Reliance Power Share Price Hits 7-Year Peak with 5% Surge: What’s Driving the Power Sector Rally? 

Is the Indian power sector finally seeing a resurgence? The recent surge in Reliance Power share price and the strong performances of other industry giants like NTPC, Tata Power, and JSW Energy suggest so.

With the Nifty approaching 26,000, the Indian stock market is bullish. This positive sentiment has spilled over into the power sector, igniting a wave of optimism among investors. The three power companies mentioned above have been particularly impressive, demonstrating a consistent upward trend that could signal a new era for the sector.

Let’s analyze the performance of each of the four companies.

Reliance Power’s Strategic Move

Reliance Power’s stock price reached a 7-year peak of ₹40.05 on the NSE today, surpassing its previous high of ₹38.07. The company has made a significant move that has captured investor attention. The company’s announcement of a preferential issue of equity shares, raising a substantial sum of ₹1,524.60 crore, has sent ripples through the market.

Key Points from the Announcement:

• Preferential Issue: Reliance Power will issue 46.2 crore equity shares at a discounted price of ₹33 per share, a 14% discount to the previous day’s closing price.
• Promoter Group Ownership: Reliance Infrastructure will hold 24.88% of Reliance Power’s equity after the allotment, and the promoter group’s aggregate shareholding will reach 24.95%.
• New Investors: Authum Investment and Infrastructure and Sanatan Financial Advisory Services Private Ltd will acquire significant stakes in Reliance Power.
• Fund Allocation: A substantial portion of the proceeds, ₹803.60 crore, will be used to expand Reliance Power’s presence in renewable energy and other new business areas and meet long-term working capital requirements.

Implications of the Preferential Issue:

• Strengthened Financial Position: The capital infusion will bolster Reliance Power’s financial position, enabling it to pursue growth opportunities and meet its operational needs.
• Focus on Renewable Energy: The company’s intention to allocate a significant portion of the funds to renewable energy projects aligns with the growing emphasis on sustainable energy sources.
• Increased Promoter Group Control: The promoter group’s increased shareholding could strengthen its control over the company and its strategic direction.
• Attractive Valuation: The discounted share price offered in the preferential issue could make it appealing to investors seeking to acquire shares at a lower valuation.

NTPC’s Financial Metrics Improve

NTPC, a leading Indian power company, demonstrated strong financial performance in the first quarter of fiscal 2025. The company’s revenue and profit increased due to higher power generation and improved operational efficiency. The company’s portfolio of coal-based power plants, combined with its strategic focus on renewable energy, positions it as a key player in meeting the nation’s growing energy demands.

• Revenue and Profit Growth: NTPC reported a double-digit increase in income and profit in the first quarter of fiscal 2025, surpassing analyst expectations.
• Strong Revenue from Power Generation: Revenue from thermal power generation grew by 14.1%, driven by increased output and improved operating efficiency.
• Capacity Expansion: The company’s installed capacity increased by 3,024 megawatts, reaching 76,048 MW.
• Increased Generation: Gross generation rose 10.56% year-over-year, reflecting strong electricity demand.
• Coal Production: Coal production from captive mines for commercial use surged by 54.49%, supporting the company’s power generation activities.
• Improved Tariff: The average tariff from power generation increased from ₹4.53 to ₹4.68, indicating a healthier pricing environment.

Tata Power’s Financial Performance and Growth Initiatives

Tata Power, a prominent player in the Indian energy sector, reported a 4.20% year-over-year increase in profit for the June quarter. This marks the 19th consecutive quarter of profit growth, driven by strong operational performance across its generation, transmission & distribution, and renewable energy businesses.

The company’s diversified portfolio, combined with strategic initiatives in solar and electric vehicle charging infrastructure, positions it well for future growth. Tata Power has significantly progressed in expanding its renewable energy capacity and establishing a strong presence in the electric vehicle charging market.

Key financial highlights include:

• Profit Growth: A 4.20% year-on-year increase in profit.
• Renewable Energy Focus: 41% of Tata Power’s installed capacity is clean and green, with further expansion plans underway.
• Electric Vehicle Charging: The company has surpassed 1 lakh home EV charger installations and has a growing network of public and captive chargers.
• Order Pipeline: A robust order pipeline for utility-scale EPC and solar rooftop projects totaling ₹15,500 crore.

(Source: EconomicTimes)

JSW Energy Share Price Surges Over 90% in a Year

JSW Energy has exhibited impressive growth over the past year, with its share price surging by 96.91%. This outperformance relative to the broader market, as evidenced by the Nifty 100 index’s return of 54.26%, highlights the company’s strong financial performance.

Key indicators of JSW Energy’s growth include:

• Share Price Volatility: The stock’s 52-week range of ₹342.25 to ₹752.40 demonstrates its potential for significant price fluctuations.
• Revenue Growth: The company’s operating revenue for the trailing twelve months has reached ₹11,437.52 crore, with an annual growth rate of 10%.
• Return on Equity: JSW Energy’s ROE of 8% is fair but suggests room for improvement.
• Earnings Performance: The stock’s EPS rank of 88 indicates consistent earnings performance, while the RS rating of 76 suggests a need for stronger recent price performance.

While these three companies have been leading the charge, it’s important to note that the entire power sector is experiencing a positive uptrend. The combination of favorable market conditions, government support for renewable energy, and increasing demand for electricity has created a conducive environment for growth.

As the Indian economy expands, the demand for electricity is expected to rise. This and the government’s focus on renewable energy present significant opportunities for power companies. Investors bullish on the Indian economy and the power sector may want to consider these companies as potential investment options.

However, it’s essential to conduct thorough research and consider market volatility, company-specific risks, and individual investment goals before making investment decisions. Like any other industry, the power sector is subject to market fluctuations and unforeseen events.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.