Power Grid benefits from transmission capex pipeline despite moderating returns and execution risks

Investment View and Target Price

Geojit Investments Limited, in its August 25, 2026 Q1FY27 result update on Power Grid Corporation of India Limited (POWERGRID), upgraded the stock to BUY and set a revised target price of Rs 303.

The broker views POWERGRID as a principal beneficiary of India’s structural transmission-capex cycle, supported by renewable-energy integration, HVDC expansion, data-centre demand and green-hydrogen development. Its investment case is supported by POWERGRID’s dominant interstate transmission system position, presence in regulated and competitively bid projects, and diversification into telecom, consultancy and grid-support solutions, including battery energy storage systems and synchronous condensers.

Q1FY27 Financial Performance

POWERGRID reported consolidated Q1FY27 revenue of Rs 11,497 crore, up 2.7 per cent year on year but down 1.4 per cent quarter on quarter. Transmission revenue grew 2.2 per cent year on year and consultancy revenue rose 27.8 per cent, while telecom revenue fell 13.0 per cent because of lower order execution.

EBITDA increased 4.3 per cent year on year to Rs 9,536 crore, with EBITDA margin expanding 120 basis points to 82.9 per cent, primarily due to an 8.7 per cent decline in other expenses. Reported and adjusted PAT were both Rs 3,598 crore, down 0.9 per cent year on year and 20.9 per cent quarter on quarter, with a regulatory drag of about Rs 160 crore. PAT margin was 31.3 per cent.

Execution and Project Pipeline

Operating execution began strongly in Q1FY27. Capitalisation rose 3.1 times year on year to Rs 5,277 crore, equivalent to about 18 per cent of FY27 guidance, while capex increased 11.2 per cent to Rs 7,765 crore. System availability was 99.8 per cent, above the 99.75 per cent incentive threshold, and receivable days compressed to about 12 days.

POWERGRID commissioned 1,635 circuit kilometres of lines and 10,500 MVA of transformation capacity during Q1FY27, predominantly for renewable-energy evacuation projects. Management retained FY27 capex guidance of Rs 37,000 crore and capitalisation guidance of Rs 30,000 crore. Geojit notes potential upside to these figures given the first-quarter execution.

By July 2026, POWERGRID had won six transmission projects, including India’s first synchronous condenser scheme, with aggregate annual tariff above Rs 2,200 crore. Management said the company is pursuing regulated battery-energy-storage assets under the new framework.

The bidding pipeline was Rs 1.19 lakh crore, comprising Rs 73,875 crore under active bidding and Rs 45,620 crore yet to be floated. Management expects the Rs 7.9 lakh crore opportunity associated with India’s 900 GW non-fossil roadmap to be largely bid out over the next three to four years.

Earnings Outlook

Geojit forecasts FY27E revenue of Rs 52,341 crore, EBITDA of Rs 43,652 crore and adjusted PAT of Rs 16,866 crore. For FY28E, the broker estimates revenue of Rs 56,633 crore, EBITDA of Rs 47,458 crore and adjusted PAT of Rs 17,848 crore.

The broker reduced its FY27E and FY28E EBITDA estimates by 3.4 per cent and 3.2 per cent, respectively. FY27E and FY28E adjusted PAT estimates were reduced by 1.2 per cent and 4.9 per cent, respectively.

Valuation and Key Risks

Geojit’s Rs 303 target price is based on 2.4 times FY28E price-to-book value, reduced from 2.9 times earlier. The broker cites moderating return on equity as the project mix shifts towards tariff-based competitive bidding projects and capitalisation lags on a growing equity base.

Geojit forecasts return on equity of 15.5 per cent in FY27E and 15.2 per cent in FY28E. Key risks to the thesis include:

• Right-of-Way bottlenecks.
• Execution risk.