Power Grid’s sharp project execution ramp-up, guidance upgrade recharges stock
Power Grid Corp. shares surged after a sharp pickup in project execution in Q3FY26 and an upward revision in capex and capitalization targets.
Power Grid Corp. of India Ltd shares gained 13% over the last four trading sessions, as investors cheered a sharp ramp-up in project execution during the December quarter (Q3FY26) and an upward revision in capital expenditure (capex) and capitalization targets.
In Q3FY26, project capitalization jumped to ₹9,023 crore from ₹3,900 crore in the first half of FY26. Capitalization refers to projects that are completed during the period and begin generating revenue. According to PL Capital, Power Grid’s Q3FY26 capitalization was 80–90% higher than Street expectations.
The acceleration was aided by revised central government guidelines on right-of-way compensation, which allow higher payouts and have helped speed up land acquisition and project execution, the management said.
Earnings support
The execution momentum supported earnings. Consolidated Ebitda, adjusted for prior-period income, rose about 6% year-on-year to ₹10,100 crore in Q3FY26. Adjusted revenue increased nearly 6% to ₹11,900 crore, while cost growth remained contained.
For the first nine months of FY26, revenue growth was modest at 4%, with Ebitda largely flat. However, improved execution visibility prompted management to revise its FY26 capex guidance to ₹32,000 crore from ₹28,000 crore and raise the capitalization target to ₹22,000 crore from ₹20,000 crore.
For FY27 and FY28, Power Grid has guided for capex of ₹37,000 crore and ₹45,000 crore, respectively, with capitalization targets of ₹30,000 crore and ₹35,000 crore.
Order pipeline
Capex during 9MFY26 rose 50% year-on-year to ₹27,000 crore. The total value of projects under execution stood at ₹1.45 trillion at the end of January, to be completed over the next three to four years.
In addition, the pipeline remains robust, with ₹55,000 crore worth of projects currently under bidding. The company also expects better earnings from recently won projects, which have been awarded at tariff levels of around 11%, compared with 7–8% for older projects.
That said, earnings uplift may take time.
“While execution visibility has improved meaningfully, capitalization remains inherently lumpy and project-led, limiting the immediacy of earnings translation," said an Antique Stock Broking report dated 3 February.
Capacity constraints
Power Grid continues to face challenges from insufficient domestic transformer and reactor manufacturing capacity. Current capacity stands at 2.3 lakh mega volt ampere (MVA) and is expected to rise to 4 lakh MVA after ongoing additions. However, this still falls short of the company’s estimated requirement of 4.2 lakh MVA for FY27.
To address this gap, Power Grid has sought government approval to import components for transformer manufacturing from neighbouring countries.
Despite the recent rally, the stock has gained just 1.5% over the past year, underperforming the Nifty50 index. Even so, Power Grid trades at about 2.4 times its FY27 estimated book value—above its long-term average—according to Bloomberg.
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