Indian Power Sector Could See Rs 40 Lakh-Crore Investment Opportunity

The Indian power sector could see an investment opportunity of Rs 40 lakh crore over the next decade, according to Motilal Oswal Financial Services Ltd. The brokerage initiated coverage on the sector with a 'buy' rating on Power Grid Corp., Tata Power Co. and JSW Energy Ltd. It has a 'neutral' rating on NTPC Ltd. and Indian Energy Exchange Ltd.

Power Grid, JSW Energy, Tata Power's share prices are expected to see a 24%, 15.8%, and 16.7% upside, respectively, Motilal Oswal said.

Motilal Oswal expects areas like generation, transmission and smart metering to account for 86%, 10%, and 4%, respectively, of this opportunity.

• The need to expand power infrastructure for generation and transmission.

• The transition from a thermal-heavy infrastructure to a renewable-ready infrastructure.

• Upgrade of existing infrastructure to meet rising demand.

The high investment opportunity is based on the country's vision to increase its installed power capacity to 900 GW in fiscal 2032, from 442GW in fiscal 2024. Solar and wind together are expected to account for 53% of the total installed capacity, while the share of thermal energy is expected to fall to 29%.

The Central Electricity Association has set a renewables energy capacity target of 500 GW by 2030, Motilal Oswal noted. The brokerage sees scope for further upside to this number, on the back of India’s green hydrogen target of 5 million metric tonnes by 2030.

Assuming that one million metric tonne of green hydrogen takes a requirement of 20 GW of renewable energy capacity, Motilal Oswal expects another Rs 5.6 lakh crore of investment opportunity from green hydrogen related renewable energy investment.

An increase in generation capacity will also require substantial investment in transmission infrastructure, according to the brokerage.

While Power Grid Corp. expects a transmission related industry capex of Rs 2 lakh crore, Motilal Oswal expects a capex of Rs 4 lakh crore.