Synopsis:
Motilal Oswal Financial Services Limited has maintained its ‘Buy’ rating on Tata Power, emphasising the company’s strong potential to benefit from the government’s push to liberalise the power distribution sector.
The shares of a large-cap company engaged in the generation, transmission, and distribution of electricity have attracted market attention after a brokerage firm gave a ‘Buy’ rating of Rs.480 with upside potential of 20.78 percent.
With a market capitalization of Rs.1,27,893.47 crore, the shares of Tata Power Limited closed at Rs.400.25, up by 0.72 percent from the previous day’s closing price of Rs.397.40.
Target & Rationale
MOFSL has given a ‘Buy’ recommendation for Tata Power with a target price of Rs. 480, indicating an upside of 20 percent from current levels. , indicating the government’s focus on liberalising the power distribution sector. The proposed Electricity 2025 bill could allow multiple companies to operate on the same power network, boosting competition, lowering costs, and improving services. While state approval is required, these changes highlight the government’s commitment to a more efficient power sector, positioning Tata Power as a key beneficiary.
Tata Power plans to expand its business by bidding to operate electricity distribution across more than 40 districts in Uttar Pradesh, potentially adding millions of new customers. The company’s experience managing a similar network in Odisha positions it well for this opportunity. Its growth is further supported by a renewed Mundra power plant agreement and progress in renewable energy and energy storage projects.
This project, which will be primarily owned and run by private companies, is structured to encourage fair competition while still providing a major opportunity for growth. The analysis firm concludes that Tata Power’s mix of different business ventures, its continuous push into renewable energy, and the expected advantages from new power sector regulations are the main factors that make the company’s stock more attractive.
The brokerage highlighted key risks, including ongoing losses at Mundra due to delays with the SPPA, slow progress in the renewable IPP segment, potential delays in upcoming pumped storage projects, and valuation pressures within the renewable IPP sector.
About the Company
Tata Power Company Limited is mainly engaged in the generation, transmission, and distribution of electricity. The company is focused on producing power entirely from renewable sources. It also manufactures solar rooftops and is planning to develop electric vehicle charging stations.
Currently, Tata Power thermal power accounts for 56 percent of its operational capacity, with solar contributing 26 percent, and rest 18 percent comprises of Hydro, Wind, Hybrid and WHRS (Waste Heat Recovery).
The company’s revenue rose from Rs.17,294 crore in Q1FY25 to Rs.18,035 crore in Q1FY26, while net profit increased from Rs.1,189 crore to Rs.1,262 crore during the same period. It recorded a return on equity of 11 percent and a return on capital employed of 10.8 percent. The P/E ratio stands at 31.07, which is higher than the industry average of 25.19.
Written by: Jhanavi Sivakumar
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