NHPC Board Approves ₹8,000 Cr Loan Plan as Margins Collapse

ENERGY
Whalesbook Logo
AuthorIshaan Verma|Published at:
NHPC Board Approves ₹8,000 Cr Loan Plan as Margins Collapse
Overview

NHPC Ltd's board has approved borrowing up to ₹8,000 crore for fiscal year 2027. The plan follows a Q3 earnings report showing a sharp 79.2% year-on-year drop in EBITDA and margins falling to 9.5% from 44.4%. NHPC's stock saw a small gain, as investors weigh future growth against current profit challenges. The company will use corporate bonds and term loans for this capital need.

Capital for Expansion Amidst Profit Worries

NHPC's board has approved borrowing up to ₹8,000 crore for fiscal year 2027. This move signals the company's intent to fund expansion in hydropower and renewable energy projects. However, the plan comes amid significant financial pressures highlighted by the latest quarterly results.

Q3 Performance: Profit Drop and Margin Collapse

In the third quarter of fiscal year 2025-26, NHPC reported a stark decline in performance. Earnings before interest, taxes, depreciation, and amortization (EBITDA) plummeted 79.2% year-on-year to ₹210 crore, down from ₹1,014 crore in the previous year. Consequently, the EBITDA margin contracted sharply to 9.5%, a significant drop from 44.4% in the same period last year. Net profit also fell 5.2% to ₹219 crore, and revenue declined 2.9% to ₹2,220 crore.

Investor Reaction and Valuation

Despite the challenging earnings, NHPC's stock saw a marginal gain of 0.86% to close at ₹77.20 on March 25, 2026. This suggests investors are balancing future growth prospects against current financial pressures. NHPC's trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio stands between 23.76 and 38.58. For comparison, peers like Tata Power trade at a TTM P/E of approximately 33.29, and JSW Energy at 37.52, while Adani Green Energy is much higher at about 103.4.

Sector Strength and Government Support

The broader Indian power sector is experiencing robust growth, driven by increasing demand from data centers, electric vehicles, and urbanization. With installed capacity exceeding 500 GW, the need for continuous infrastructure investment is high. Government initiatives to boost non-fossil fuel capacity to nearly 70% by 2036 further support the strategic importance of renewable and hydropower developers like NHPC.

Key Risks: Profitability and Debt

The primary risk for NHPC is the sharp decline in its operational margins. This contraction suggests potential issues with costs, efficiency, or pricing that are impacting profitability. Combined with the approved ₹8,000 crore borrowing plan, this escalates the company's financial leverage. Investors will be watching the increased interest expenses that will accompany this new debt, potentially straining the company's financial performance further.

Analyst Outlook

Despite current concerns, analysts maintain a generally positive outlook. The average 12-month price target for NHPC is around ₹85.83 to ₹89.57, with consensus ratings leaning towards 'Buy' or 'Hold'. Forecasts suggest earnings and revenue growth of approximately 27.3% and 26% annually over the next few years. The company also recently declared an interim dividend of 14% for FY25-26.

Disclaimer:This content is for informational purposes only and does not constitute financial or investment advice. Readers should consult a SEBI-registered advisor before making decisions. Investments are subject to market risks, and past performance does not guarantee future results. The publisher and authors are not liable for any losses. Accuracy and completeness are not guaranteed, and views expressed may not reflect the publication’s editorial stance.