Torrent Power Ltd - Annual Report 2023-24 Analysis

Overview #

Detailed Analysis #

This analysis looks into Torrent Power Limited’s Integrated Annual Report for FY2023-24, covering financial performance, business segments, identified risks, and ESG initiatives.

I. Financial Performance:

Torrent Power demonstrated strong financial performance in FY24, although some key metrics show a year-over-year (YoY) decline attributed to exceptional gains in FY23 from higher merchant sales, including RLNG. Adjusted for these one-time gains, the underlying operational performance improved.

Key Financial Highlights (Consolidated):

• Revenue from Operations: ₹27,183 Crore (+5.8% YoY, +15.63% 5-year CAGR) – Strong growth driven by robust power demand.
• EBITDA: ₹4,904 Crore (-4.61% YoY, +7.67% 5-year CAGR) – Lower YoY due to exceptional gains in FY23; adjusted figures show improvement.
• PAT (excluding exceptional items): Significant YoY growth (27%) after adjusting for FY23’s higher LNG trading gains.
• Capital Expenditure (CAPEX): ₹3,855 Crore (+31.21% YoY) – Significant investment in renewable energy and distribution network upgrades.
• Market Capitalization: ₹65,112 Crore (+165.9% YoY, +39.42% 5-year CAGR) – Substantial increase in shareholder value.
• Debt to Equity: 0.90 (improved from 0.92 in FY23) – Indication of a healthy financial position.
• Return on Net Worth (RoNW): 14.48% (down from 19.07% in FY23) – Decline due to exceptional gains in prior year.
• Return on Capital Employed (ROCE): 14.60%
• Credit Rating: CRISIL AA+/Stable; IND AA+/Stable (long-term); CRISIL A1+/ IND A1+ (short-term) – Maintained strong creditworthiness.

Key Operational Highlights:

• Power Generated: 11 Billion Units (+77% YoY) - reflects increased reliance on gas and renewables, and higher PLFs.
• Power Distributed: 30 Billion Units (+4% YoY) – Growth driven by strong demand.
• Distribution Losses (Licensed): 2.69% (well below normative levels) – Demonstrates operational excellence.
• Distribution Losses (Franchised): 11.89% (Significant reduction from prior year through loss reduction activities).
• Renewable Projects Under Construction: ~3 GWp – Significant expansion of green energy portfolio.

II. Business Segments:

Torrent Power operates across four core business segments:

• Thermal Generation: Includes coal and gas-fired power plants (AMGEN, SUGEN, UNOSUGEN, DGEN). Strong performance in coal-fired AMGEN due to high demand and secured domestic coal allocation. Gas-based plants saw improved PLFs due to increased demand and government initiatives to utilize gas capacity. Gas price moderation also played a role.
• Renewable Generation: Focuses on wind and solar power. Significant capacity additions planned and underway. Strong growth potential but subject to weather conditions and regulatory hurdles.
• Licensed Distribution: Includes Ahmedabad/Gandhinagar, Surat, Dadra & Nagar Haveli and Daman & Diu, and Dahej SEZ. High reliability and low distribution losses. Achieved top rankings in Ministry of Power assessment.
• Franchised Distribution: Operates in Bhiwandi, Agra, and SMK. Significant reduction in distribution losses achieved through improved network management and anti-theft measures. Aiming for single-digit distribution losses.
• Cables Manufacturing: A smaller segment focusing on EHV, HT, and LT power cables.

III. Risks and Concerns:

The report highlights many key risks:

• Gas Price Volatility: Fluctuating LNG prices and the “take-or-pay” clauses in gas contracts pose a significant risk to profitability, especially for merchant capacity. The report mentions efforts to mitigate these risks through hedging and optimizing power sales.
• Renewable Energy Integration: While a key focus, the intermittent nature of renewable energy poses challenges for grid stability and the need to supplement with thermal generation.
• Regulatory Uncertainty: Changes in government policies and regulatory frameworks could impact profitability, especially in the distribution sector.
• Environmental Regulations: Stricter emission norms for thermal plants present a potential challenge, although the report details measures taken to comply.
• Land Acquisition and Approvals: Delays in land acquisition and regulatory approvals for renewable energy projects pose a significant risk to timely project completion and revenue generation.
• Cybersecurity Threats: Increasing digitalization exposes the company to cybersecurity risks, especially ransomware attacks and data breaches. Mitigation measures like robust security systems, regular audits and cybersecurity insurance are highlighted.

IV. ESG (Environmental, Social, and Governance) Initiatives:

Torrent Power demonstrates a strong commitment to ESG through various initiatives, aligned with the UN Sustainable Development Goals and many global frameworks. A materiality assessment guided the prioritization of ESG issues.

Key ESG Initiatives:

• Environmental: Significant investment in renewable energy (~3 GWp under construction), initiatives to reduce GHG emissions, water conservation (rainwater harvesting, efficient module cleaning with robots), waste management (reduce, reuse, recycle, aiming for zero waste to landfills), and fly ash utilization. The report also highlights initiatives like mangrove development and carbon offsetting.
• Social: Focus on community development programs through the UNM Foundation, including child healthcare (REACH), education (Shiksha Setu), and community welfare initiatives, such as supporting equestrian training and old-age homes. Significant investment in these initiatives (₹59 Crore). Emphasis on employee well-being (health and safety programs, work-life balance initiatives, diversity and inclusion). Strong employee engagement programs.
• Governance: Robust risk management framework aligned with the COSO framework, transparent reporting and communication, commitment to board diversity, and dedicated board committees focused on audit, risk management, nomination and remuneration, CSR, and stakeholder relationships.

