Is Reliance Power overvalued or undervalued?

As of 1 October 2025, the valuation grade for Reliance Power has moved from attractive to fair, indicating a shift in its perceived investment quality. The company is currently considered overvalued based on its significant negative PE ratio of -3661.83, a Price to Book Value of 1.16, and an EV to EBITDA ratio of 16.37. These figures suggest that the company's earnings are not aligned with its market valuation, raising concerns about its financial health.
In comparison to its peers, Reliance Power's valuation metrics stand out unfavorably. For instance, NTPC, which is rated attractive, has a PE ratio of 13.76 and an EV to EBITDA of 10.79, while Tata Power Co. also rated attractive, shows a PE of 30.24 and an EV to EBITDA of 12.23. The stark contrast in these ratios highlights Reliance Power's overvaluation relative to its competitors. Although the stock has shown a year-to-date return of 7.50%, outperforming the Sensex's 3.64%, the long-term trend reveals a decline of 10.47% over the past year, further supporting the conclusion that Reliance Power is overvalued at its current price of 45.75.