Mumbai, India – Tata Power Company Ltd. is poised for substantial earnings growth, with Religare Broking projecting a 25% compound annual growth rate (CAGR) in net profit from FY26 to FY28. This optimistic outlook comes as the private sector power producer embarks on an aggressive expansion, particularly in renewable energy, which will necessitate significant capital investments and lead to a rise in the company's debt.
The brokerage firm anticipates Tata Power's revenue to grow at a 13% CAGR over the same period, indicating that profit expansion will outpace revenue due to improved operating leverage, new project commissioning, and enhanced profitability from regulated operations.
Ambitious Expansion Drives Profit and Debt
Tata Power's strategic focus on renewable energy capacity additions and solar manufacturing is a key driver of its projected growth. In FY26, the company commissioned approximately 2.5 GW of renewable capacity, bringing its total renewable portfolio to 11.6 GW, including 5.1 GW under construction. The renewable energy segment alone saw a 59% year-on-year increase in profit after tax (PAT) in FY26, highlighting its growing contribution.
Solar manufacturing also emerged as a significant earnings contributor, generating a PAT of ₹857 crore in FY26, supported by robust module and cell production. Additionally, the company's rooftop solar installations reached 1.7 GWp in FY26, further strengthening its market position.
The expansion, however, is capital-intensive. Tata Power has planned capital expenditures of ₹25,000 crore for FY27 and ₹27,000 crore for FY28. Consequently, net debt is projected to increase from ₹46,600 crore in FY26 to an estimated ₹62,600 crore by FY28. The company's ability to execute projects on time, maximize asset utilization, and generate sufficient cash flow will be crucial in managing this leverage.
Stable Regulated Operations Provide Cushion
While the renewable energy and manufacturing segments drive growth, Tata Power's regulated transmission and distribution businesses continue to provide a stable foundation. These operations offer predictable earnings and cash flows, acting as an important financial cushion for the company's ambitious growth plans. The transmission and distribution segment reported a 49% year-on-year increase in PAT in FY26, with Odisha's distribution companies (DISCOMs) notably contributing to this rise.
Religare Maintains 'BUY' Rating
Religare Broking has reiterated its 'BUY' recommendation for Tata Power, setting a target price of ₹421. The brokerage attributes its positive outlook to the strong compounding of PAT, driven by renewable capacity additions, increasing contributions from solar manufacturing, and steady earnings from regulated operations. The firm emphasizes that while elevated capital expenditure and rising debt require careful monitoring, improving asset utilization and cash-flow generation are expected to support the company's expansion cycle.
Tata Power's longer-term growth opportunities also extend to pumped-hydro storage and nuclear power, though progress in these areas will depend on regulatory clearances and commercial viability.