Torrent Power (TORNTPOWER) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of a 1.4 GW supercritical coal-based power plant in Punjab expands operational capacity from 5 GW to 6.4 GW, strengthens presence in northern India, and aligns with a strategy of stable cash flows, disciplined growth, and portfolio diversification.

• Asset is fully contracted under a 25-year PPA, providing reliable and visible cash flows and supporting immediate EPS accretion.

• Strong operational track record with plant availability above 90% and high efficiency, supporting robust performance and growth in the thermal sector.

• Acquisition enhances regional presence in North India, diversifies geographic risk, and provides a platform for future capacity expansion.

• Proximity to major cement plants enables monetization of fly ash through long-term contracts, creating a secondary revenue stream.

Financial terms and conditions

• Enterprise value net of cash is INR 6,889 crore, including INR 3,661 crore equity and convertible instruments, INR 495 crore for promoter loan repayment, and INR 2,733 crore net debt as of March 31, 2025.

• Transaction based on a lock box date of March 31, 2025, with customary closing adjustments and subject to regulatory approvals.

• Implied EV/EBITDA multiple is 5.97x, with per MW cost of INR 4.92 crore, below sector averages.

• NPL reported revenue of INR 4,866 crore and adjusted EBITDA of INR 1,153 crore in FY 2025.

• Expected to close by Q1 FY 2027.

Synergies and expected cost savings

• Acquisition is value accretive from day one, boosting revenues, profitability, and delivering mid-teen IRRs with upside from expansion, lower O&M costs, and higher fly ash income.

• Entire plant capacity is tied up through a two-part availability-based tariff, ensuring stable distributable cash flows.

• Low auxiliary consumption and high efficiency contribute to cost savings and strong EBITDA margins.

• Gains institutional expertise and technical capabilities from NPL.

• Conservative assumptions in projections may result in additional cash flow upside.