Shares of Thermax Ltd. gained as much as 7% on Friday, October 9, following reports of potential divestment in its renewable energy subsidiary. According to Business Standard, the stock was trading 4.5% higher at ₹3,280.60 at 10:36 AM, compared to a 1.13% rise in the BSE Sensex. The latest surge builds on the previous 5% gain following Kotak Institutional Equities' upgrade to 'Buy' rating with a ₹4,000 price target. However, since July 2026, the stock has underperformed the market, declining 39% until Thursday, though it remains up 30.6% in the past month and has surged 248% in this year.
According to Business Standard, Thermax is exploring the sale of a stake exceeding 51% in its renewable energy subsidiary First Energy, with an estimated enterprise value of ₹3,000 crore. The company is working with advisors on the potential transaction, as reported by ICICI Securities. First Energy operates approximately 800 MW of renewable capacity and provides captive, group-captive and open access renewable power solutions to commercial and industrial customers, including hybrid and battery storage offerings. The business has faced execution challenges, including right-of-way issues and coordination with state governments, with Thermax acknowledging in its FY26 annual report that First Energy underperformed expectations and was implementing corrective measures.
Kotak said Thermax is trading at 35 times its estimated FY2028 earnings, a valuation it considers attractive given its expectation of a 16% compound annual growth rate (CAGR) in revenue over FY2026-29. As reported by CNBC TV18, the brokerage expects businesses in the early stages of development to add 5-6 percentage points to revenue growth. These include data centres in the US and India, as well as compressed biogas, where Thermax has a strong competitive position and market opportunities are expanding. The company's strong performance trajectory reflects its strategic positioning in high-growth sectors.
The potential renewable energy divestment comes as India's capex cycle continues, with private capex concentrated in policy-driven areas such as renewables, transmission & distribution, electronics, aerospace, data centres, and green hydrogen. According to InCred Equities, the Middle East chaos and rising geopolitical tensions are expected to fast-track India's energy-independence goals, with targets of 900GW renewable energy by 2036 and ₹7.9 trillion T&D capex over FY27-36. For Thermax, a potential stake sale could reduce operational burden and unlock value from the subsidiary, though the transaction remains exploratory with valuation dependent on the stake sold and deal structure.
