Every PSU (Public Sector Undertaking) gets its day in the sun.
NTPC is busy reinventing itself as a green powerhouse.
Coal India is flirting with solar.
BHEL is cashing in on the capex boom.
But the real surprise may come from a company most investors still dismiss as an old-world dam builder, NHPC, formerly known as National Hydro Electric Power Corporation.
For decades, NHPC was typecast as a predictable PSU utility.
It built dams, earned regulated equity and sent out predictable dividend cheques.
Nothing more, nothing less. Investors could set their watch to its earnings.
Yet, now the script seems to be changing. This is thanks to a string of projects long stuck in the pipeline, finally reaching the finish line. If execution holds, NHPC could be on the cusp of a rare growth cycle.
More Than a Dam Builder: A Green Giant in Plain Sight
Hydropower is often seen as yesterday’s story. It takes decades to build a dam, costs balloon and nature always has the final say.
In contrast, solar and wind farms pop-up in months. That is why NHPC has often been left out of the clean energy conversation.
But look at its capacity.
NHPC runs 30 power stations with 8,140 MW (megawatt) of installed capacity. Of this, 7,771 MW is hydro, and the rest is renewable through solar and wind. It contributes 16% of India’s hydro capacity.
On paper, that makes it one of the country’s largest renewable energy companies. Yet it is rarely described that way.
The future pipeline is even more striking. Nearly 46,000 MW is under various stages of construction, clearance or investigation. This includes not just dams but pumped storage projects and solar parks. For a company that began as a hydro specialist in 1975, the transformation into a broader green energy platform is underway.
The Logjam Breaks: A Wave of Projects Nears the Finish Line
FY25 (Financial Year) was a reminder of the risks in the hydropower business.
Floods in the Teesta basin knocked out nearly 2,000 million units of generation.
Consolidated sales were ₹10,380 crore, up ~7.8% year on year, and consolidated net profit was ₹3,412 crore, down ~14.7%. Plant availability slipped to 74% from 78% the previous year.
At first glance, it looked like business as usual for a utility that plods along.
But the physical progress on projects tells a different story.
Parbati II, an 800 MW project that had been delayed for decades, is now fully operational.
Subansiri Lower, at 2,000 MW, is 96% complete. Five of its units are expected to start generating this financial year, with the rest by May 2026.
Rangit IV in Sikkim is due by December 2025. Teesta VI is targeted for 2027. And then there is Dibang in Arunachal Pradesh, India’s largest hydro project at 2,880 MW, scheduled for 2032.
Each of these projects add regulated equity and lift long-term earnings power. And unlike merchant solar or wind, the returns are guaranteed once projects are commissioned.
Profits with patience
The near-term numbers do not capture this change. FY25 profits of just over ₹3,412 crore look like a decline.
But investors with patience can see what is coming.
With a capital work-in-progress of about ₹50,601 crore, NHPC’s earnings will tilt sharply upward as new capacity switches on.
Return on equity, stuck in single digits for years, should climb into the teens over the next few years. Earnings could also see a boost if the commissioning schedule holds.
For a PSU utility, that is a step change.
Dividend investors are not ignored either. The company’s dividend payout ratio was at ~64% in FY25, with a dividend yield ~2.30% at the current price. Income continues to flow while investors wait for the growth cycle to kick in.
The weak spots
Much like every other story, this also has some cracks.
Hydropower remains unpredictable. Floods, landslides and geological surprises can delay projects and dent output.
Teesta is the most recent reminder, but not the only one. Subansiri itself has faced decades of delays due to safety and environmental concerns.
Debt is another watchpoint. Long-term borrowings rose to ₹39,557 crore in FY25 from ₹32,561 crore the year before. Debt to equity is at a 1, which is not very comforting.
With capex set to accelerate, leverage will increase further before stabilizing. That is manageable under the regulated return model, but still raises execution risk.
And there is the classic PSU problem: bureaucracy.
While NHPC enjoys Navratna status that grants greater autonomy, it still answers to government oversight. This can slow decisions and limit flexibility compared with private peers.
The paradox of hydropower
Hydropower is both NHPC’s moat and its Achilles heel.
It is the most reliable renewable resource, offering round-the-clock power unlike solar and wind. It stabilizes the grid and helps integrate intermittent renewables. It also fits neatly into India’s climate commitments and net-zero ambitions.
Yet it comes with baggage. Projects take decades to complete, involve massive resettlement and environmental challenges, and are prone to natural disasters. That makes hydropower both indispensable and controversial. NHPC sits right in the middle of this paradox.
The investor’s blind spot
Markets still treat NHPC as a dull utility. It trades at a price-to-book ratio of 2 times, with a fair dividend yield.
Compare that with the lofty valuations of private renewable players, and the gap looks striking.
The irony is that NHPC already is a renewable company by any definition. It has more green megawatts than many so-called new energy firms. It has half the under-construction hydro pipeline in the country. And it has a balance sheet cushioned by government support. The market just refuses to give it the same premium.
A policy story as much as a corporate one
Step back, and NHPC’s role extends beyond earnings. Hydropower is central to India’s energy security, water management and even geopolitics. The push to harness river waters, including those flowing from China, gives these projects a strategic dimension. Grid stability in an era of rising solar and wind penetration also depends on hydro’s balancing role.
This makes NHPC not just a corporate growth story but a policy instrument. The government will continue to back it, delays and all. For investors, that brings both comfort and constraint: comfort in sovereign support, constraint in the pace of change.
Conclusion: a PSU in disguise
How should investors see NHPC?
If you are looking for a fast-moving green stock, this is not it. If you expect quarterly excitement, you will be disappointed.
But if you want steady dividends with the possibility of a structural lift in earnings over the next few years, NHPC deserves attention.
It may look like a dam builder from another era. In reality, it is one of India’s largest renewable utilities with a growth cycle about to unfold. Every PSU gets its day in the sun. For NHPC, that day may finally be coming.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.