Power Grid capitalisation momentum and transmission pipeline underpin medium-term earnings growth

Investment View and Medium-Term Growth Drivers

ICICI Securities Retail Equity Research's August 7, 2026 result update identifies higher capitalisation, easing execution constraints and a strong transmission investment cycle as the principal drivers of Power Grid Corporation Limited's medium-term earnings growth.

Power Grid is India's largest power transmission utility, with 186,595 circuit km of transmission lines and 634,516 MVA of transformation capacity. It transmits about 45 per cent of India's power generation, owns about 84 per cent of the inter-state transmission system, serves more than 150 domestic consultancy clients and operates about 100,000 km of telecom network.

The brokerage maintains a BUY recommendation and values Power Grid at 17 times FY28E EPS to derive a target price of Rs 325.

Q1FY27 Operating Performance

Power Grid reported muted operating performance in Q1FY27. Revenue from operations declined 1.3 per cent year-on-year to Rs 9,795 crore, while EBITDA was broadly flat, declining 0.1 per cent to Rs 8,111 crore. EBITDA margin nevertheless expanded by 104 basis points year-on-year to 82.8 per cent. Adjusted PAT declined 6.6 per cent year-on-year to Rs 3,411 crore, reflecting lower regulatory income and a higher effective tax rate.

Regulatory Timing and Capitalisation

Management attributed the quarterly profitability weakness to a Rs 560 crore regulatory timing drag, comprising Rs 330 crore of lower depreciation recovery and Rs 230 crore of lower interest income. These effects resulted from timing differences between tariff petitions and regulatory orders. Management indicated that, excluding these effects, PAT would have increased by Rs 227 crore in Q1FY27.

Power Grid incurred capex of Rs 7,765 crore in Q1FY27, compared with Rs 6,981 crore in Q1FY26. Capitalisation rose sharply to Rs 5,277 crore from Rs 1,683 crore. Management retained FY27 capex guidance of Rs 37,000 crore and capitalisation guidance of Rs 30,000 crore, with stronger execution anticipated in subsequent quarters.

Order Book and Execution Visibility

Power Grid's work-in-hand stood at about Rs 1.75 lakh crore, supporting multi-year revenue visibility. The order book comprised 83 per cent TBCB projects, about 14 per cent RTM projects worth Rs 25,168 crore, and 3 per cent other businesses.

Other businesses include smart metering, data centres, cross-border and international projects, and battery energy storage systems. The bidding pipeline exceeded Rs 1.19 lakh crore.

During Q1FY27, Power Grid commissioned 1,635 circuit km of transmission lines and 10,500 MVA of transformation capacity. Additional transmission lines and the 765/400 kV Koppal-II substation were commissioned after the quarter-end.

By July 2026, the company had won six of 19 ISTS and InSTS TBCB projects bid, carrying annual tariff of more than Rs 2,200 crore. It also secured India's first SynCon project under TBCB. Management expects this asset class to become important for grid strength, inertia and reactive-power support as renewable integration rises.

Transmission Investment Cycle and Execution Outlook

Management expects the National Electricity Plan's more than 900 GW non-fossil capacity plan by FY36 to require Rs 7.9 lakh crore of transmission investment. Most of these projects are expected to be bid over the next three to four years.

Data centres, green hydrogen, green ammonia and hydro projects could add to transmission demand. Transformer and GIS availability has improved as OEM capacity has expanded, while equipment prices have stabilised.

Revised execution timelines of 26 to 30 months for 765 kV double-circuit lines, versus the previous 18-month target, are intended to reduce execution risk.

Financial Estimates and Valuation

ICICI Securities forecasts FY26 to FY28E revenue CAGR of 9.0 per cent and PAT CAGR of 2.6 per cent.

The broker values Power Grid at 17 times FY28E EPS to derive its Rs 325 target price and maintains its BUY recommendation.

Key Risks

• A slowdown in power demand.
• Delays in renewable-capacity execution.