Markets
Nuclear power: Two stocks tapping into a huge but restricted opportunity
Summary
- India’s nuclear power sector offers a unique blend of opportunity and constraint—promising significant growth but limited by strict regulation and a small pipeline of projects. Companies like BHEL and HCC could play a key role in advancing the nation’s low-carbon energy ambitions.
The growing Indian economy has significantly increased the demand for electricity. India, now the third-largest producer of electricity, is not only focused on enhancing production but also on reducing its carbon footprint. As a result, the country is steadily shifting to renewable energy sources such as hydro, solar, and wind, alongside exploring nuclear energy.
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Nuclear power plays a vital role in India's energy generation strategy. According to data from the ministry of power, as of October, the installed capacity across 24 operational nuclear reactors stands at 8,180 MW, accounting for approximately 1.8% of the country's total installed electricity capacity. Non-fossil fuel sources, including renewables and nuclear energy, collectively contribute to about 46.3% of India's total installed electricity generation capacity as of 30 September.
A report by the World Nuclear Association cites a 2018 statement by the Indian government, projecting nuclear power capacity to reach 22.5 GW by 2031. This marks a substantial 2.7x growth compared to the current capacity of approximately 8.2 GW.
This raises a key question: which companies are linked to nuclear power generation, and which stand to benefit from this growth trajectory?
Companies focused on nuclear power
Several companies in India are directly involved in nuclear power generation and related infrastructure. Prominent names include:
Nuclear Power Corp. of India Ltd (NPCIL): A state-run enterprise under the Department of Atomic Energy (DAE).
Bharat Heavy Electricals Ltd (BHEL): The largest engineering and manufacturing enterprise in India's energy and infrastructure sectors.
Bharatiya Nabhikiya Vidyut Nigam Ltd (BHAVINI): A government company under the administrative control of the DAE.
Hindustan Construction Co. Ltd (HCC): An engineering and construction firm.
Other companies offering allied services include IREL (India) Ltd, Uranium Corp. of India Ltd, Electronics Corp. of India Ltd, Larsen & Toubro Ltd, and Mitsubishi Heavy Industries.
Among these, BHEL and HCC are publicly listed entities with exposure to the nuclear power sector. Let’s delve deeper into their roles and potential benefits from India's nuclear power expansion.
Bharat Heavy Electricals Ltd
BHEL, a public-sector undertaking (PSU) under the ministry of heavy industries, is India's largest government-owned electrical and industrial technology company. Its diverse business portfolio spans multiple core sectors, including power, renewables, oil & gas, transmission, rail transportation, defence and aerospace, industrial systems, water management, and battery energy storage solutions.
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The company's power segment encompasses nuclear, thermal, hydro, gas, and renewable power plant businesses, showcasing its expertise in delivering turnkey power projects from concept to commissioning.
In the nuclear power domain, BHEL manufactures a wide range of critical components, such as steam generators, reactor headers, end shields, and nuclear turbine generator sets for reactors ranging from 200MWe to 700MWe. It handles the construction and commissioning of nuclear power reactors, while NPCIL oversees their operation and upgrades.
BHEL holds the distinction of supplying the highest number of steam generators among Indian manufacturers. Notably, in Q2 2025, it delivered its 45th steam generator for the Gorakhpur Haryana Anu Vidyut Pariyojana (GHAVP) Nuclear Power Plant.
In 2023, BHEL entered into a Memorandum of Understanding (MoU) with NPCIL to jointly explore opportunities in pressurized heavy water reactor (PHWR)-based nuclear power plants, strengthening its position in India's nuclear energy landscape.
As per Screener.in, the BHEL stock is currently trading at ₹249, approximately 3.6x its book value of ₹69.5. The company maintains a dividend payout ratio of 27.8%.
However, challenges persist. BHEL has reported poor sales growth over the past five years, a low interest coverage ratio, and a return on equity of just 1.77% over the last three years.
Shareholding pattern as of September reveals:
Promoters: 63.2%
FIIs: 9.5%
DIIs: 14.7%
Public: 12.6%
JM Financials issued a "BUY" recommendation in its report dated 28 October 2024, setting a target price of ₹371 per share, which translates to 35x the estimated earnings per share (EPS) for September 2026.
BHEL's strategic focus on nuclear power and its partnership with NPCIL underscore its potential to capitalize on India's growing energy demand, despite facing operational and financial headwinds.
