Motilal Oswal upbeat on India's power sector; suggests buying 2 stocks

India's power utilities industry is well-positioned for continued investment and operational expansion in FY26 and beyond thanks to rising power demand and growing renewable energy capacity

India's power utilities industry is still well-positioned for long-term growth thanks to strong supply-side readiness supported by policy, reliable coal production, and renewable energy (RE) additions. Structural tailwinds including energy transition, increased electrification, and economic growth are anticipated to continue sectoral momentum even if the demand for electricity moderates in the near future.

 

India's peak power demand was 250 GW in FY25 and is expected to reach 270 GW in FY26. Demand volatility in peak months indicates the possibility of a significant recovery in the near future, even though demand growth slowed to about 5 per cent in FY25 (compared to 7–9 per cent in FY22–24) and then further reduced to about 2 per cent year-on-year (Y-o-Y) in April 2025 as a result of strong base effects and milder weather.

 

 

FY25 saw notable capacity gains, with total generation capacity increasing by 33.3 GW, or 29 per cent Y-o-Y. With a 28.8 GW contribution, renewable energy was the main driver, with solar additions accounting for 23.8 GW. The remaining 5 GW came from wind energy, indicating the industry's obvious shift to greener sources. However, thermal capacity saw a net decrease of 2.2 GW, which was indicative of India's slow transition away from traditional power generation.

 

To guarantee peak season readiness, the Ministry of Power has taken precautionary measures. Gas-based power plants are required by Section 11 of the Electricity Act, 2003, to optimise their generation throughout the summer. Grid India will organise and provide advance notice of operational schedules in the meantime. The action became more significant since India deactivated about 4.4 GW of inoperable gas-fired capacity, which caused operational gas capacity to drop sharply from 24.5 GW on March 25 to 20.1 GW on April 25.  Catch Stock Market Updates Today LIVE 

One important supply indicator, coal availability, is still strong. With Coal India alone having 105 MT of stock (+22.1 per cent Y-o-Y), domestic coal production increased 3.6 per cent Y-o-Y to 81.6 MT on April 25. With a total coal inventory of 125.8 MT, the government's efforts to alleviate supply for imported coal-based facilities also provided a sizable buffer for summer demand.

 

While market volumes remain high, on the pricing front, unseasonable rains and better sell-side liquidity on IEX helped Real-Time Market (RTM) prices drop 24 per cent Y-o-Y in May (till the 25th). Besides, average Day-Ahead Market (DAM) rates remained steady at ₹5.2/unit in April.

 

India's utilities industry is moving into a phase of structural resilience due to a robust pipeline of renewable energy projects, governmental emphasis on thermal stability, and growing energy demands. The sector is well-positioned for continued investment and operational expansion in FY26 and beyond thanks to rising power demand and growing renewable energy capacity.

Suzlon – Target price: ₹83

Suzlon Energy (SUEL) remains our high-conviction pick amid improving execution, a net cash balance sheet, and strong earnings momentum ahead. Positive developments with respect to the implementation of local content in wind turbine manufacturing will boost market share and protect margins. We model FY26 delivery of 2.4GW, implying a quarterly run rate of 600MW, which we believe is reasonable (3QFY25 delivery: 447 MW). 

 

For SUEL, we estimate a compound annual growth rate (CAGR) of 46 per cent/51 per cent in revenue/adjusted profit after tax (PAT) over FY25-27. As per our understanding, key orders slated for FY26 already have substantial land acquisitions completed and have high power evacuation visibility.

JSW Energy – Target price: ₹592

JSW Energy (JSWE) reported consolidated revenue of ₹3,180 crore in Q4FY25, with adjusted PAT up 34 per cent Y-o-Y, aided by higher other income and deferred tax benefits. Operational capacity reached 12.2 GW, with a robust project pipeline of 6.7 GW, reflecting strong growth visibility. 

 

Completion of KSK Mahanadi and O2 Power acquisitions positions JSWE for Earnings before interest, tax, depreciation, and amortisation (Ebitda) expansion in FY26. Net generation rose 24 per cent Y-o-Y, supported by new capacities and a high thermal plant load factor (PLF) of 84 per cent. 

 

With merchant exposure below 1GW and coal import dependence reduced to 9–10 per cent, earnings volatility is expected to decline. We give a 'Buy' rating, backed by clear growth visibility and strong capacity additions.  (Discalimer: This article is by Motilal Oswal Financial Services Research desk. Views expressed are its own.)