPPA). This new mechanism is expected to be similar to ‘Section XI’, that allows the government to order power plants to operate during critical situations while ensuring they can recover their fuel costs.
However, in the case to Tata Power:
- The Problem: The Mundra plant runs on imported coal. When global coal prices shoot up, running the plant becomes too expensive because old contracts don’t allow Tata Power to charge higher rates. In the past, they would shut down to avoid losses.
- The ‘Section XI’ Fix: During high power demand, the government invokes Section XI to order the plant to run at full capacity while allowing Tata Power to pass on higher coal costs to buyers. This keeps the lights on and ensures fair payment.
- The New Deal: The proposed mechanism aims to make this a permanent contract that always covers fuel costs instead of waiting for emergency orders. If successful, this would enable power scheduling from January 2026, improving plant utilization and providing clearer earnings visibility for investors.
(Source: CNBC-TV-18, Moneycontrol)
Focus on Captive Generation and Hydro Projects
Apart from the big grid projects, the company is sharpening its focus on “captive generation.” This refers to power plants set up by industries for their own use. Tata Power plans to prioritise this segment, aiming to add 2 to 2.5 GW of capacity every year starting from FY27.
The company is also making strides in hydro and pumped storage projects, which are crucial for balancing power grids.
- Khorlochhu Hydro Project (600 MW): Expected to be ready by 2029.
- Dorjilung Hydro Project (1,125 MW): Targeted for 2032.
- Bhivpuri Pumped Storage (1,000 MW): Targeted for 2028.
- Shirwata Project (1,800 MW): Expected by 2029.
(Source: Business Today)
Manufacturing and New Tech
Tata Power is not just generating power. It wants to manufacture the equipment too. The company’s CEO and MD, Praveer Sinha, confirmed that they are looking to set up a massive 10 GW wafer and ingot plant.
This project is estimated to cost ₹6,500 crore. It is a strategic move towards “backward integration,” meaning the company will make its own raw materials for solar panels. Since they already make solar cells and modules, this new plant will make them a completely integrated solar player.
Furthermore, the company is looking into the future with nuclear energy. They are exploring the setup of small modular reactors (SMR) with a capacity of 20-50 MW. However, this will depend on the government making legal amendments to allow private players into the nuclear space.
(Source: Economic Times)
What This Means for Investors
With over 43.36 lakh retail investors already holding this stock as of September 30, the interest in Tata Power is undeniable. Motilal Oswal believes that the company’s strong focus on renewable energy, the potential resolution at Mundra, and the expansion into solar manufacturing create a solid case for long-term value. With a target price of ₹500, the experts see plenty of room for growth.
(Source: Business Today)
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