Hindustan Construction Company Ltd
HCC is a prominent engineering and construction firm providing services across several core sectors, including building and industrial projects, transportation, hydroelectric power, nuclear power, and water solutions.
In the nuclear power sector, HCC specializes in constructing reactors, auxiliary buildings, turbine generator buildings, spent fuel buildings, safety pump houses, cooling towers, and control buildings.
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HCC's contributions to India's nuclear energy infrastructure are significant. The company has built plants with an aggregated capacity of 5,780 MW, which accounts for approximately 60% of India’s total nuclear power capacity of 9,580 MW. However, as some of these plants are still under construction or yet to be commissioned, the current installed nuclear power capacity in India stands at 8,180 MW.
At the Q2 2025 analyst meet, Santosh Rai, operations director and chief business officer, noted that nuclear projects are highly specialized, with only one or two projects being announced annually. He explained that the Department of Atomic Energy retains the design drawings, while NPCIL serves as the implementing body. Rai highlighted a civil works opportunity worth ₹15,000–20,000 crore annually, of which HCC could secure ₹2,000–3,000 crore.
Financial performance and share price
As per Screener.in, HCC’s shares are currently trading at ₹47.01, reflecting a valuation of 29.9x the book value of ₹1.57. The company has successfully reduced its debt in recent years but faces challenges, including poor sales growth over the last five years and a low interest coverage ratio.
Shareholding pattern as of September is as follows:
Promoters: 18.6% (with ~76.8% of promoter holdings pledged)
FIIs: 9.7%
DIIs: 6.0%
Public: 65.7%
Promoter holdings have decreased by approximately 16.1% over the past three years.
Elara Capital issued a "BUY" recommendation in its report dated 10 June, with a target price of ₹63 per share, based on the sum-of-the-parts valuation method.
HCC’s robust capabilities in nuclear power infrastructure and its strategic position within India's energy sector highlight its potential to benefit from new project opportunities, despite ongoing operational and financial constraints.
Challenges in nuclear power
The nuclear power industry in India operates within a highly regulated framework, with the Department of Atomic Energy (DAE) controlling and monitoring all aspects under the Government of India. Companies such as BHEL and HCC are typically outsourced for construction and commissioning of nuclear plants, while the DAE handles the design, and NPCIL is responsible for the operations of nuclear reactors. Currently, NPCIL operates 24 nuclear power reactors with a total capacity of 8,180 MW.
In addition to NPCIL, BHAVINI (Bharatiya Nabhikiya Vidyut Nigam Ltd.) is also active in the nuclear power domain and is currently constructing a 500 MW Prototype Fast Breeder Reactor at Kalpakkam. However, the limited number of projects at various stages of construction highlights the scarcity of opportunities within the sector.
The case for nuclear power
Fossil fuels, such as coal, contribute to over 40% of global energy-related carbon emissions. Although all electricity generation methods emit carbon dioxide at some stage of their lifecycle, nuclear and renewable energy sources produce no carbon dioxide during electricity production.
According to a public awareness e-newsletter from NPCIL, nuclear power generation emits the same amount of carbon dioxide equivalent per unit as wind power, which is only one-third of the emissions produced by solar power. This positions nuclear energy as a crucial component of a low-carbon future.
India's nuclear power capacity is projected to grow steadily, reaching approximately 22 GW by 2031, according to estimates from NPCIL and the World Nuclear Association. This expansion is expected to directly boost the growth of engineering and construction firms such as BHEL, HCC, Larsen & Toubro, and others, which play pivotal roles in building the necessary infrastructure.
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As nuclear energy gains traction, its role in reducing carbon emissions and supporting India’s energy demands solidifies its importance in the country’s energy strategy.
Note: This article relies on data from www.Screener.in and company presentations. In instances where such data was unavailable, alternate but widely recognized and accepted sources were used.
The primary aim of this article is to share insightful charts, data points, and thought-provoking perspectives. It is NOT an investment recommendation. Readers are strongly encouraged to consult their financial advisor before making any investment decisions. This content is intended solely for educational purposes.
About the author: Mohit Bhambhani is a seasoned financial professional with over 13 years of experience in financial research and corporate advisory. He brings a wealth of knowledge about the Indian stock markets and applies an analytical approach to deeply study company performance, delivering value to readers.
Disclosure: The author and/or his dependents hold shares of BHEL, as discussed in this article.
