Profitable Power Play

Power takes the fifth spot on the list of most profitable sectors as companies focus on renewables and technology upgrades to meet the massive rise in demand

- BY RICHA SHARMA

INDIA WILL REQUIRE power generation capacity of 780GW by FY30. This means addition of 305GW in the next five years, three times that added between FY20 and FY25, and yearly growth of 10%, faster than India's 6% average gross domestic product (GDP) growth rate in 10 years to FY25. The link between GDP and power demand is inching up, says UBS Research. Historically, peak power demand has grown 0.85 times the rate of real GDP growth, but with increased electrification across industries and households, this is expected to rise to nearly 0.92 times, says the report.

While most of the new capacity will be renewable, such as solar and wind, thermal power will still be essential to ensure grid stability when renewables are not generating adequate power. The BT500 assessment of power companies on the basis of profitability shows vast growth for power companies as they focus on expanding generation capacity, increasing investments and transitioning to cleaner sources. NTPC, Power Grid Corporation of India, Adani Power, Reliance Infrastructure and Tata Power are the top five power sector players in the BT500 list. Their efforts have made power the fifth most profitable sector in the BT500 list with profit after tax (PAT) rising 19% to ₹91,255 crore. What makes them profitable?

Arun Kailasan, Research Analyst at Geojit Investments Ltd, says profitability in the power sector is driven by regulated tariffs and a balanced energy mix.

“Thermal utilities have benefited from high demand and plant load factors; renewable companies enjoy stable returns through long-term PPAs (power purchase agreements) and some have turned to the open market for better realisations. Transmission firms operate under cost-plus models, ensuring predictable cash flows and steady earnings, supported by high system efficiency,” he says.