V. Conclusion:

Torrent Power’s Integrated Annual Report demonstrates a robust business model with a strong emphasis on growth, financial prudence, and a significant commitment to ESG initiatives. While the company faces risks related to fuel price volatility and regulatory uncertainty, its focus on renewable energy and operational efficiency positions it favorably for future growth. The company’s commitment to ESG is commendable, with notable investments and progress across various key areas. The report provides a transparent overview of the company’s performance and strategic direction. However, a deeper dive into specific financial data for individual subsidiaries and more detailed metrics for each ESG initiative would provide a more detailed understanding of the company’s performance and impact.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values requested can be found in the Standalone Financial Statements section of the annual report, specifically within the Standalone Balance Sheet. The Consolidated Balance Sheet presents a different picture, incorporating the financial information of subsidiaries. Since the prompt did not specify whether standalone or consolidated figures were desired, I’ll provide both. Note that all figures are in Indian Rupees (₹) in Crores.

Standalone Balance Sheet (as of March 31, 2024):

• Total Assets: ₹29,191.41 Crore
• Current Assets: ₹7,033.24 Crore
• Cash and Cash Equivalents: ₹263.66 Crore
• Accounts Receivable (Trade Receivables): ₹1,565.93 Crore
• Inventory: ₹645.56 Crore

Consolidated Balance Sheet (as of March 31, 2024):

• Total Assets: ₹33,392.48 Crore
• Current Assets: ₹8,506.36 Crore
• Cash and Cash Equivalents: ₹350.83 Crore
• Accounts Receivable (Trade Receivables): ₹2,190.86 Crore
• Inventory: ₹800.45 Crore

It’s essential to note the difference between the standalone and consolidated figures. The consolidated figures provide a more complete picture of the entire group’s financial position, while the standalone figures reflect only Torrent Power Limited’s own assets and liabilities.

Liability Analysis #

Similar to the asset values, the liability figures are found in the Standalone Balance Sheet and the Consolidated Balance Sheet. Again, both are presented below as the request did not specify whether standalone or consolidated values were needed. All figures are in Indian Rupees (₹) in Crores.

Standalone Balance Sheet (as of March 31, 2024):

• Total Liabilities: ₹17,152.91 Crore
• Current Liabilities: ₹6,154.17 Crore
• Long-term Debt: ₹10,998.74 Crore (Note: This includes lease liabilities)
• Accounts Payable (Trade Payables): ₹1,436.14 Crore (Current) + ₹345.71 Crore (Non-current) = ₹1,781.85 Crore

Consolidated Balance Sheet (as of March 31, 2024):

• Total Liabilities: ₹20,794.98 Crore
• Current Liabilities: ₹7,813.09 Crore
• Long-term Debt: ₹12,981.89 Crore (Note: This includes lease liabilities)
• Accounts Payable (Trade Payables): ₹1,747.80 Crore (Current) + ₹345.71 Crore (Non-current) = ₹2,093.51 Crore

As with the assets, there is a significant difference between the standalone and consolidated numbers. The consolidated figures reflect the total liabilities of the entire Torrent Power group, while the standalone figures are specific to Torrent Power Limited. Also note that long-term debt includes lease liabilities in both standalone and consolidated figures.

Equity Analysis #

Shareholders’ equity, retained earnings, and share capital values are found in the Standalone Balance Sheet and the Consolidated Balance Sheet. Again, both are provided below because the prompt didn’t specify standalone vs. consolidated. Remember that all figures are in Indian Rupees (₹) in Crores.

Standalone Balance Sheet (as of March 31, 2024):

• Shareholders’ Equity: ₹12,038.50 Crore
• Retained Earnings: ₹7,768.37 Crore
• Share Capital: ₹480.62 Crore

Consolidated Balance Sheet (as of March 31, 2024):

• Shareholders’ Equity (Attributable to equity holders of the Company): ₹12,061.71 Crore
• Retained Earnings: ₹7,751.58 Crore (Note this is within ‘Other Equity’)
• Share Capital: ₹480.62 Crore

Important Considerations:

• Consolidated vs. Standalone: The consolidated figures include the equity of all subsidiaries, providing a broader view of the entire group’s equity. The standalone figures represent only Torrent Power Limited’s equity.
• Other Equity: The “Other Equity” section in both statements includes many reserve accounts (securities premium, debenture redemption reserve, contingency reserve, special reserve, and general reserve). Retained earnings are a component of this section. The detailed breakdown of the reserves is provided in Note 24 (Standalone) and Note 22 (Consolidated) of the respective financial statements.

Therefore, while retained earnings are explicitly shown, the total shareholders’ equity is the sum of share capital and all reserve accounts including retained earnings.

Income Statement #

Operating Performance #

These figures are found in the Standalone Statement of Profit and Loss and the Consolidated Statement of Profit and Loss. Since the request did not specify which set of financial statements to use, I’ll provide both. All values are in Indian Rupees (₹) in Crores.

Standalone Statement of Profit and Loss (for the year ended March 31, 2024):

• Revenue: ₹20,446.56 Crore (This includes revenue from operations and other income)
• Revenue from Operations: ₹19,956.96 Crore
• Cost of Revenue: ₹18,000.29 Crore (This includes all expenses directly related to generating revenue from operations.)
• Gross Profit: ₹1,956.67 Crore (Revenue from Operations - Cost of Revenue)
• Operating Expenses: ₹1,251.46 Crore (This appears to be the sum of employee benefits expense, finance costs, depreciation and amortisation expense, and other expenses. There’s a lack of clarity in the report regarding the specific components which make up ‘operating expenses’, so this is an approximation.)
• Operating Income: ₹705.21 Crore (Gross Profit - Operating Expenses)

Consolidated Statement of Profit and Loss (for the year ended March 31, 2024):

• Revenue: ₹27,527.53 Crore (This includes revenue from operations and other income)
• Revenue from Operations: ₹27,183.21 Crore
• Cost of Revenue: ₹20,509.01 Crore (This includes all expenses directly related to generating revenue from operations.)
• Gross Profit: ₹6,674.20 Crore (Revenue from Operations - Cost of Revenue)
• Operating Expenses: ₹2,115.01 Crore (This is an approximation as the report doesn’t explicitly define what comprises “operating expenses.”)
• Operating Income (PBDIT): ₹4,904 Crore (Gross Profit - Operating Expenses)

Important Notes:

• Definition of Operating Expenses: The standalone and consolidated statements lack clear definitions of “operating expenses.” The values presented above are derived by summing the relevant expense categories reported. A more precise breakdown would be needed for a completely accurate calculation.
• Revenue Breakdown: Revenue is broken down into revenue from operations and other income. Revenue from operations is further categorized by business segment (Generation, Transmission & Distribution, Renewables) in the Management Discussion and Analysis section. Consolidated revenues include the financial results of all subsidiary companies.
• Consolidated vs. Standalone: The consolidated figures reflect the overall financial performance of the entire Torrent Power group, while the standalone figures represent only Torrent Power Limited.

