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NHPC's Building Boom Finally Pays Off
3 Jul
Summary
- NHPC's long construction cycle is shifting to earnings phase.
- Multiple large projects are now contributing to operations.
- Future growth hinges on upcoming project completions.
NHPC, India's largest hydropower company, is transitioning from a prolonged period of significant capital investment in dam construction to a phase where its assets are beginning to generate substantial earnings. For years, the company invested heavily in Himalayan projects, but earnings growth remained modest due to assets being under construction.
FY26 marked a turning point, with increased revenue and power generation driven by the commissioning of projects like Parbati-II and Subansiri Lower. While margins saw some pressure due to increased interest and depreciation costs from newly operational assets, this is typical during such transitions.
The company is also expanding into solar and wind power, with several projects commissioned or expected soon. Pumped storage projects are identified as a significant future growth area, crucial for balancing India's rapidly expanding renewable energy capacity.
NHPC's balance sheet reflects its investment cycle, with elevated borrowings. However, comfortable interest coverage suggests current profits can service debt. The focus is now on timely project commissioning to convert its construction pipeline into stable, regulated earnings and improved returns on capital, which have historically been below industry peers.
