Power Grid's Execution Momentum and Revised Guidance Spark Investor Optimism
Power Grid Corporation of India Ltd shares experienced a significant rally, gaining 13% over four trading sessions following impressive third-quarter performance and upward revisions to financial targets. The state-owned power transmission giant reported a sharp acceleration in project execution during Q3FY26, coupled with enhanced visibility for future growth.
Quarterly Performance Exceeds Expectations
During the December quarter, Power Grid's project capitalization surged to ₹9,023 crore, marking a substantial increase from ₹3,900 crore recorded in the first half of FY26. Capitalization represents completed projects that have begun generating revenue, and this Q3 figure exceeded Street expectations by 80-90% according to PL Capital analysis.
The execution acceleration received support from revised central government guidelines on right-of-way compensation, which facilitated higher payouts and expedited land acquisition processes. Management highlighted this policy change as a key enabler for improved project timelines.
Financial Metrics Show Steady Growth
The execution momentum translated into solid financial performance. Consolidated Ebitda, adjusted for prior-period income, increased approximately 6% year-on-year to ₹10,100 crore in Q3FY26. Adjusted revenue grew nearly 6% to ₹11,900 crore, while cost growth remained contained within manageable limits.
For the first nine months of FY26, revenue growth remained modest at 4%, with Ebitda largely flat. However, the improved execution visibility prompted management to revise its FY26 capital expenditure guidance upward to ₹32,000 crore from ₹28,000 crore, while raising the capitalization target to ₹22,000 crore from ₹20,000 crore.
Future Capex and Capitalization Outlook
Looking ahead, Power Grid has provided ambitious guidance for the coming years. For FY27, the company projects capex of ₹37,000 crore with a capitalization target of ₹30,000 crore. The following year, FY28, sees even higher projections with capex planned at ₹45,000 crore and capitalization targeted at ₹35,000 crore.
Capex during the first nine months of FY26 already demonstrated strong growth, increasing 50% year-on-year to ₹27,000 crore. The company's project pipeline remains substantial, with ₹1.45 trillion worth of projects under execution at the end of January, scheduled for completion over the next three to four years.
Robust Order Pipeline and Tariff Improvements
Beyond current execution, Power Grid maintains a healthy project pipeline with approximately ₹55,000 crore worth of projects currently under bidding. The company anticipates better earnings from recently secured projects, which have been awarded at tariff levels around 11%, compared to 7-8% for older projects.
However, analysts caution that earnings translation may require time. An Antique Stock Broking report noted that while execution visibility has improved meaningfully, capitalization remains inherently lumpy and project-led, potentially limiting the immediacy of earnings impact.
Capacity Constraints and Strategic Responses
Power Grid continues to navigate challenges related to domestic manufacturing capacity for transformers and reactors. Current capacity stands at 2.3 lakh MVA, with ongoing additions expected to increase this to 4 lakh MVA. Despite this expansion, the company estimates requiring 4.2 lakh MVA for FY27, indicating a persistent gap.
To address this shortfall, Power Grid has sought government approval to import components for transformer manufacturing from neighboring countries, reflecting strategic adaptation to supply chain constraints.
Valuation and Market Performance Context
Despite the recent rally, Power Grid shares have gained just 1.5% over the past year, underperforming the broader Nifty50 index. The stock currently trades at approximately 2.4 times its FY27 estimated book value, which sits above its long-term average according to Bloomberg data.
The combination of accelerated project execution, revised upward guidance, and a robust project pipeline has reinvigorated investor interest in Power Grid Corporation, positioning the company for potential growth in India's evolving power transmission landscape.