Remember to always refer to the original financial statements and accompanying notes for the most accurate and detailed information.

Bottom Line Metrics #

These key financial metrics are reported in both the standalone and consolidated statements of profit and loss. Because the request didn’t specify which to use, I’ll provide both. All figures are in Indian Rupees (₹) unless otherwise noted; values are in Crores except for EPS which is per share.

Standalone Statement of Profit and Loss (for the year ended March 31, 2024):

• Net Income: ₹1,798.03 Crore (Profit for the year)
• EBITDA: This value is not explicitly stated in the Standalone Statement of Profit and Loss. It would need to be calculated from the provided data by subtracting operating expenses (an approximation as noted before) from revenue from operations.
• Basic EPS: ₹37.41
• Diluted EPS: ₹37.41 (same as basic EPS in this case)

Consolidated Statement of Profit and Loss (for the year ended March 31, 2024):

• Net Income (Profit for the year): ₹1,896.00 Crore
• EBITDA: ₹4,904 Crore
• Basic EPS: ₹38.14
• Diluted EPS: ₹38.14 (same as basic EPS)

Important Notes:

• EBITDA Calculation (Standalone): To precisely calculate the standalone EBITDA, one would need to identify all operating expenses directly related to the revenue-generating activities. The provided financial statements do not offer a clear definition or separation of operating expenses from non-operating expenses. Therefore, a precise standalone EBITDA calculation cannot be performed with the provided information alone.
• Exceptional Items: The Consolidated Statement of Profit and Loss does not explicitly separate exceptional items from regular income. Therefore, the net income and EPS are not adjusted for exceptional items. The Management Discussion and Analysis section explicitly notes that the year-over-year change in Profit Before Tax is impacted by one-time higher gains in FY23.
• Consolidated vs. Standalone: The consolidated figures reflect the overall net income, EBITDA, and EPS of the entire Torrent Power group, whereas the standalone figures represent only Torrent Power Limited’s performance.

Always refer to the original financial statements and accompanying notes for accurate and detailed financial information. The lack of detailed categorization of certain expenses in the provided statements limits the precision of some calculations.

Cash Flow #

Cash Flow Components #

The cash flow data is found in the Standalone Statement of Cash Flows and the Consolidated Statement of Cash Flows. Both are presented below since the prompt didn’t specify which to use. All figures are in Indian Rupees (₹) in Crores.

Standalone Statement of Cash Flows (for the year ended March 31, 2024):

• Cash Flow from Operating Activities: ₹3,413.69 Crore
• Cash Flow from Investing Activities: ₹(3,187.06) Crore (negative indicates net cash outflow)
• Cash Flow from Financing Activities: ₹(101.05) Crore (negative indicates net cash outflow)

Consolidated Statement of Cash Flows (for the year ended March 31, 2024):

• Cash Flow from Operating Activities: ₹4,258.35 Crore
• Cash Flow from Investing Activities: ₹(3,544.43) Crore (negative indicates net cash outflow)
• Cash Flow from Financing Activities: ₹(551.32) Crore (negative indicates net cash outflow)

Important Notes:

• Indirect Method: Both statements use the indirect method of presenting cash flows, starting with net income and adjusting for non-cash items and changes in working capital.
• Investing Activities: Significant cash outflows are noted for property, plant, and equipment (PPE) acquisitions in both statements. The consolidated statement also includes significant cash outflows related to the acquisition of subsidiaries.
• Financing Activities: Both statements show a net cash outflow from financing activities. Significant inflows are noted from long-term and short-term borrowings, offset by significant outflows for debt repayments and dividend payments.
• Consolidated vs. Standalone: The consolidated cash flow statement incorporates the cash flows of all subsidiaries, offering a holistic perspective of the Torrent Power group’s cash position. The standalone statement focuses solely on Torrent Power Limited’s cash flows.

As always, for complete detail and accuracy, please refer to the original financial statements and accompanying notes. The notes provide essential detail on the individual components of each cash flow category.

Cash Flow Metrics #

The annual report doesn’t directly provide a calculated free cash flow figure. However, we can approximate it using the information provided in the Statement of Cash Flows and the Board’s Report. Capital expenditure and dividends paid are explicitly stated. All figures are in Indian Rupees (₹) in Crores.

Approximating Free Cash Flow:

Free cash flow (FCF) is typically calculated as operating cash flow minus capital expenditures. The consolidated figures will be used for the approximation as they offer a more complete view of the group’s cash flows.

• Operating Cash Flow (Consolidated): ₹4,258.35 Crore (from the Consolidated Statement of Cash Flows)
• Capital Expenditure (CAPEX) (Consolidated): ₹3,855 Crore (from the Board’s Report’s Key Performance Highlights)
• Approximate Free Cash Flow: ₹4,258.35 Crore - ₹3,855 Crore = ₹403.35 Crore

Other Key Figures (Consolidated):

• Capital Expenditure (CAPEX): ₹3,855 Crore (from the Board’s Report)
• Dividends Paid: ₹771.10 Crore (from the Consolidated Statement of Cash Flows)

Important Considerations:

• FCF Approximation: The FCF calculation above is an approximation. A truly accurate FCF calculation would require adjustments for changes in working capital (beyond what is explicitly presented in the cash flow statement). Furthermore, the report may use a different definition of FCF.
• Other potential FCF deductions: Other items like interest payments, taxes and other non-operating cash flows could be considered when determining a more precise FCF. The provided reports don’t provide enough information to perform a complete FCF analysis.
• Consolidated Figures: The figures presented here are based on the consolidated financial statements because the report does not offer a clear separation of capital expenditure and operating cash flow for the standalone financial statements.

