Motilal Oswal remains optimistic about the future of India’s power utilities sector, emphasizing the industry’s strong growth prospects backed by government policies, reliable coal supply, and rapid additions in renewable energy capacity.
Despite a recent slowdown in electricity demand growth—5% in FY25, down from 7–9% in previous years, and just 2% year-on-year in April 2025—India’s peak power demand reached 250 GW in FY25 and is projected to rise to 270 GW in FY26. Demand fluctuations, particularly during peak months, suggest the potential for a significant rebound soon.
FY25 was marked by impressive capacity expansions, with total power generation capacity growing by 33.3 GW (29% year-on-year). Renewables led the charge, contributing 28.8 GW, dominated by solar additions of 23.8 GW, while wind energy accounted for 5 GW. Thermal capacity declined by 2.2 GW, reflecting India’s gradual shift towards cleaner energy sources.
To ensure grid stability during peak seasons, the Ministry of Power has mandated increased generation from gas-based plants under the Electricity Act, 2003. This has become critical after India retired around 4.4 GW of non-operational gas capacity, dropping operable gas capacity from 24.5 GW in March to 20.1 GW in April.
Coal availability remains robust, a crucial supply-side factor. Coal India’s stockpile stands at 105 million tonnes (+22.1% year-on-year), while domestic coal production increased 3.6% to 81.6 million tonnes as of late April. The total coal inventory, including imported coal buffers, provides a strong cushion for summer demand.
On the pricing front, Real-Time Market (RTM) power prices declined 24% year-on-year in May due to favorable rains and improved liquidity on the Indian Energy Exchange (IEX). Meanwhile, Day-Ahead Market (DAM) prices stayed stable at ₹5.2 per unit in April.
India’s utilities sector is entering a phase of structural resilience driven by a robust pipeline of renewable energy projects, government focus on thermal power stability, and rising electricity consumption. This combination positions the sector for sustained investment and operational growth in FY26 and beyond.
Stock Recommendations:
- Suzlon Energy (SUEL) – Target Price: ₹83
Suzlon is a top pick due to improving execution, a strong net cash position, and healthy earnings momentum. Local content requirements in wind turbine manufacturing are expected to boost market share and margins. The company aims to deliver 2.4 GW in FY26, with quarterly output reaching 600 MW. Analysts forecast a compound annual growth rate (CAGR) of 46% in revenue and 51% in adjusted profit after tax from FY25 to FY27. - JSW Energy (JSWE) – Target Price: ₹592
JSW Energy posted ₹3,180 crore in consolidated revenue for Q4FY25 and a 34% rise in adjusted PAT year-on-year. With operational capacity at 12.2 GW and a healthy 6.7 GW project pipeline, the company is set for EBITDA growth in FY26, supported by acquisitions like KSK Mahanadi and O2 Power. Net generation rose 24%, powered by strong plant load factors. Lower merchant market exposure and reduced coal import reliance (9–10%) are expected to stabilize earnings volatility. JSW Energy carries a ‘Buy’ rating based on its growth outlook and capacity additions.
