Mehtas Gain From Pharma, Power Tailwinds

LAST FINANCIAL YEAR saw incredible wealth generation by siblings Sudhir Mehta and Samir Mehta. The net worth of Ahmedabad-based Torrent Group promoters rose 126.2% to ₹1,41,694 crore as shares of two listed companies — Torrent Pharmaceuticals and Torrent Power — rallied. The promoters own 71.25% and 53.57% in Torrent Pharma and Torrent Power, respectively. While Sudhir has quit all executive positions and is chairman emeritus of the group, Samir is chairman of both Torrent Pharma and Torrent Power.

“We have built solid businesses which have strong growth visibility and operational excellence. Governance standard is high. The market is appreciating it,” says Samir Mehta. Torrent Pharma is the fifth-biggest player in the market with leading position in top five therapeutics segments. Torrent Power is an integrated power utility with presence across generation, transmission and distribution in six states and one Union Territory. Its total capacity is 4,294 MW of which renewable is 1,202 MW. Privately held Torrent Gas, started in FY18, distributes gas in 34 districts and seven states.

With ₹10,785 crore turnover in FY24, Torrent Pharma accounts for over 31% group revenues and close to 60% market cap. It earns 47% revenue from overseas with U.S., Germany and Brazil contributing 10% each. Torrent Power, which accounts for close to 59.7% group revenues with a turnover of ₹20,446 crore in FY24 and about 40% market cap, has accelerated growth with its power distribution entities in eight locations improving efficiency and reducing distribution losses. Torrent Gas turnover rose to ₹1,911 crore in FY23 from ₹468 crore in FY22 and ₹120 crore in FY21.

The group’s past year performance does not tell the complete story, says Samir. “Five-year or 10-year CAGR in each of the businesses is one of the best. One year seems huge but what has brought us to that is what we have done over the past decade,” he says. “In pharma, we have been deepening presence in existing geographies, and in power, we are building a new distribution culture. Torrent Gas, also a related business, is Ebitda positive and will grow much stronger,” he says.

Torrent Pharma has been growing faster than the industry. Revenue grew 15% in June quarter of FY25, which Torrent attributes to its niche branded generic portfolio and go-to-market strategies. In FY24, it launched more products than any other company in India, helped by mergers and acquisitions during last decade. The company enjoys a strong presence in key segments such as cardiovascular, central nervous system, gastro-intestinal, women healthcare, nutrients and cosmo-dermatology.

Motilal Oswal said in an investor note after Q1 FY25 results that Torrent Pharma is a promising play with 64% revenue from branded generics and out-performance in India and Brazil. “Generic drug approvals in U.S. are expected to pick up. This will not only boost revenue growth but also improve profitability of the U.S. generics segment,” it says. It estimates 32% earnings CAGR over FY24-26.

Torrent Power is also enjoying tailwinds. The company calls FY24 a transformative year as generation and distribution saw strong growth with all thermal and renewable assets witnessing higher plant load factors (PLFs). Easing natural gas prices helped Torrent’s gas-based plants. Renewable PLF improved due to better wind speeds and plant performance. The company is present in power generation, transmission & distribution and operations in Gujarat, Maharashtra, U.P. and Karnataka. In FY24, Torrent participated in auctions for renewable projects (including hybrid) and got contracts of about 956 MW. About three-GW renewable capacity involving capex of ₹18,000 crore is under construction. It is expected to reach approximately 4.3 GW over next two-three years; medium-term goal is five GW. “If 1.5 GW is operational today and three-five GW is seen as the next possible addition, that does play a role in market expectations,” says Mehta.

However, a February 2024 note from Geojit Financial Services sounded caution over valuation concerns, execution risks and the “now devoid opportunity” of gains from LNG trading which it said were key to higher profits over the last few quarters.

Torrent Gas, the latest business segment for the group, is building pan-India state-of-art city gas distribution networks in 17 geographical areas across 34 districts in Uttar Pradesh, Punjab, Telangana, Rajasthan, Gujarat, Maharashtra, Puducherry and Tamil Nadu. Mehta considers this a natural extension of Torrent’s power business. “There are three synergistic references between power distribution and gas-based power plants. First is laying the network and the infrastructure, second is serving the consumer, and third is procurement of gas,” says Mehta.

Mehta says while its power and gas businesses are contributing to investor enthusiasm, pharma is the most stable. “It is relatively insulated from ups and downs. It is a steady growth business but overall Torrent Pharma revenues have also grown in one year, and it is not insignificant,” says Mehta, adding: “Market looks at future growth (potential of companies).” The increase in networth of Mehta brothers is a testimony to that market faith.