Can Power Grid Corporation Regain Its Growth Momentum After a Weak Q2 FY26?
About Power Grid Corporation
Power Grid Corporation of India Ltd. (PGCIL) is India’s central transmission utility responsible for nationwide power transmission. It manages over 1.7 lakh circuit kilometers of transmission lines and maintains more than 270 substations across the country. The company’s regulated return model ensures steady earnings but faces challenges under evolving regulatory norms.
The company’s Q2 FY26 results reflected operational pressures under new Central Electricity Regulatory Commission (CERC) guidelines, leading to higher O&M costs and slower project capitalization. Despite continued capital investment, margins came under stress due to low-yield projects.
Financial Highlights (Q2 FY26)
| Metric | Q2 FY26 | YoY | Variance |
|---|---|---|---|
| Revenue | ₹11,200 Cr | +3% | Flat |
| PAT | ₹3,550 Cr | -4% | 6% below estimates |
| Transmission Expenses | +55% YoY | Due to under-recovery under new CERC norms | |
| Regulated Equity Growth | +3% YoY | Impacted by low-yield TBCB projects (12–13% ROE) | |
Revenue ₹11,200 Cr — remained broadly stable YoY due to project delays and slower capitalisation. Growth is expected to resume in FY27 as new projects come online.
PAT ₹3,550 Cr — declined 4% YoY, missing estimates, mainly due to increased transmission expenses under the revised CERC framework.
O&M Costs — surged 55% YoY due to under-recoveries and maintenance-linked adjustments, affecting overall profitability.
Regulated Equity — grew 3% YoY, with a higher mix of TBCB projects (12–13% ROE) weighing on margins.
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Peer Comparison
| Company | Focus Area | ROE |
|---|---|---|
| Power Grid Corp | Transmission Utility | 12–13% |
| Adani Transmission | Private Transmission | 16–18% |
| REC Ltd | Power Finance | 14–15% |
Despite stable fundamentals, Power Grid’s earnings trajectory is expected to remain muted due to regulatory cost headwinds and slower capitalisation pace.
Strengths & Weaknesses
Strengths
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Weaknesses
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Weaknesses reflect short-term pressures from regulatory changes, but the company retains strong fundamentals for long-term investors.
Opportunities & Threats
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While renewables create new long-term opportunities, near-term earnings remain subdued amid tighter norms and delayed project monetization.
Valuation & Investment View
- Short-term: Weak, owing to limited triggers and elevated cost structure.
- Medium-term: Neutral, as steady regulated returns offset rising expenses.
- Long-term: Positive, with growth visibility in renewable transmission projects.
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Despite regulatory headwinds, Power Grid remains a stable yield-oriented investment backed by strong government ownership and consistent dividends.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, observes that Power Grid’s near-term weakness reflects transitional regulatory challenges, not structural decay. The company’s green energy focus may drive recovery from FY27 onward. Explore more such insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Power Grid Corporation
- Why Did Power Grid’s Margins Decline in Q2 FY26?
- How Will CERC Norms Affect Power Grid’s Profitability?
- Is Power Grid Still a Safe Dividend Play for Long-Term Investors?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions.