To obtain a precise free cash flow figure, one would need to refer to the notes to the financial statements for a more detailed breakdown of cash flow components, potentially involving additional calculations.

Financial Ratios #

Profitability Ratios #

Profitability ratios can be calculated using the data from the Standalone and Consolidated Statements of Profit and Loss. Since the prompt didn’t specify which, I’ll provide calculations for both. Note that due to the lack of explicit detail on certain expenses (specifically a clear definition of “operating expenses” is missing), some calculations, especially operating margin, will be approximations. All figures are expressed as percentages.

Standalone Financial Statements (for the year ended March 31, 2024):

• Gross Margin: (Revenue from Operations - Cost of Revenue) / Revenue from Operations = (₹19,956.96 Crore - ₹18,000.29 Crore) / ₹19,956.96 Crore = 9.8%
• Operating Margin (Approximation): (Operating Income) / Revenue from Operations = (₹705.21 Crore) / ₹19,956.96 Crore = 3.5% (Note: This is an approximation because Operating Income is calculated from approximated operating expenses.)
• Net Profit Margin: Net Income / Revenue = ₹1,798.03 Crore / ₹20,446.56 Crore = 8.8%
• Return on Equity (ROE): Net Income / Average Shareholders’ Equity = ₹1,798.03 Crore / (₹11,019.67 Crore + ₹12,038.50 Crore)/2 = 14.63%
• Return on Assets (ROA): Net Income / Average Total Assets = ₹1,798.03 Crore / (₹25,987.50 Crore + ₹29,191.41 Crore)/2 = 6.97%

Consolidated Financial Statements (for the year ended March 31, 2024):

• Gross Margin: (Revenue from Operations - Cost of Revenue) / Revenue from Operations = (₹27,183.21 Crore - ₹20,509.01 Crore) / ₹27,183.21 Crore = 24.6%
• Operating Margin (Approximation): Operating Income (PBDIT) / Revenue from Operations = ₹4,904 Crore / ₹27,183.21 Crore = 18.0% (Note: This is an approximation because “Operating Expenses” are not explicitly defined.)
• Net Profit Margin: Net Income / Revenue = ₹1,896.00 Crore / ₹27,527.53 Crore = 6.9%
• Return on Equity (ROE): Net Income Attributable to Owners of the Company / Average Shareholders’ Equity = ₹1,833.23 Crore / (₹11,010.00 Crore + ₹12,061.71 Crore)/2 = 14.48%
• Return on Assets (ROA): Net Income Attributable to Owners of the Company / Average Total Assets = ₹1,833.23 Crore / (₹29,910.18 Crore + ₹33,392.48 Crore)/2 = 5.5%

Important Considerations:

• Approximations: The operating margin calculations are approximations due to the lack of a precise definition of “operating expenses” in the provided financial statements.
• Average Equity/Assets: ROE and ROA calculations use the average of the beginning and ending equity and asset balances for the year.
• Exceptional Items: The impact of any exceptional items should be considered when analyzing profitability. The annual report indicates that there were exceptional items in FY23.
• Consolidated vs. Standalone: The consolidated ratios provide a view of the entire Torrent Power group’s profitability, while the standalone ratios reflect only Torrent Power Limited’s performance.

Always consult the original financial statements and accompanying notes for precise figures and a detailed explanation of the calculation methodology. The lack of precise expense categorization in the report slightly limits the accuracy of these calculations, especially operating margin.

Liquidity Ratios #

Liquidity ratios assess a company’s ability to meet its short-term obligations. These ratios can be calculated using data from the Standalone and Consolidated Balance Sheets. Since the prompt didn’t specify which, I’ll provide calculations for both. All figures are in Indian Rupees (₹) in Crores.

Standalone Balance Sheet (as of March 31, 2024):

To calculate these ratios accurately, we need to carefully define the components used. The balance sheet includes many items that are short-term but might not be immediately liquid (e.g., accounts receivable, some prepaid expenses, and inventories).

• Current Ratio: Current Assets / Current Liabilities = ₹7,033.24 Crore / ₹6,154.17 Crore = 1.14
• Quick Ratio: (Current Assets - Inventories) / Current Liabilities = (₹7,033.24 Crore - ₹645.56 Crore) / ₹6,154.17 Crore = 1.04
• Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹263.66 Crore / ₹6,154.17 Crore = 0.04

Consolidated Balance Sheet (as of March 31, 2024):

Similar considerations apply to the consolidated figures. Defining liquid assets is crucial.

• Current Ratio: Current Assets / Current Liabilities = ₹8,506.36 Crore / ₹7,813.09 Crore = 1.09
• Quick Ratio: (Current Assets - Inventories) / Current Liabilities = (₹8,506.36 Crore - ₹800.45 Crore) / ₹7,813.09 Crore = 0.99
• Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹350.83 Crore / ₹7,813.09 Crore = 0.04

Important Considerations:

• Definition of Liquid Assets: The calculation of quick and cash ratios hinges on the definition of “liquid” assets. The quick ratio excludes inventories because they are not always readily convertible to cash. The cash ratio considers only the most liquid assets (cash and cash equivalents). Different interpretations of what constitutes a liquid asset can lead to varying ratio results.
• Security Deposits: The balance sheet shows significant amounts of “Security Deposits from Consumers”. While these are technically current assets, their immediate liquidity is questionable as they’re not readily convertible to cash without impacting service provision. This could affect the interpretation of the current ratio.
• Consolidated vs. Standalone: The consolidated ratios represent the liquidity position of the entire Torrent Power group, while the standalone ratios reflect only Torrent Power Limited’s liquidity.

Always refer to the original financial statements and accompanying notes to understand the specific items included in the calculations and any potential limitations of these ratios in assessing liquidity. Further, the company notes to financial statements provides explanation on credit risk of certain assets e.g., receivables.

