TORNTPOWER

Expands Coal Portfolio with Nabha Acquisition

has acquired Nabha Power Ltd. from Larsen & Toubro at an enterprise value of ₹6,889 crore (including ₹2,733 crore net debt), marking a strategic expansion into North India. Nabha operates a 1.4 GW coal-based plant in Punjab, with potential to expand by 0.8 GW. The long-term PPA with Punjab State Power Corp. till 2039 provides earnings visibility, while supercritical technology ensures efficiency. However, EBITDA is projected to moderate due to lower fixed-charge recovery, and valuation remains demanding despite a healthy balance sheet and strong project pipeline. Acquisition Details - Nabha Power: 1.4 GW coal plant, expandable to 2.2 GW. - PPA with Punjab discom valid till 2039, ensuring revenue visibility. - Technology: Supercritical, enabling lower variable costs and higher merit order dispatch priority. - Deal value: ₹6,889 crore EV, including ₹2,733 crore net debt. Operational Performance - Plant load factor (PLF): 84% in H1FY26, vs NTPC thermal average of 70.5%. - Availability factor: 99%, exceeding 85% requirement, ensuring full fixed-cost recovery and incentives. - EBITDA (adjusted for lease accounting): ₹480 crore in H1FY26, vs ₹1,153 crore in FY25. - ICICI Securities projects sustainable EBITDA of ₹1,050 crore, valuing the asset at 6.5x EV/EBITDA. Portfolio & Expansion - Current generation portfolio: 5 GW. - Under construction: 5.6 GW, including 1.6 GW thermal plant in Madhya Pradesh (₹22,000 crore investment). - Balance sheet: Net debt-to-equity at 0.6x, providing cushion for acquisitions. - Deal expected to close by June 2026, subject to CCI approval. Valuation & Outlook - Torrent trades at 11x FY27E EBITDA, per Bloomberg consensus. - Shares up 18% in past year, aided by Madhya Pradesh project optimism. - Risks: EBITDA moderation at Nabha, demanding valuation, and integration challenges. - Outlook: Long-term accretive, but near-term trajectory depends on successful integration and execution of large projects.