The BSE Power Index has emerged as one of the top three performers over the past year, delivering impressive returns of 86%. This surge has been largely fueled by India’s ambitious renewable energy push, making the sector one of the most attractive for investors.

With the government aiming to achieve 500 GW of renewable capacity by 2030, and initiatives like the National Solar Mission and substantial investments in solar, wind, and hydro energy, the power sector is well-positioned for solid growth. India’s commitment to clean energy has seen the country surpass Japan to rank third in the Lowy Institute’s Asia Power Index.

The index’s strong performance is also reflected in its price-to-earnings (P/E) ratio of 32.48, which signals strong demand from investors. This P/E ratio showcases the robust infrastructure of India’s energy sector as it transitions towards sustainable development on multiple fronts.

Since the pandemic, there has been a noticeable uptick in power demand, particularly from industries and commercial sectors. This surge has driven revenues for power companies, further boosting the sector.

Looking ahead, it can be assumed that FY25 will continue to see growth in the power sector, driven by ongoing renewable energy expansion, ESG (Environmental, Social, and Governance)-focused investments, and the modernization of power grids. These factors are expected to attract even more investment into the sector. As countries around the world prioritize cleaner energy, India’s power sector is poised to benefit from these trends.

Mutual fund (MF) schemes with significant exposure to the power sector have reaped the benefits of this surge. As of August 2024, the total market value of mutual fund investments in the power sector was ₹1.1 lakh crore. The power sector’s strong performance has made it a favorite among fund managers, with several large-cap, mid-cap, and small-cap stocks seeing significant investment.
Here are some of the most popular power stocks among active mutual fund managers as of August 2024 (Source: ACEMF):

Large-Cap Power Stocks:

NTPC
Number of active MF schemes holding the stock: 294

Power Grid Corporation of India
Number of active MF schemes holding the stock: 167

Tata Power Company
Number of active MF schemes holding the stock: 87

JSW Energy
Number of active MF schemes holding the stock: 35

NHPC
Number of active MF schemes holding the stock: 33

Adani Energy Solutions
Number of active MF schemes holding the stock: 26

Mid-Cap Power Stocks:

Torrent Power
Number of active MF schemes holding the stock: 54

NLC India
Number of active MF schemes holding the stock: 41

Small-Cap Power Stocks:

Kalpataru Projects International
Number of active MF schemes holding the stock: 68

CESC
Number of active MF schemes holding the stock: 56

The BSE Power Index’s remarkable performance is a testament to India’s ambitious renewable energy goals and the sector’s robust growth prospects. As the country continues its push towards achieving 500 GW of renewable energy by 2030, the power sector is set to remain a key focus for investors, supported by favorable government policies and increasing global demand for clean energy. With mutual funds actively increasing their exposure to power stocks, the sector is positioned for continued growth and solid returns in the coming years.

Tata Power reached a major milestone recently by becoming the sixth Tata group company to attain a market capitalization of over ₹1 lakh crore. The integrated power utility has charted an ambitious growth path that propelled its stock price 7% higher to ₹315 on December 7th, taking its m-cap across the 10,000 crore mark.

Tata Power shares have surged over 50% so far in 2023, building on a 72.7% rally from March 2023 lows. Analysts note this performance is led by positive outlook from the company’s recent analyst meeting, where it outlined targets for 2027:

• Doubling FY23 revenue, EBITDA and net profit
• Increasing clean/green EBITDA share from 70% to 79%
• ₹60,000 crore capex until 2027, with 45% for renewables
• Pumped hydro storage projects of 2.8GW for 24/7 renewable power

The company currently has 5.5GW renewable capacity and plans to have 20GW by 2030. Tata Power also aims to tap high-margin opportunities in group captive renewables, exit non-core businesses and expand its transmission footprint.

JM Financial upgraded Tata Power to a “Buy” rating with ₹350 target price on its recalibrated strategy and resolution of previous issues. The brokerage sees potential for accelerated growth and upside for the stock.

With its strong performance and strategy signaling promising prospects ahead, Tata Power has etched its name on an elite list of Indian firms valued at over ₹1 lakh crore m-cap.

Shares of Tata Power hit an all-time high on Thursday after a buy rating and price target upgrade from JM Financial. The brokerage set a new target of ₹350, representing potential upside of 24% over the next year. Tata Power stock closed up 7.7% for the day at ₹315.25, bringing year-to-date gains to 51%.

JM Financial highlighted Tata Power’s recalibration efforts across four areas: moving into high-margin group captive renewables, divesting non-core assets, expanding into hydro storage, and growing its transmission footprint. The brokerage forecasts strong growth ahead, with 15% revenue CAGR, 23% EBITDA CAGR, and 32% profit CAGR over fiscal years 2023-2026.

The note also pointed to an expected near-term resolution on the Mundra power plant issues. Tata Power’s market capitalization has now crossed ₹1 lakh crore, making it the 6th Tata group company to hit this milestone. The stock’s breakout performance reflects increasing optimism around Tata Power’s strategic repositioning and future growth potential across its business lines.

Tata Power Company Limited has unveiled its stellar financial performance for the second quarter of FY 24, showcasing impressive growth and reaching significant milestones in the clean energy sector. The company declared a consolidated net profit of Rs 1,017.41 crore for the quarter, marking an 8.79 percent year-on-year increase from the previous year’s profit of Rs 935.18 crore. This remarkable growth was primarily fueled by higher revenue generated from the company’s core operations in generation, transmission, and distribution.

Revenue and Financial Highlights:

Tata Power’s consolidated revenue witnessed a substantial nine percent surge, reaching Rs 15,442 crore, compared to Rs 14,163 crore in the same period last year. This robust financial performance can be attributed to the company’s healthy balance sheet, operational excellence, and synergies across all its business clusters.

Operational Achievements:

Notably, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) recorded a remarkable 51 percent increase, soaring to Rs 3,087 crore. This surge in EBITDA contributed to an all-time high figure of Rs 6,092 crore in the initial six months of FY24, underscoring Tata Power’s financial strength and operational efficiency.

Praveer Sinha, CEO and Managing Director, Tata Power, said this is the 16th consecutive Profit after Tax (PAT) growth for the company. “We have reported yet another strong quarter of financial performance, driven by robust contribution from all our core business clusters. Our adherence to financial discipline, operational excellence along with business resilience and diversification has helped us in maintaining this consistent profit growth.”

Clean Energy Milestone:

In a significant milestone, Tata Power’s clean energy portfolio achieved a remarkable feat, reaching 5,500 MW during Q2 FY24. This achievement accounts for 38 percent of the total installed generation capacity, highlighting the company’s commitment to renewable energy initiatives and sustainable practices.

Tata Power’s strong financial performance, coupled with its achievements in the clean energy sector, underscores its position as a key player in the energy industry. With a focus on operational excellence and sustainable practices, the company continues to pave the way for a greener and more efficient energy future.

“Tata Power also made significant progress in its distribution business by improving its cash flow and reducing AT&C losses in Odisha. Further, it is well-poised to capitalize on the pumped hydro storage projects and has signed an MoU with the Maharashtra government for the development of a 2,800 MW projects,” the company said in a statement on November 8.