Efficiency Ratios #

Efficiency ratios measure how effectively a company utilizes its assets to generate sales. These ratios are calculated using data from the Standalone and Consolidated Statements of Profit and Loss and Balance Sheets. Since the prompt didn’t specify which to use, I’ll provide calculations for both. All figures are in Indian Rupees (₹) in Crores, unless otherwise specified.

Standalone Financial Statements (for the year ended March 31, 2024):

• Asset Turnover: Revenue from Operations / Average Total Assets = ₹19,956.96 Crore / (₹25,987.50 Crore + ₹29,191.41 Crore) / 2 = 0.71 times
• Inventory Turnover: Cost of Revenue / Average Inventory = ₹18,000.29 Crore / (₹645.71 Crore + ₹645.56 Crore) / 2 = 27.8 times
• Receivables Turnover: Revenue from Operations / Average Accounts Receivable = ₹19,956.96 Crore / (₹1,516.04 Crore + ₹1,565.93 Crore) / 2 = 12.95 times

Consolidated Financial Statements (for the year ended March 31, 2024):

• Asset Turnover: Revenue from Operations / Average Total Assets = ₹27,183.21 Crore / (₹29,910.18 Crore + ₹33,392.48 Crore) / 2 = 0.84 times
• Inventory Turnover: Cost of Revenue / Average Inventory = ₹20,509.01 Crore / (₹820.28 Crore + ₹800.45 Crore) / 2 = 24.7 times
• Receivables Turnover: Revenue from Operations / Average Accounts Receivable = ₹27,183.21 Crore / (₹2,246.33 Crore + ₹2,190.86 Crore) / 2 = 11.9 times

Important Considerations:

• Average Balances: These calculations utilize the average of the beginning and ending balance sheet values for assets, inventory, and receivables to smooth out any fluctuations during the year.
• Revenue Used: Revenue from operations is used in the numerator of the asset turnover and receivables turnover ratios.
• Cost of Revenue: Cost of revenue (which is not explicitly defined in the report) is used in the numerator of the inventory turnover ratio. This value includes all direct costs associated with producing the revenue.
• Consolidated vs. Standalone: The consolidated ratios show the efficiency of the entire Torrent Power group, while the standalone ratios pertain only to Torrent Power Limited.

Always consult the original financial statements and accompanying notes for precise values and a clear understanding of the calculation methodology. There is a lack of clarity in the expense definitions provided, which affects the accuracy of the calculations.

Leverage Ratios #

Leverage ratios measure the extent to which a company uses debt financing. These ratios can be calculated from the Standalone and Consolidated Balance Sheets. Since the prompt didn’t specify which, both are provided below. All values are in Indian Rupees (₹) in Crores unless otherwise noted.

Standalone Financial Statements (as of March 31, 2024):

• Debt to Equity Ratio: Total Debt / Shareholders’ Equity = (₹8,285.07 Crore (Non-current Borrowings) + ₹1,418.45 Crore (Current Borrowings) + ₹34.50 Crore (Non-current Lease Liabilities) + ₹6.38 Crore (Current Lease Liabilities) ) / ₹12,038.50 Crore = 0.80
• Debt to Assets Ratio: Total Debt / Total Assets = (₹8,285.07 Crore + ₹1,418.45 Crore + ₹34.50 Crore + ₹6.38 Crore) / ₹29,191.41 Crore = 0.33
• Interest Coverage Ratio: Profit Before Interest and Taxes (PBIT) / Interest Expense = ₹2,446.27 Crore / ₹781.43 Crore = 3.13

Consolidated Financial Statements (as of March 31, 2024):

• Debt to Equity Ratio: Total Debt / Shareholders’ Equity = (₹9,916.40 Crore (Non-current Borrowings) + ₹1,668.63 Crore (Current Borrowings) + ₹39.50 Crore (Non-current Lease Liabilities) + ₹7.27 Crore (Current Lease Liabilities))/ ₹12,597.50 Crore = 0.88
• Debt to Assets Ratio: Total Debt / Total Assets = (₹9,916.40 Crore + ₹1,668.63 Crore + ₹39.50 Crore + ₹7.27 Crore) / ₹33,392.48 Crore = 0.35
• Interest Coverage Ratio: Profit Before Interest and Taxes (PBIT) / Interest Expense = ₹2,582.60 Crore / ₹943.40 Crore = 2.74

Important Considerations:

• Debt Definition: The definition of “debt” used in these calculations includes both current and non-current borrowings and lease liabilities.
• Equity Definition: Shareholders’ equity used in the debt-to-equity ratio calculation is the total equity attributable to equity holders of the company and it includes reserves and surplus in addition to share capital.
• Average Balances: The debt-to-equity and debt-to-asset ratios ideally use average debt and equity balances over the reporting period for a more accurate representation. The calculations presented here use the year-end values for simplicity.
• Interest Expense: The interest coverage ratio uses the interest expense reported in the income statement. Any capitalized interest should be considered separately.
• Consolidated vs. Standalone: The consolidated use ratios reflect the debt burden of the entire Torrent Power group, whereas the standalone ratios show only Torrent Power Limited’s leverage.

It’s recommended to always refer to the original financial statements and their accompanying notes for precise figures and a complete understanding of the calculation methodology used. The interest coverage ratios are more accurate than debt ratios, since the company’s reporting didn’t define the exact composition of its current and non-current debt.

Business Analysis #

Segment Analysis #

The annual report doesn’t provide a complete breakdown of all the requested information for each business segment. Specifically, market share data is not explicitly provided. However, we can compile the available information from the annual report (primarily the Management Discussion and Analysis section) to give you a summary. Revenue figures are in Indian Rupees (₹) in Crores. Growth rates are calculated year-over-year (YoY).

