Tata Power shares: MOFSL retains 'Buy', shares target price, catalysts & risks

MOFSL has reiterated its 'Buy' rating on Tata Power, highlighting the company as a key beneficiary of the government’s focus on liberalising the power distribution sector. The recently proposed Draft Electricity Bill, 2025, suggests allowing multiple licensees to operate on a common network. This move is expected to increase competition, lower costs, and improve service quality. While the implementation of these reforms will require state-level cooperation, MOFSL said that the proposal underscores the government’s commitment to enhancing efficiency in the power sector.

Tata Power is also participating in a distribution tender in Uttar Pradesh, aimed at privatising power distribution across more than 40 districts in Agra (Dakshinanchal) and Varanasi (Purvanchal). Private players are expected to hold a majority stake. The tender is divided into five packages, with bidders allowed to win a maximum of two packages, each serving approximately 30–35 lakh consumers. According to MOFSL, this presents a significant expansion opportunity, building on Tata Power’s experience in its Odisha distribution business, which serves around 98 lakh consumers and contributed about six per cent to the company’s consolidated PAT in FY25.

Other key growth drivers for Tata Power include the finalisation of a supplementary power purchase agreement (SPPA) for the Mundra plant and progress in installed capacity across its renewable independent power producer (IPP) and pumped storage segments. MOFSL expects 2QFY26 Ebitda to remain broadly flat year-on-year, as weak profitability at the Mundra plant due to the expiry of Section XI is likely to be offset by contributions from 0.6GW of additional renewable assets commissioned on a year-on-year basis, growth in the fully ramped solar cell and module business, and continued strong performance in the solar rooftop and Odisha distribution businesses.

MOFSL also highlighted that the Draft Electricity Bill’s distribution reforms could act as a key catalyst in FY27. Allowing multiple licensees to operate on the same grid is expected to reduce asset duplication, lower capital expenditure, and enhance service efficiency. While progress will depend on state-level buy-in, these reforms are seen as positive for distribution companies like Tata Power.

Additionally, MOFSL said that Tata Power’s participation in the UP distribution privatization tender, structured as a public-private partnership with private players likely to hold a majority stake, could further strengthen its distribution footprint. The tender’s structure, which limits each bidder to a maximum of two packages, is expected to foster competitive bidding while offering sizable growth opportunities. Overall, MOFSL views Tata Power’s diversified operations, ongoing renewable expansion, and potential gains from distribution reforms as key drivers for a favorable re-rating of the stock, supporting its 'Buy' rating and target price of Rs 480 per share.