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Transforming into a renewables play

We initiate coverage on TPWR, India’s leading private utilities company, with a BUY and SOTP-based TP of INR300. TPWR is: a) transforming itself into a RE utility targeting 60% share of clean energy by 2025 and 80% by 2030; b) tapping the large regulated distribution privatisation opportunity; c) tapping the EPC solar market, electric vehicle (EV) charging and government subsidies on solar pumps and solar roofs; and d) debt reduction, selling non-core assets and value unlocking in carved out RE assets. With specific environmental targets for 2025-30, TPWR has pledged for carbon-neutral status before 2050

Only utility with full service RE offerings

TPWR targets to increase RE to 15GW (60% of total) by 2025 and 25GW (80%) by 2030 from current 4.2GW (32%). We believe TPWR is the only Indian utility to develop an integrated RE model from manufacturing solar cells/modules extended to micro grids in rural India (10k by 2027), EV chargers (target 100k by FY26), solar pumps (16% market share by FY25) and solar rooftop (33% market share by FY25). Finally, as the #1 EPC solar company, it targets revenue of INR120b by FY25E vs INR54b for FY22E. The recent fund raising announcement in renewables business of INR40b for about 10% stake is a testimony to the improving business dynamics.

Regulated market offers stability

TPWR targets to increase capital in regulated businesses to INR135b by FY25E from INR98.3b in FY21. The focus will be on power transmission and distribution, which offers stable ROEs and upside from lower AT&C losses. TPWR is India’s #1 distribution company with 12.3m customers. We believe this will give more predictability and stability to earnings.

Best bet in Indian RE

We believe TPWR is best placed to benefit from India’s push to increase RE capacity to 500GW by 2030. There are multiple catalysts from RE assets value-unlocking, sale of non-core assets, tariff resolution and tax benefit from merger of Mundra assets in the standalone entity and new renewable and distribution contracts

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