Synopsis: Shares of Tata Power Company Limited (NSE: TATAPOWER) rallied over 5% on Friday, March 20, 2026, hitting an intraday high of ₹418.45. The surge followed the Gujarat government’s approval of a revised Power Purchase Agreement (PPA) for the company’s 4,000 MW Mundra ultra-mega power project, ending a costly six-month operational halt.

Tata Power Gujarat PPA Approved: Mundra 4 GW Plant to Restart

The approval from the Gujarat administration marks a critical turning point for the utility giant, which has faced a ₹1,000 crore cash burn in the first nine months of FY26 due to the Mundra facility’s closure. India braces for record summer peak demand and potential gas shortages. This is linked to the ongoing West Asian conflict, the return of this massive coal-fired plant provides a vital safety net for the national grid.

The Mundra Breakthrough: Key Terms of the Deal

The revised agreement, modeled after a similar resolution with the Adani Group, addresses long-standing disputes over the “pass-through” of imported coal costs.

• Retrospective Effect: Accordingly, the new PPA will apply retrospectively from April 2025, subject to final ratification by the Central Electricity Regulatory Commission (CERC).
• Fuel Cost Pass-Through: A core element of the supplemental agreement (SPPA) allows Tata Power to pass through the actual cost of imported coal, indexed to global benchmarks like the Argus-McCloskey or Platts Kalimantan indices.
• Pricing Cap: While specific tariff details remain confidential, the Gujarat government has mandated that the rate paid by state discoms (GUVNL) must not exceed the price paid by other procurer states like Maharashtra or Rajasthan.
• Operational Timeline: Tata Power MD Praveer Sinha confirmed that the plant is scheduled to resume generation “from next week onwards”. This integrates into the merit order dispatch ahead of the April heatwaves.

Why Investors are Turning Bullish

The news triggered a fresh wave of buying interest as the deal removes a major financial overhang:

1. End of Losses: The Mundra plant accounts for nearly 25% of Tata Power’s total capacity. Its restart transforms the project from a loss-making drag into a cash-positive asset.
2. Earnings Upside: Brokerage firm ICICI Securities estimates that the PPA could lead to an initial earnings upside of ₹700–₹800 crore, potentially rising to ₹1,400 crore annually once agreements with other states are finalized.
3. Summer Demand Play: With India’s peak electricity demand expected to touch 271 GW in 2026, thermal power producers are seeing a valuation re-rating as the market prioritizes reliable baseload capacity over intermittent renewables during peak hours.

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Intraday Market Snapshot (March 20, 2026)

The stock showed significant resilience, trading near its 52-week high after a strong technical breakout above the ₹400 resistance level.

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