Business Segment Summary:

Important Notes:

• Operating Margin Approximation: Operating margins are approximations because the report doesn’t clearly separate operating expenses from other expenses. The figures provided here represent Profit Before Depreciation, Interest and Taxes (PBDIT) / Revenue for each segment. This gives a reasonable estimate of operational profitability, but additional calculations are needed to determine precise operating margin.
• Growth Rate Calculation: The growth rates for each segment are based on available data which is not explicitly laid out in the document and hence these figures may differ from those reported in official communications. For renewables and franchisee, the growth was calculated based on total units sold for the segment.
• Market Share: The report doesn’t provide market share data for any segment. Obtaining this information requires consulting external market research reports.
• Revenue Allocation: Revenue from operations in the consolidated statement of profit and loss is not explicitly allocated to each segment. The allocation has been estimated based on revenue disclosure provided in Management Discussion and Analysis.
• Geographic Presence: This represents a summary of operational areas. The annual report doesn’t specify the exact number of cities/towns within each state/territory where the Company operates.

Always refer to the original annual report, specifically the Management Discussion and Analysis, and related notes to get the most complete and precise data for each segment. The lack of explicit segmental reporting limits the precision of this summary.

Risk Management #

Risk Assessment #

The annual report’s “Risk Management” section and the “Management Discussion and Analysis” section discuss many key risk factors. However, the report doesn’t explicitly categorize risks, assign precise likelihood or impact severity scores, or consistently detail mitigation strategies and trends for each risk. This analysis compiles the available information to provide a summary.

Key Risk Factors (Summary):

Important Notes:

• Qualitative Assessment: The risk assessment provided by this analysis is qualitative, based on the descriptions in the report. The annual report doesn’t provide quantitative measures of likelihood and impact severity.
• Mitigation Strategy Detail: The report mentions mitigation strategies but does not provide exhaustive detail on their implementation and effectiveness.
• Trend Analysis: The report provides some indication of future trends, but these are generally not specific to the individual risks.

To get a more precise risk assessment, one should carefully read the entire risk management section in conjunction with the Management Discussion and Analysis of the annual report, and consider expert opinions.

Strategic Overview #

Management Assessment #

Torrent Power’s management outlines its key strategies, competitive advantages, market conditions, challenges, and opportunities primarily within the “Integrated Strategic Framework,” “Chairman’s Message,” and “Management Discussion and Analysis” sections of the annual report. Here’s a summary:

I. Key Strategies:

Management articulates many core strategic themes to drive sustainable growth:

• Invest in the Company’s Growth Engine: Focused expansion of generation capacity, especially in renewable energy (aiming for 5 GW within the medium term), transmission, and distribution (both licensed and franchised). Prudent capital allocation and participation in competitive bidding processes are key aspects.
• Operational Excellence: Maintaining high operational efficiency and reliability across all segments. Emphasis on reducing distribution losses, improving plant load factors (PLFs), and enhancing customer service. This strategy uses their experience in operating well-run utilities.
• Empower Stakeholders: Prioritizing strong relationships with employees, customers, suppliers, and communities. Focus on employee well-being, customer satisfaction, sustainable supply chain practices, and community development initiatives through CSR activities.
• Deploy Digital Technologies: Accelerated digitization of operations to improve efficiency, improve customer service, and strengthen cybersecurity. Leveraging big data analytics, AI, and other advanced technologies.
• Responsible Actions: Commitment to environmental sustainability through emission reduction, energy conservation, water stewardship, and responsible waste management.

II. Competitive Advantages:

Torrent Power highlights many competitive strengths:

• Integrated Business Model: Presence across the entire power value chain (generation, transmission, distribution) providing a competitive edge and synergies.
• Operational Excellence: Demonstrated track record of well-managed, efficient operations, especially in distribution with consistently low distribution losses.
• Financial Strength and Creditworthiness: Strong balance sheet, robust cash flows, and stable credit ratings providing financial flexibility for growth initiatives.
• Experienced Management Team: Deep industry expertise and long-term commitment to the business.
• Commitment to ESG: Strong ESG profile and proactive engagement on sustainability issues. This enhances reputation and may attract investors focused on responsible investing.

III. Market Conditions:

Management notes many key market characteristics:

• Strong Power Demand: Rapid economic growth in India is driving a significant increase in electricity demand.
• Energy Transition: Shift towards cleaner energy sources and renewable energy, presenting both opportunities and challenges. Government policies are actively promoting this transition.
• Distribution Sector Reforms: Ongoing reforms in the power distribution sector are aimed at reducing losses and improving efficiency.
• Increased Competition: Increased private sector participation in power generation and distribution.

IV. Challenges:

The company acknowledges many key challenges:

• Fuel Price Volatility: Fluctuations in natural gas and coal prices impacting profitability.
• Renewable Energy Intermittency: Challenges in integrating intermittent renewable energy sources into the grid.
• Regulatory Uncertainty: Changes in government policies and regulatory frameworks creating uncertainties.
• Land Acquisition and Approvals: Difficulties in obtaining timely land acquisitions and project approvals.
• Transmission Capacity Constraints: Shortage of transmission infrastructure limiting the integration of new generation capacities.

V. Opportunities:

Management identifies many key growth opportunities:

• Renewable Energy Expansion: Significant potential for growth in renewable energy generation, especially through organic and inorganic expansion, driven by increasing demand and government support.
• Green Hydrogen and Green Ammonia: Developing expertise in green hydrogen production and green ammonia is seen as a key avenue for growth in the future.
• Distribution Privatization: Potential to expand distribution operations through acquiring licenses or franchises in new areas. This uses their proven expertise in distribution optimization and loss reduction.
• Transmission Sector Growth: Opportunities in the transmission sector through competitive bidding processes and brownfield acquisitions.

VI. Conclusion:

Torrent Power’s management has a clear strategic vision focused on sustainable and profitable growth. They recognize the evolving energy landscape and have tailored their strategy to address both opportunities and challenges. Their integrated business model, operational excellence, and strong financial position create a solid foundation for their growth ambitions. However, success will depend significantly on their ability to manage the inherent risks associated with fuel price volatility, regulatory uncertainty, and the complexities of integrating large amounts of renewable energy into the grid.

ESG Ratings #

The provided annual report does not explicitly state ESG ratings from specific agencies like MSCI, Sustainalytics, or S&P Global. While the report extensively covers ESG initiatives and performance, it does not include a summary table of ratings from external ESG rating providers. To find this information, you would need to consult independent ESG rating agency websites directly. These ratings often change as agencies update their data and methodologies.

