Capacity Additions to Bolster Power Sector Earnings Amid Subdued Demand

India's Power Sector Enters Earnings Season Amid Demand Slowdown

India's power sector is entering the March quarter earnings season with a slowdown in demand growth, despite strong capacity addition, according to brokerage previews. Electricity demand rose 0.8 percent year-on-year to about 1,715 billion units (BU) in FY26, while the system added roughly 43 GW of capacity, largely led by renewables, according to Nuvama Institutional Equities.

The trend persisted into the March quarter, with demand increasing 1.9 percent YoY to about 425 BU, affected by an extended monsoon and a delayed start to summer. India's installed power capacity stood at about 529 GW as of February 2026, while the renewable pipeline remains substantial at about 368 GW under tendering.

Earnings Supported by Capacity Addition

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Despite weaker demand, earnings are expected to remain supported by capacity additions, brokerages estimate. Companies such as NTPC, NLC India, and JSW Energy are likely to report growth in revenue and EBITDA, driven by incremental capacity and generation under contracted frameworks.

According to Axis Securities, NTPC is expected to report around 9 percent YoY revenue growth and about 7 percent YoY EBITDA growth in Q4FY26, although profit after tax may decline around 25 percent YoY due to a high base. JSW Energy is also likely to post around 40 percent YoY revenue growth and about 88 percent YoY EBITDA growth, supported by renewable capacity additions, though higher depreciation and finance costs may weigh on net profit.

Utilisation and Pricing Reflect Demand Conditions

Operating indicators, brokerages suggest point to lower utilisation. During the quarter, overall thermal plant load factors declined to 69.8 percent in Q4FY26 from 73.4 percent a year earlier, according to Nuvama Institutional Equities. NTPC's PLF stood at about 76.7 percent compared with 82.7 percent a year ago, while Tata Power reported utilisation of about 63 percent versus 72.9 percent. Coal availability remained adequate, with NTPC maintaining around 20 days of inventory, or about 59 million tonnes, according to Nuvama Institutional Equities.

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Power market pricing also highlights the demand-supply balance. Solar-hour tariffs were about Rs 3.3 per unit in March 2026, while non-solar tariffs were around Rs 5.3 per unit. Day-ahead market prices averaged Rs 3.77 per kWh in Q4FY26, down 13 percent YoY but up 13 percent sequentially.

Peak Demand and Future Projections

Peak demand reached about 245 GW in FY26, below the 250 GW recorded in FY25, according to Axis Securities. Going ahead, the Central Electricity Authority has projected peak demand of 366 GW by FY32.

Regulated Segments Expected to Remain Insulated

Regulated segments are expected to remain insulated, according to brokerages. For example, Power Grid Corporation of India is expected to report around 10 percent YoY profit growth, aligned with expansion in its regulated asset base, according to Nuvama Institutional Equities. At the sector level, utilities are expected to report an around 4.1 percent YoY decline in profit in Q4FY26, according to Elara Securities.

Returns and Valuations Diverge Across Segments

Market performance continues to show divergence across segments, visible in both March quarter and year-to-date returns. The BSE Power Index, as of April 21, up 16.5 percent YTD and 3.0 percent in the March quarter.

Valuations also vary widely. NTPC currently trades at about 16.1x and Power Grid Corporation of India at about 18.9x, both close to historical peaks. On the other hand, capital goods and energy transition-linked companies trade at higher multiples, including ABB India at about 81.1x, CG Power and Industrial Solutions at about 103.7x, and Bharat Heavy Electricals at about 95.0x. Siemens trades at around 64.0x, while Siemens Energy India is at about 74.9x, below its earlier peak.