Growing electricity consumption and targeted renewable energy targets are expected to expand the power transmission and distribution (T&D) industry substantially. By 2030, India wants to add 500 GW of renewable energy, nearly tripling the 180 GW that is now built. This is the biggest drive for capital investment in electricity infrastructure.
As a result, the power ministry recently unveiled the National Electricity Plan (NEP) for 2023–2022, a strategic plan for developing and growing transmission networks at the federal and state levels. The NEP proposes to invest Rs 9.15 lakh crore to meet the increasing demand. Initiatives like creating green hydrogen, incorporating renewable energy sources, and starting pumped storage projects are examples of this.
However, switching to renewable energy necessitates spending money on generating capacity and redesigning power infrastructure to better manage supply variations. It is imperative that new digital grids be developed to guarantee a consistent supply of electricity throughout the transition.
The state electricity boards’ health is the government’s main concern when it comes to distribution. With an initial investment of Rs 2.5 lakh crore, the RDSS is the largest contributor to capital expenditures in the distribution sector. Discoms spend 50,000 crore rupees a year. This primarily benefits the unorganized sector. An opportunity exists for some of the listed firms in this market because most RDSS spending is on smart meters and grid fortification, which should trickle down to organized players.
We have seen an increase in orders for equipment and transmission firms within the last six months. For two to three years, this is probably going to continue, giving businesses a significant increase in sales and profits. Equipment manufacturers’ profitability has significantly increased as a result of a lack of capacity in the early stages of the ordering cycle, especially in the transformer industry. We anticipate that margins will hold steady for a while before capacities finally catch up.
In the medium term, Power T&D as a theme has a good growth trajectory. Equipment and product firms stand to gain the most from this subject, in our opinion, since they will profit from both exports and domestic demand. It is important to keep in mind, too, that this industry is cyclical, going from a lack of capacity to overcapacity in a short period. We would examine product and end-market variety to combat it.