ESG Initiatives #

Torrent Power’s Integrated Annual Report extensively details its environmental, social, and governance (ESG) initiatives and sustainability goals. Here’s a summary:

I. Environmental Initiatives:

Torrent Power’s environmental focus centers on reducing its environmental footprint and contributing to a cleaner energy future:

• Clean Energy Transition: A core strategy is the significant expansion of renewable energy generation capacity (with a target of 5 GW in the medium term). This is evidenced by substantial capital expenditure in new solar and wind projects, as well as exploration into pumped hydro storage, green hydrogen, and green ammonia projects. Over 95% of the company’s generation capacity is from cleaner fuels (gas and renewables).
• Emissions Reduction: Active management of greenhouse gas (GHG) emissions through operational efficiency improvements (optimized auxiliary consumption, plant heat rate), cleaner fuel sources, and carbon offsetting initiatives (tree plantation). A reduction in GHG emission intensity is a stated goal.
• Water Stewardship: Implementing various measures to conserve water, including rainwater harvesting, efficient module cleaning (using robots to minimize water usage), wastewater treatment and reuse, and minimizing freshwater withdrawal.
• Waste Management: Commitment to reduce, reuse, and recycle waste through robust waste management processes, aiming for zero waste to landfills. This includes initiatives like the segregation of different waste types, the use of authorized vendors for hazardous waste disposal, and the utilization of fly ash.

II. Carbon Footprint:

The report highlights the company’s efforts to reduce its carbon footprint, but does not provide a single, overall carbon footprint number. Instead, it focuses on emission intensity (tCO2 eq/GJ), showing a significant reduction in FY24 compared to FY23. The reduction is attributed to a greater share of generation from cleaner fuels (gas and renewables).

• Emission Intensity: A significant reduction (~18%) in CO2 emission intensity (tCO2 eq/GJ) is reported in FY24 compared to FY23.
• Carbon Offsetting: The company engages in tree plantation drives and has developed mangrove forests to offset carbon emissions.
• Scope 1 & 2 Emissions: While the report details GHG emissions, precise Scope 1 and Scope 2 figures and their breakdown by GHG type are not clearly presented. Only the total Scope 1 and 2 emissions (in million tonnes of CO2 equivalent) are given.

III. Social Initiatives:

Torrent Power’s social initiatives primarily focus on community development and employee well-being:

• Community Healthcare (REACH): A flagship program providing child healthcare services, including screening for anemia and malnutrition, and support for adolescent girls’ health and sanitation. The program has expanded significantly, reaching a large number of children in many states.
• Education (Shiksha Setu): Aimed at improving primary education, especially in reading and arithmetic, through initiatives like the Learning Enhancement Program (LEP) and introduction of smart classes. The program addresses learning gaps through remedial camps.
• Community Development: Supporting various other community initiatives, including the development and maintenance of public parks, supporting an equestrian center, and providing assistance to old-age homes.
• Employee Well-being: Focus on employee health and safety (low LTIFR rates, detailed safety training programs), work-life balance, and promoting a culture of diversity and inclusion.

IV. Governance Practices:

The company’s governance framework emphasizes transparency, integrity, and accountability. Key aspects include:

• Board Composition: Balanced representation of executive, non-executive, and independent directors, including a significant proportion of independent directors and women directors. The board’s composition and experience are discussed in detail.
• Board Committees: Dedicated committees (Audit, Nomination and Remuneration, CSR & Sustainability, Stakeholders Relationship, Risk Management) to oversee specific areas of the business, ensuring robust oversight and decision-making processes.
• Risk Management: A well-defined risk management framework is used to identify, assess, and mitigate key risks across the business.
• Transparency and Disclosure: Commitment to transparent reporting and communication with stakeholders. The Integrated Annual Report itself reflects this commitment.
• Compliance: Strict adherence to legal and regulatory requirements and the adoption of relevant international standards for environmental and safety compliance.

V. Sustainability Goals:

While specific, quantified sustainability goals with timelines aren’t explicitly laid out in a single table, many key aspirations are clear from the report:

• Renewable Energy Target: Increase renewable energy generation capacity to 5 GW in the medium term.
• GHG Emission Reduction: Lowering greenhouse gas emission intensity. Precise targets are not provided.
• Distribution Loss Reduction: Drive down distribution losses, especially in franchised areas, to single-digit figures.
• Operational Efficiency: Continuously improve operational efficiency across all business segments.
• Stakeholder Engagement: Maintain strong relationships with all key stakeholder groups.
• Community Development: Continue to invest in and expand the scope of community development initiatives.

In summary: Torrent Power demonstrates a commitment to sustainability through a detailed range of environmental and social initiatives, backed by robust governance practices. While specific, quantified targets and measurable KPIs for some of their goals (like GHG emission reduction) are not explicitly stated, the report gives a clear indication of their sustainability ambitions and ongoing efforts. Further, independent ESG ratings from specialized agencies should be consulted to obtain an external perspective on their sustainability performance.

Additional Information #

Operational Metrics #

The annual report states that no expenditure was incurred on Research and Development (R&D) in FY2023-24.

The total employee count (including both permanent and other than permanent employees) at the end of FY2023-24 was 8,206. The report also notes a total of 13,592 workers (most of whom are not employees).

