Under Jinal Mehta, Torrent Power is hitting refresh as it turns its focus to consumers

It is a little past 6 pm and Jinal Mehta slowly settles into his chair. The past month has been frenetic for the Vice Chairman and Managing Director of Torrent Power.

First off, there was the buyout of Nabha Power in Punjab from L&T, followed by the unveiling of a new brand identity for the group, which also has a presence in gas, pharmaceuticals, electricals, and diagnostics. The brand identity indicates a new B2C (business-to-consumer) thrust. “That is what we are doing at the group level too with both Torrent Power and Torrent Gas aggressively targeting the B2C segment. Even on renewables, we are tying up PPAs (power purchase agreements) with commercial and industrial customers,” he says.

The branding refresh was the first such exercise by the group in four decades. “Perhaps, there was no need to refresh the brand (all these years) since it still looked contemporary. But we felt it was necessary now as the group starts to look at more B2C businesses,” says Mehta. The new logo will be used across group entities, albeit with some changes in colour in some cases.

Amid all this, Torrent Power stands out. Prod Mehta on what makes it different and pat comes the reply: “There must be over 50 active players in the power sector and that includes those who are largely focused on renewables or transmission or thermal. But there are only three or four with deep capabilities in many parts of the value chain.”

Torrent Power has built a pan-India footprint after an ambitious expansion entailing big money. “Total capital outlay over the next six to seven years is likely to be around Rs 1 lakh crore, of which Rs 60,000 crore is already in projects on hand and under execution,” says Mehta.

A couple of years ago, the group launched the Torrent 2.0 strategy that focused, among other things, on transition to renewable energy. “It has played out well and we have built a project pipeline across thermal, renewables, storage distribution and even green hydrogen,” says Mehta.

Divyam Mour, Research Analyst at Samco Securities, says Torrent Power stands out due to its vertically integrated utility structure. “They own and operate across generation, transmission and licensed distribution, a rarity among listed power companies,” he says.

One of its recent achievements has been turning around loss-making power distribution assets in Bhiwandi in Maharashtra, Agra in Uttar Pradesh and Daman after taking them over.

Acquisitions, in fact, have become an important part of the group’s growth strategy. Last June, Torrent Pharma acquired JB Chemicals & Pharma at an equity valuation close to Rs 26,000 crore. “For Torrent Power, it will continue to be a significant area of focus,” says Mehta.

Mour says Torrent’s M&A track record is exceptional in India’s power sector. “The sector has witnessed enormous vale destruction from over-leveraged and poorly timed buyouts,” he says. Patience and price discipline are critical, he says. “Torrent typically waits for motivated sellers or distressed situations to acquire assets at meaningful discounts to replacement cost rather than competing aggressively in auctions,” adds Mour.

Picking out examples like Sugen (a gas-based plant near Surat in Gujarat) in infrastructure, distribution franchise expansions, and bolt-on renewable assets, Mour says Torrent has integrated well and delivered against strategic rationale. “There is no example of a Torrent acquisition leading to write-downs or materially impairing book value,” he adds.

In mid-February, Torrent acquired Nabha Power from L&T Power Development, a wholly-owned subsidiary of L&T, for an enterprise value of Rs 6,889 crore. Nabha Power has a 1,400 MW supercritical coal-fired thermal power plant at Rajpura in Patiala district of Punjab. Mehta says the world-class plant gives Torrent access to the north India market. “We don’t have a presence there. Apart from being well-positioned in Punjab, it is among the lowest cost projects in the state,” he says. Besides, there is land for another unit with 800 MW capacity. Mehta and his team closed the deal in three months flat.

At Torrent Power, the management likes to keep things simple, aligning the strategy with what India wants. “We have capabilities across the value chain, be it coal, gas or renewable. In the past few years, the focus has been around storage solutions,” says Mehta.

A sound understanding of these capabilities has helped the company allocate capital more efficiently. “The idea is to look at opportunities that make financial sense and keep the country’s needs in mind. In the last two years, for instance, distribution companies (discoms) have realised they need more thermal capacity.” To cater to that demand, Torrent refocused there, highlighting its flexible strategy. Be it a greenfield or a brownfield opportunity, Mehta says thermal will remain a key component of the energy mix in India. “It is definitely one of our growth engines. The Nabha buyout also made sense from the perspective of reasonable valuation.”

Mour says Torrent is not dogmatically committed to any single fuel. “Capital is deployed where risk-adjusted returns are most attractive. This pragmatism sharply distinguishes Torrent from pure-play renewable energy developers who chase headline gigawatts at a thin IRR (internal rate of return) or legacy thermal players anchored to coal,” he says. This makes Torrent’s investors more comfortable, even if the company appears to be writing big cheques.

The Nabha deal is one such example. A report by Crisil on February 24 said though the purchase is likely to be funded entirely through debt, it is “not expected to have a material impact on the company’s financial risk profile.” The reason: expected synergies can be absorbed within Torrent Power’s overall leverage thresholds.

“The anticipated incremental debt will be supported by stable Ebitda contributions from the acquired asset and robust internal accruals from existing regulated and long-term contracted businesses,” it added.

Mour believes this deal is Torrent’s boldest move to date.

“The entry valuation, at a meaningful discount to the Rs 6-7 crore per MW replacement cost benchmark, provides adequate margin of safety. The primary risk is the long-term PPA with Punjab State Power Corporation, a financially distressed discom, with a history of payment delays and tariff disputes,” he explains. But Torrent’s ability to navigate regulation and Punjab’s supply shortfall make the risk manageable at the price paid, he says.

For Mehta, there is little respite from a busy schedule. Come March-end and work takes a different dimension.

The marquee Indian Premier League kicks off and he will be there cheering for Gujarat Titans, not just because he lives in the state. Last February, Torrent Group picked up a 67% stake in the franchise from CVC Capital Partners. The new brand identity will be even more visible, and Mehta is not complaining. For him and Torrent, there is no dearth of opportunities.

@krishnagopalan