 "electricity")
Power demand during the first eleven months of 2024-25 (April-February or 11MFY25) is up only 4.4 per cent year-on-year (Y-o-Y) due to the impact of excess rainfall and weaker economic activity in industry. This is much lower than the average Y-o-Y power demand growth of 8 per cent-plus in the last three financial years and hit generation unit volume and merchant prices.
But with a hot summer on the horizon, power demand should pick up strongly in FY26. This has positive implications for utilities and other power sector companies. We may assume higher demand for irrigation since around 10 per cent of demand is rain-sensitive. We may also assume higher power demand from households and also hope for an industrial pickup if power intensive industries do better. Taken in tandem with base-effect of low base, this could push up FY26 demand by 8.5 per cent Y-o-Y.
During the first ten months of FY25, thermal generation grew only 3 per cent Y-o-Y with plant load factor (PLF) of 69 per cent, whereas hydro generation increased by 10 per cent Y-o-Y. Generation at India’s largest power generation utility, NTPC grew by 3 per cent Y-o-Y in the first nine months of FY25 (9MFY25) versus 5 per cent Y-o-Y in 9MFY24. Public sector utility, SJVN’s hydro generation surged 26 per cent Y-o-Y in 9MFY25 (10 per cent Y-o-Y decline in 9MFY24). Torrent Power’s gas plants recorded a PLF of 55.6 per cent in Q1FY25 but that declined to 17 per cent in Jul-Dec’25. Average merchant power prices stood at ₹4.5 per kWh in 10MFY25 versus ₹5.4 per kWh in 10MFY24.
Companies like JSW Energy, NTPC, Tata Power and Torrent Power will directly benefit from higher demand while India’s largest power transmission utility, Power Grid Corporation of India (PGCIL) is also a beneficiary. NTPC is going to add capacity as it targets 130GW capacity (FY32) from 76GW currently. NTPC plans to add 26GW thermal capacity and RE (renewable energy) capacity of 20 GW by FY27 and 60 GW by FY32. It is also making a push towards nuclear with a target of 100GW nuclear power capacity by 2047 and it has partnered with the Nuclear Power Corporation of India Limited (NPCIL) to form Anushakti Vidhyut Nigam Ltd (ASHVINI), a joint venture, and incorporated ‘NTPC Paramanu Urja Nigam Limited’, a wholly-owned subsidiary for nuclear power. In the Pumped Storage Project (PSP), NTPC plans for 8-10GW capacity by FY32.
The regulated tariff model of NTPC provides clear visibility on revenues, and there could be RoE (return on equity) increases given expansion in both thermal and RE. Valuations at below 2X of Price/ Book Value seem reasonable given potential long-term growth and there’s a good dividend yield. Investors need to monitor pace of additions to capacity and write-offs/high receivables related to dues from discoms.
Tata Power is also a long-term play across RE including solar module and cell manufacture, as well as being a generator, which intends to have 65 per cent of capacity coming from RE by FY28. The Odisha discom acquisitions may have stabilised. But the RE contribution to profits of Tata Power will really start kicking in only around FY27 and FY28.
JSW Energy has completed the acquisition of a 74 per cent stake in KSK Mahanadi at an enterprise value of ₹16,100 crore, adding 1,800 MW of operational coal capacity with another 1,800 MW under construction. JSW Energy targets a capacity of 28GW by FY30. Growth through both inorganic means and capex is strong but valuations are relatively high. JSW Energy is also pushing a battery storage project, pump storage hydro and investments in green hydrogen.
