NHPC’s bond push lifts stock, but debt and execution risks linger
The hydropower major’s ₹2,000-crore bond issue has buoyed investor sentiment, even as high leverage, weather-linked disruptions and project delays keep risks in focus.
India’s largest hydropower generator and distributor, NHPC Ltd, last week announced plans to raise ₹2,000 crore through a private placement of bonds—part of a broader ₹10,000 crore fundraising programme for FY26. Investors cheered the move, pushing the stock up 8% since the fundraising announcement on 1 September.
The rally, however, comes after a choppy stretch, even as industry tailwinds promise potential. Its long operating track record and market leadership position NHPC as a key beneficiary of the government’s ambition to build 55 GW of hydropower capacity by 2030. The company has also strategically diversified into solar and wind power.
Beyond its installed capacity of 8.3 GW, NHPC boasts a sizeable project pipeline that offers strong revenue visibility. Projects under construction are expected to add 9.7 GW, while upcoming projects awaiting clearances account for another 7.7 GW. A further 10.8 GW is under survey and investigation. The company reported more than 10% year-on-year revenue growth in the September quarter (Q2FY26), alongside an expansion in Ebitda margin to 60.2% from 59.1%.
Yet risks remain. NHPC’s Q2FY26 earnings missed expectations, weighed down by flash floods that delayed project commissioning and caused a one-off loss of ₹160 crore. Revenue growth also fell short, as lower standalone generation offset gains at subsidiaries. The stock corrected accordingly, erasing about 5% of investor wealth between 6 November 2025 and 1 January 2026.
Although last week’s bond-issuance announcement has helped the stock recover, underlying concerns persist. Hydropower projects are vulnerable to lumpy execution given long gestation periods and delays in regulatory approvals, making sales and margins volatile.
ICICI Securities notes that NHPC’s plant availability factors slipped to 77% and 74% in FY24 and FY25, respectively, due to lower water flows and flood-related damage at certain projects.
Leverage is another pressure point. Rising borrowings have pushed up finance costs, squeezing net profit margin. Finance costs climbed to nearly 10% of Q2FY26 sales, from 4% a year earlier. NHPC’s ongoing amalgamation with Jalpower Corp., acquired through the insolvency process, will also need close monitoring for its impact on consolidated debt.
That said, some buffers remain in place. NHPC’s cost-plus tariff model offers partial margin protection, while the successful commissioning of ongoing projects should add regulated equity and unlock incentives. These factors could support earnings upgrades for a stock that trades at about 12x FY27 estimated EV/Ebitda, according to Bloomberg data.
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