Tata Power reported a 49% increase in net profit for the second quarter of FY27, reaching ₹1,200 crore. This growth was supported by a 26% rise in revenue, totaling ₹15,100 crore. However, analysts say the company's diverse business mix means that revenue growth may not fully reflect operational performance.
Renewable Power Gains
The renewable power segment stood out, with operating profit rising 32% year-on-year to ₹1,061 crore. This increase was driven by a 25% rise in capacity to 7.1 GW. Despite this, challenges like 11% load curtailment and transmission constraints affected overall performance. Analysts noted that battery energy storage solutions could help address some of these issues. In contrast, the solar engineering, procurement, and construction (EPC) business faced difficulties. Operating profit nearly halved to ₹180 crore due to a decline in large project orders.
Market Reactions
After the earnings report, Tata Power shares rose as brokerages had mixed views. Citi maintained a positive outlook on growth prospects. Meanwhile, JPMorgan and CLSA raised concerns about valuation, execution risks, and margin pressures. The company's regulated power business operates on a fixed return on equity of 15.5%. This may limit the relevance of revenue growth as a performance metric. Ongoing legal issues related to the Mundra power plant and the supplementary power purchase agreement (SPPA) also remain significant risks.
Tata Power's earnings report could influence investor sentiment in the renewable energy sector. This is especially true for firms focused on solar and battery storage solutions. The company's performance may affect the stock prices of related companies in the renewable space. Watch for updates on Tata Power's strategy regarding its legal challenges and execution risks in upcoming earnings calls.
Based on reporting by: livemint.com, moneycontrol.com