Profit Soars, Margins Contract

NHPC Limited's fourth-quarter results revealed a stark contrast: substantial profit growth alongside a significant squeeze in operating margins. While revenue and net profit climbed, falling profit margins indicate rising costs or a change in revenue mix.

NHPC's net profit surged 68.5% year-on-year to ₹1,549 crore for the fiscal fourth quarter, driven by a 20% increase in revenue from operations to ₹2,816 crore. Despite this top-line growth, core operational profitability weakened. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) edged down 0.7% to ₹1,196 crore, compared to ₹1,205 crore a year earlier. This led to a sharp drop in the EBITDA margin to 42.5%, down from 51.3% in the same period last year. This divergence suggests higher operating expenses or lower revenue per unit of power.

Board Adds Ministry Nominee, Dividend Proposed

The board recommended a final dividend of ₹0.21 per equity share for FY26, subject to shareholder approval. This proposed payout, along with an interim dividend of ₹1.40 per share already paid, signals a commitment to shareholder returns.

In a governance update, the Ministry of Power appointed Diwakar Nath Misra as a Government Nominee Director to NHPC's board, effective May 14, 2026. Mr. Misra, Additional Secretary (Hydro) at the Ministry of Power, brings extensive administrative experience from his 2000-batch IAS tenure.

Mixed Analyst Views and Stock Performance

NHPC's recent performance presents a mixed picture against its peers. The company's market capitalization stood at approximately ₹77,628 crore, with a trailing twelve-month Price-to-Earnings (P/E) ratio around 24.7x as of May 15, 2026, placing it in a comparable range to other large-cap power utilities.

For comparison, Power Grid Corporation of India reported a 9.7% rise in net profit to ₹4,546 crore for Q4 FY26, though its revenue declined 5% and EBITDA margins contracted to 77.7%. NTPC, India's largest power producer, is expected to report robust earnings for Q4 FY26.

Analyst sentiment is mixed, with many rating NHPC a 'Buy' and targeting upside, but a significant group maintains a 'Strong Sell' rating. Historically, NHPC's stock has underperformed, declining by approximately 24% from its 52-week high of ₹118 to around ₹85 before these results. This underperformance is attributed to factors like foreign institutional investor (FII) selling pressure following US tariff announcements, project commissioning delays, and a broader correction in the PSU power sector.

Margin Pressure Fuels Investor Concerns

NHPC's primary concern is the sustained compression of its EBITDA margins. The nearly 9-percentage-point drop from 51.3% to 42.5% in Q4 FY26, despite revenue growth, signals potential structural issues like rising operational expenses or a shift to lower-margin segments. This operational pressure, combined with the stock's year-long underperformance and a 'Strong Sell' consensus from some analysts, questions the sustainability of its profit growth.

While the board appointment is a governance positive, closer government oversight could influence strategic decisions and project approvals, potentially impacting operational agility. The company also faces macro headwinds, including uncertainty from US reciprocal tariffs that could affect foreign institutional investor (FII) flows.

Outlook: Capacity Growth and Cost Control

NHPC's expansion pipeline, including key projects like the Subansiri Lower Hydroelectric Project, is set to drive future capacity growth. Investor calls will be crucial for management guidance on future capital expenditure, project timelines, and tariff structures as new capacity comes online.

Navigating rising operational costs while capitalizing on its project pipeline will be key for NHPC's stock re-rating, especially amid evolving sector dynamics and mixed investor sentiment.