Key Events #

Several significant events are mentioned throughout Torrent Power’s annual report. These can be categorized as follows:

I. Business Developments:

• Significant CAPEX: A substantial increase in capital expenditure (₹3,855 Crore) reflecting major investments in renewable energy projects (~3 GWp under construction) and distribution network upgrades. This signifies a major push towards expanding their green energy portfolio and upgrading infrastructure.
• Renewable Energy Wins: The company successfully bid for and secured many large-scale renewable energy projects (solar and wind) through competitive bidding processes. This includes the securing of contracts for approximately 956 MW with high CUF requirements. This expansion strengthens their position in the renewable energy sector.
• Green Hydrogen Initiatives: Commenced work on a pilot project for blending green hydrogen with natural gas in a city gas distribution network. This demonstrates progress in their strategic foray into the green hydrogen sector, aligning with government initiatives.
• Transmission Project Wins: Secured bids for significant inter-state transmission projects (Khavda and Solapur), representing growth in this segment.
• Distribution Growth: Commenced operations in the Dholera Special Investment Region (SIR) licensed area. This represents strategic expansion of their distribution network, capitalizing on an area expected to have substantial future growth.
• Scheme of Arrangement: Approved a scheme for transferring its renewable power undertaking to a wholly-owned subsidiary, Torrent Green Energy Private Limited. This strategic move aims to unlock value in their renewable energy business and attract investors focused on clean energy.
• Change in Senior Management: Significant changes in senior management roles occurred during the year, including the elevation of Jinal Mehta to Vice-Chairman and Managing Director and the appointment of Jigish Mehta as Whole-time Director (Generation). These appointments reflect the company’s internal growth and succession planning strategy.

II. Financial Highlights:

• High Dividend Payout: A substantial dividend payout demonstrates the company’s commitment to returning profits to shareholders while maintaining a healthy financial position.
• Strong Market Capitalization Growth: The significant growth in market capitalization underlines investor confidence in the company’s future prospects.
• Improved Credit Rating: This reflects their strong financial performance and stability.
• Increased Debt: The company undertook increased debt to support its expansionary capital expenditures in renewables and distribution networks.

III. ESG Initiatives:

• Implementation of IMS and 5S: Torrent Power implemented and actively maintained its Integrated Management System (IMS) and 5S Workplace Management System standards across many of their units. This reflects their operational excellence and commitment to continuous improvement.
• Continued CSR Initiatives: Significant spending on Corporate Social Responsibility (CSR) initiatives, focusing on community healthcare, education, and environmental sustainability.
• Women’s Empowerment Initiatives: Continued focus on promoting the role of women in their workforce and on various diversity and inclusion programs.

IV. Other Notable Events:

• Founder’s Birth Centenary: The report prominently features the birth centenary year of the company’s founder, highlighting his legacy and the family’s commitment to philanthropy. This has a major effect on the narrative and priorities of the company.

These events highlight Torrent Power’s growth strategy, financial strength, environmental commitments, and focus on community engagement, illustrating a company navigating the energy transition while maintaining a strong financial position. Always refer to the original report for the most complete and accurate information.

Audit Information #

The auditor’s opinion and key accounting policies are detailed in the annual report’s “Independent Auditor’s Report” and “Notes to the Financial Statements” sections. The report includes both standalone and consolidated financial statements, each with their own auditor’s reports and notes.

I. Auditor’s Opinion:

Both the standalone and consolidated financial statements received an unmodified (clean) auditor’s opinion. This means that, in the auditors’ opinion, the financial statements present a true and fair view of the financial position, financial performance, and cash flows of Torrent Power Limited (standalone) and its consolidated group, in accordance with Indian Generally Accepted Accounting Principles (GAAP) and the Companies Act, 2013.

The auditors (Price Waterhouse Chartered Accountants LLP) highlight key audit matters in their report related to:

• Impairment assessment of the DGEN power plant: The significant judgement and estimation involved in assessing the recoverability of this asset. The auditors concluded that management’s assessment was reasonable.
• Recoverability of deferred tax assets: The significant judgement involved in assessing the recoverability of deferred tax assets based on future taxable profits. The auditors again concluded that management’s assessment was reasonable.

II. Key Accounting Policies:

The “Notes to the Financial Statements” detail the key accounting policies used to prepare both standalone and consolidated financial statements. The significant policies include (but are not limited to):

• Basis of Preparation: The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) as notified under Section 133 of the Companies Act, 2013.
• Business Combinations: The acquisition method is used for business combinations. The pooling of interests method is used for common control transactions. Specific guidance on determining if an acquisition constitutes a ‘business’ or not is detailed.
• Property, Plant, and Equipment (PPE): PPE are measured at cost less accumulated depreciation and impairment losses. Different depreciation methods and useful lives are used for assets in regulated and non-regulated businesses. The process for impairment testing is described.
• Impairment of Assets: Assets are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. The higher of fair value less costs of disposal and value in use is used to determine the recoverable amount.
• Borrowing Costs: Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized.
• Cash and Cash Equivalents: Defined as readily convertible to known amounts of cash and subject to an insignificant risk of changes in value (original maturities of three months or less).
• Inventories: Valued at the lower of cost and net realizable value. Cost is determined using the weighted average method for most items but a different method for RLNG.
• Revenue Recognition: Revenue is recognized when control of goods or services is transferred to customers. Specific guidance on revenue recognition from power supply, RLNG trading, CER sales, and generation-based incentives is provided.
• Foreign Currency Translation: Transactions are initially recorded at the exchange rate prevailing at the transaction date. Monetary items are re-translated at the closing rate.
• Employee Benefits: Both defined contribution and defined benefit plans are described, along with the accounting for gratuity, compensated absences, and pension plans. Actuarial valuations are used for defined benefit plans.
• Taxation: Covers both current and deferred tax. The method for recognizing deferred tax assets and liabilities, including the assessment of recoverability, is specified.
• Earnings Per Share: Describes the computation of basic and diluted earnings per share.
• Provisions: Explains the recognition criteria and measurement of provisions, including contingencies.
• Financial Instruments: Details on the classification and measurement of financial assets (at amortized cost or fair value) and financial liabilities are provided. The fair value hierarchy is clearly defined and explained. The approach for measuring expected credit losses is described. Accounting treatment of derivative instruments is also explained.
• Government Grants: The criteria for recognizing government grants and the method of recognizing them in the financial statements are specified.
• Investment Properties: Specifies that investment properties are measured initially at cost and subsequent expenditure, and discusses the criteria for derecognition.

The notes to the financial statements provide detailed explanations, supporting the overall auditor’s opinion. For complete understanding, always refer to the full text of the auditor’s report and notes.