Power Grid’s FY27 Capex Guidance and HVDC Pipeline Offset Weak Fourth-Quarter Earnings

Investment View and Valuation

Motilal Oswal Financial Services retained its Neutral rating on Power Grid Corporation of India after the company’s May 18, 2026 4QFY26 result update. The broker highlighted weak fourth-quarter operating performance, although management maintained its FY27 and FY28 capex and capitalisation guidance. Power Grid also retains a large transmission-project pipeline.

MOFSL derives its Rs 305 target price from December 2027 book value per share of Rs 124 and a 2.5 times price-to-book multiple. This implies 3 per cent upside from the CMP of Rs 297.

4QFY26 Financial Performance

Power Grid reported standalone 4QFY26 revenue of Rs 99.7 billion, down 9 per cent year on year and quarter on quarter, and 19 per cent below MOFSL’s estimate. Standalone EBITDA was Rs 75 billion, down 19 per cent year on year and 20 per cent quarter on quarter, and 31 per cent below the broker’s estimate, owing to lower revenue and elevated other expenses.

Standalone reported PAT was Rs 45.5 billion, up 5 per cent year on year and 9 per cent quarter on quarter, and in line with MOFSL’s estimate. However, PAT was aided by a Rs 52.8 billion deferred-tax asset. The regulatory deferral balance saw a net negative movement of Rs 38 billion. Adjusted PAT was Rs 32.7 billion and materially below the broker’s estimate.

Consolidated 4QFY26 revenue was Rs 116.7 billion, down 5 per cent year on year, while reported PAT rose about 10 per cent year on year to Rs 45.5 billion.

FY26 Financial and Dividend Update

Management attributed the annual EBITDA decline primarily to several regulated tariff mechanism, or RTM, projects crossing the 12-year mark. The Board approved a final dividend of Rs 1.25 per share, taking the FY26 dividend to Rs 9 per share.

Capex, Capitalisation and Billing

Management reported FY26 capex of Rs 399.7 billion and capitalisation of Rs 282 billion. FY27 capex and capitalisation guidance is Rs 370 billion and Rs 300 billion, respectively, while FY28 targets are Rs 450 billion and Rs 350 billion. Management indicated that these targets could be revised upwards.

FY26 billing was Rs 402 billion, with a 101.2 per cent realisation rate and Rs 407 billion recovered. Return on net worth declined in FY26 as equity dilution from the TBCB pipeline outpaced near-term earnings accretion. Management expects benefits from capitalisation towards the end of FY26 to flow through in FY26-27.

Operational Performance and Project Pipeline

Power Grid added 4,765 circuit kilometres, 72 GVA of transformation capacity and nine substations in FY26. System availability was 99.84 per cent, earning the company the full availability incentive. The annual tripping rate improved to 0.26 from 0.27 in FY25.

Works-in-hand stood at Rs 1.7 trillion as of March 31, 2026, comprising 81 per cent TBCB projects and 17 per cent RTM projects. The company won nine of the 28 TBCB projects awarded during the year, including one intrastate project.

MOFSL views the resulting 32 per cent market share as below Power Grid’s historical 50-60 per cent range. Project wins from the expected annual Rs 800-1,000 billion bid pipeline are a key monitorable.

Growth Opportunities

Management cited a roughly Rs 15 trillion long-term pipeline across renewable-energy evacuation, the Brahmaputra hydro corridor and OSOWOG interconnections. Power Grid also identified 22 HVDC projects at bidding or planning stages, with combined capacity of about 127 GW.

• Power Grid signed its first BESS purchase agreement for the Kalikiri 150 MW/300 MWh project, with an annual tariff of Rs 0.29 billion.
• Data centres and green hydrogen could create incremental transmission demand.

Key Risks and Monitorables

• Right-of-way acquisition.
• Transformer and skilled-labour supply constraints.
• Project-execution timelines.
• The pace of project wins from the expected annual Rs 800-1,000 billion TBCB bid pipeline, given the current 32 per cent market share versus Power Grid’s historical 50-60 per cent range.

MOFSL Estimates