The domestic brokerage house, Motilal Oswal, reiterated its ‘Buy’ rating on Tata Power Company after the Gujarat government finalised a Supplemental Power Purchase Agreement (SPPA) with the firm, making it a “significant positive development.” This addresses the viability challenges of the Mundra plant.
The brokerage has maintained its target price at Rs 455 on the back of this news. This implies an upside of over 18% from the current market price.
“If the SPPA is adopted by all states, losses at Mundra are likely to be reduced by 75% from the current Rs 1,700-1,800 crore per annum,” said Motilal Oswal.
This would lead to a revision of 4.5%-5.5% in earnings upward to the net profit estimates of FY27 and FY28, as Motilal Oswal currently factored in an annual net loss of Rs 700 crore at Mundra.
Gujarat government approves SPPA
Recently, Tata Power, in a press release, said that the Government of Gujarat has approved the execution of an SPPA for the Mundra imported coal-based power plant. This development marks a significant step towards restarting the asset, which was previously operated under Section 11 of the Electricity Act, 2003, until June 2025 and has remained non-operational since then.
Key growth driving factors
Outside of Mundra, Tata Power’s robust performance in its distribution operations in Odisha and Delhi is a key growth driver. This, along with the rooftop solar sector, as well as the planned 10GW ingot and wafer manufacturing facilities for backwards integration, the emergence of new distribution opportunities (such as the privatisation of UP discoms), are significant factors behind growth and acting as catalysts.
Indonesian coal business to give extra support
Tata Power’s Indonesian coal business could provide an additional upside of 18% (annualised) to FY27 net profit for every $10 per tonne of additional realisations, as the coal prices shot up due to the Iran-Israel conflict.
Tata Power has exposure to coal mining through its stakes in the Indonesian ventures Kaltim Prima (30%) and BSSR & AGM (26%).
Tata Power share price performance
The stock price of Tata Power has fallen 2.25% in the last five trading sessions. The stock has given a return of 3% in the last one month and 1.68% in the past six months. Tata Power’s stock price has given a return of 4% in the previous 12 months.
Tata Power Q3FY26
The company posted a net profit of Rs 1,194.33 crore in the third quarter of the current financial year. In the same quarter last year, the company’s profit came in at Rs 1,187.54 crore.
The firm’s revenue from operations dropped 4% YoY to Rs 14,485 crore in Q3FY26, from Rs 15,118 crore in the same period a year back.
On the other hand, the company’s EBITDA rose 12% YoY to Rs 3,913 crore in Q3FY26from RS 3,481 crore in the same quarter last year.
