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Power demand in India has commenced at a modest pace for the second consecutive year, with demand for 4MFY26 growing at 1.2%, owing to the early onset of monsoons and following a low single-digit growth (3% yoy) in FY2025 as well. Capacity addition has been on a firmer footing, with 22 GW (16 GW RE) of capacity added in 4MFY26. Moderated demand growth and healthy capacity addition have once again put the sector on the back foot. Our coverage universe has seen mixed trends in capacity addition, with NTPC improving from its weak performance in FY2025 and JSW Energy benefitting from new acquisitions, but these capacity additions are yet to translate into healthy earnings growth.

Weak power demand for 4MFY26 on the back of modest growth in FY2025

Power demand in India grew just 1.2% yoy in 4MFY26 to 599 BU, impacted by unseasonal rains and a less favorable base (up 7% yoy in 4MFY25). The demand weakness follows a modest 3% yoy growth in power demand for FY2025. Peak power demand until July 2025 stands at 243 GW in comparison with 250 GW in FY2025. We highlight that weather patterns do have an impact on agricultural and domestic demand as well as overall economic activity, and unseasonal rains in the month of May 2025 did not augur well for power demand.

Strong capacity addition in 4MFY26, after healthy addition in FY2025

India added an impressive 22.2 GW capacity in 4MFY26 (15.5 GW RE, 4.1 GW coal, 1.9 GW hydro and 0.7 GW nuclear), further improving upon the 33 GW addition in FY2025 (28.7 GW RE, 4.2 GW coal, 0.8 GW hydro) and 26 GW addition in FY2024 (18 GW RE, 6 GW coal)—a marked improvement over the 15 GW avg. annual addition in the preceding six years. India currently has 33 GW of underconstruction coal capacity to be commissioned in the next 6-7 years. We expect overall capacity addition to improve to 47/45 GW in 2026/27 and further to 51 GW in 2030, largely led by renewables, a tad higher than our earlier estimates. We note that modest demand, coupled with aggressive capacity addition, has re-ignited the discussion on demand-supply balance, with talks of curtailment in parts of the country and the non-extension of Sec 11 for imported coal capacities such as Mundra. According to the National Solar Energy Federation of India (NSEFI), modest power demand, combined with commissioning delays for new transmission projects and the consequent congestion in existing lines, has led to curtailment of 3-4 GW of solar capacity in Rajasthan in the last six months, with some curtailment in Gujarat as well.

Coverage universe improves capacity additions in 1QFY26

Companies in our electric utilities coverage universe have started FY2026 with better capacity additions compared with missing the targets in FY2025. NTPC has added 2.7 GW (1.3 GW coal and 1.1 GW RE), against its full-year capacity addition target of 11.8 GW. ACME Solar’s 350 MW addition in 1QFY26 is tracking ahead of its full-year target of 450 MW commissioning.

Companies in our electric utilities coverage universe have started FY2026 with better capacity additions compared with missing the targets in FY2025. NTPC has added 2.7 GW (1.3 GW coal and 1.1 GW RE), against its full-year capacity addition target of 11.8 GW. ACME Solar’s 350 MW addition in 1QFY26 is tracking ahead of its full-year target of 450 MW commissioning.

Earnings print remains modest, despite improvement in capacity addition

Our coverage universe of electric utilities continued to report modest earnings in 1QFY26. Despite the initial euphoria, we note that the absence of earnings growth, execution slippages and weak power demand have led to modest stock performance. Valuations have come off from the peaks seen in FY2024, but still do not fully factor the execution risks that would impede earnings growth.

Among the public utilities, NTPC’s consolidated PAT (up 11.6% yoy) was aided by the reversal of an impairment of Rs3 bn and higher regulatory income. Adjusted PAT stood at Rs44 bn (up 5% yoy) on regulated equity of Rs923 bn (up 4% yoy) for 1QFY26.

NHPC commissioned Parbati II in April 2025 but saw lower profit contribution from the project as operations were impacted by a cloudburst, among other teething issues. Further, tariff for Parbati II is yet to be approved by the regulator, which led to an increase in the unbilled receivables.

Among the private players, JSW Energy reported doubling of EBITDA to Rs27.9 bn, aided by the acquisitions of Mahanadi (1.8 GW) and O2 (1.3 GW operational) + 2 GW of organic capacity addition in the last 12 months. Adjusted for acquisitions, EBITDA grew ~25% yoy. PAT growth was lower at 42% yoy to Rs7.4 bn, owing to higher finance costs from the debt for funding the acquisitions.

TPWR’s consolidated PAT of Rs10.6 bn (up 9% yoy) was aided by (1) improved profitability from the Odisha distribution utilities and (2) higher execution and improved margin profile for the renewable equipment and execution business. The discontinuation of the Section 11 order starting July 1, 2025 takes away the lower losses from Mundra.

CESC reported consolidated PAT of Rs4 bn (up 5% yoy), which was driven by 10% yoy growth in standalone PAT (aided by higher other income and lower taxes despite weak unit sales, which declined 3% yoy), healthy growth in Noida (up 35% yoy), but partly offset by continued losses in Malegaon. Losses at Malegaon have remained a pain point for CESC over the years.

ACME Solar saw strong 1QFY26 EBITDA of Rs4.6 bn (up 68% yoy) on the back of doubling of operational capacity to 2.9 GW. The PLF increased to 28.5% in 1QFY26 from 27% in 1QFY25, aided by the recently commissioned capacities, while the blended tariff declined to Rs3.1/kwh (down 20% yoy, 3% qoq), owing to the lower tariff for the recently commissioned capacities.

ACME Solar saw strong 1QFY26 EBITDA of Rs4.6 bn (up 68% yoy) on the back of doubling of operational capacity to 2.9 GW. The PLF increased to 28.5% in 1QFY26 from 27% in 1QFY25, aided by the recently commissioned capacities, while the blended tariff declined to Rs3.1/kwh (down 20% yoy, 3% qoq), owing to the lower tariff for the recently commissioned capacities.

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