Tata Power shares down 5% after weak operating performance in Q4, Nuvama downgrades

Shares of Tata Power Ltd. declined nearly 7% in early trade on Wednesday, May 13, after the company reported a subdued set of earnings for the March quarter.

The company's results were lower as it witnessed the final quarter of losses from the Mundra plant.

Tata Power's revenue declined 12.8% to ₹14,900 crore from ₹17,096 crore last year. It was also below Street estimates of ₹15,910 crore.

The company net profit declined 4.5% to ₹996 crore from ₹1,043 crore. However, it was above estimates, due to multiple one offs.

Earnings before interest, tax, depreciation and amortization (EBITDA) declined 20% to ₹2,599.2 crore from ₹3,246 crore and was below estimates of 3,454 crore, while margins narrowed to 17.4% from 19% in the year-ago period.

The profit after tax was aided by — recognised deferred tax assets at standalone basis and additional profit booked in Delhi discom due to tariff orders. However, impairment of investment dragged the profit after tax.

Nuvama Downgrades

Brokerage firm Nuvama has downgraded the stock to "reduce" from its previous "hold" rating. It has a price target of ₹390 per share, indicating a downside of 6.9% from its previous closing price.

The brokerage said Tata Power's valuations are stretched at 24 times its estimated earnings per share (EPS) for FY28 at the current market price.

Goldman Sachs Bearish

The brokerage has a "sell" rating and a price target of ₹300 per share, a downside of 28.4% from its previous closing price.

Tata Power's earnings miss was primarily driven by lower renewables generation, impacted by reduced PLFs and load curtailment, along with weaker contribution from joint ventures, particularly coal mining and Tata Projects, Goldman Sachs said.

While the Mundra plant shutdown continued to weigh on earnings, this was largely offset by strong growth in upstream renewables, rooftop solar and the distribution business, it said.

Tata Power also reported a capex miss — ₹13,000 crore in FY26 compared to guidance of ₹25,000 crore — largely due to right of way issues and delays in transmission readiness pushing product timelines.

Heading into FY27, the company appears to be moving past the drag from the Mundra plant, with operations stabilising and the earnings overhang reducing, the brokerage said.

Overall, its earnings may remain healthy, but Goldman Sachs believes the current valuation already factors in a large part of this optimism with the stock trading at a significant premium to its historical price-to-book valuations.

Of the 26 analysts who have coverage on Tata Power, 13 have a "buy" rating, seven have a "hold" rating and five have a "sell" rating.

Stock reaction

Shares of Tata Power are trading 4.6% lower on Wednesday at ₹399.3. The stock is trading 4.2% higher on a year-to-date basis so far.