IGI Logo

We hope this message finds you well. As part of our ongoing commitment to keeping you updated with relevant and actionable insights, we are pleased to share our latest report – “Top Conviction Ideas: Power & Utilities.” This quarter has seen a confluence of seasonal and structural factors shaping sector performance, offering both challenges and exciting opportunities for long-term investors. In this report, we aim to highlight key financial and operational trends, along with our top conviction investment ideas that we strongly recommend you consider for portfolio allocation.

Q1FY26 Review – A Muted Quarter Led by Seasonal Weakness

The Power & Utilities sector experienced a largely subdued Q1FY26 due to the early onset of the monsoon and a less intense summer, both of which led to a 3% YoY decline in peak electricity demand. Consequently, gross power generation and spot power prices on the IEX also saw notable declines.

Key players like NTPC reported a 3% YoY decline in net sales, with EBITDA and margins under pressure due to lower generation. However, NTPC’s PAT grew 11% YoY and beat estimates by 13%, indicating underlying operational resilience. Similarly, NLC India benefitted from a deferred tax liability reversal and posted a strong PAT growth of 48% YoY, while core performance was slightly muted.

In contrast, JSW Energy delivered a robust performance, driven by the O2 Power and KSK Mahanadi acquisitions, with PAT up 56% YoY and a significant expansion in EBITDA margins. Among the wind and transmission segments, Inox Wind, Skipper, and Genus Power showed promising execution trends and margin improvements, despite seasonal execution challenges.

Outlook – Tailwinds in Place for Long-term Growth

Despite a tepid quarter, the long-term growth outlook for the Power & Utilities sector remains highly compelling, driven by rising energy demand and aggressive capacity expansion plans. The Central Electricity Authority (CEA) projects that peak demand will increase from 243 GW in Q1FY26 to 366 GW by FY32, necessitating substantial additions in both thermal and renewable capacity. India aims to raise its installed capacity to 900 GW by FY32, up from the current 490 GW, with significant expansion expected across solar, wind, and hybrid (FDRE) projects. On the thermal power front, 80 GW of new capacity is planned by FY32 to meet base load requirements. Renewable energy continues to gain traction, with capacity rising from 177 GW in Mar’25 to 193 GW in Jul’25, led primarily by solar installations; wind capacity alone increased by 1,673 MW in Q1FY26. Additionally, the ambitious targets under the Revamped Distribution Sector Scheme (RDSS) for smart meter installations and grid upgrades position transmission and smart infrastructure players for significant growth over the coming years.

Key Monitorables:

As we look ahead, several key factors will determine the pace and profitability of the sector’s transition:

* On-ground Execution: Accelerating implementation timelines for capacity addition and resolving transmission bottlenecks remain crucial.

* Renewable Tendering: Continued momentum in RE and FDRE tendering will be essential to meet FY27 and FY32 targets.

* Grid Expansion: Strengthening of the transmission ecosystem, including the timely addition of lines and substations, is necessary to support new RE projects.

* Smart Meter Penetration: Timely rollout of smart meters under RDSS will drive digitalisation and efficiency gains in power distribution.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633