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Why Torrent Power’s Stock Jumped To A Record High

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Shares of Torrent Power Ltd. rose to record levels after the emergence of a power producer and transmitter that offered the highest price for the sale of a 51% stake in electricity distribution companies in Dadra & Nagar Haveli and Daman & Diu.

The bidding for the Union Territorial Distribution Business was part of a government privatization initiative to increase the efficiency of distribution utilities.

Currently, Torrent Power is distributing 16.66 billion units to more than 3.65 million customers in Ahmedabad, Gandinagar, Surat, Dahej SEZ and Dholera SIR in Gujarat; Bivandi in Maharashtra, Shil, Mumbra and Kalva, along with Agra in Uttar Pradesh. “With the addition of Dadra & Nagar Haveli and Daman & Diu, Torrent will distribute nearly 25 billion units to more than 3.8 million customers and meet demand above 5,000 megawatts,” the document said.

The acquisition will significantly strengthen Torrent Power’s position as a leading distributor in the country, said Torrent Group Chairman Samir Mehta. “It is great to be involved in the new opportunities that arise in this area in the production, transmission and privatization of renewable generations of state-owned distribution circles.”

Torrent Power has a total capacity of 3,879 MW, including 2730 MW of gas-based capacity, 787 MW of renewable and 362 MW of coal-based capacity.

“Torrent Power plans to record 10% profit each year after tax increases, which is reinforced by the existing regulated distribution portfolio of operations, franchising circles, IPP and RE projects,” the IIFL said. “Its cash flow is well ahead of the capex, which is a very good reason to collect payments.” The brokerage expects higher payments to improve the company’s return on equity and average valuation.

Shares of Torrent Power rose 3.7% in early trading on Monday to 379 rupees each. According to Bloomberg, seven of the 10 analysts tracking the company recommend “buying” while three suggest “holding”. The stock crossed the 12-month consensus price of 374.7 soums on Monday.

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