Building a hydroelectric power plant is one of the most frustrating businesses in the world. It demands enormous capital, years of construction, endless regulatory clearances and the patience to wait nearly a decade before the first unit starts generating electricity. Investors, meanwhile, are left watching debt pile up and projects miss deadlines, with little to show in the interim.
That has been the story of NHPC (formerly, National Hydroelectric Power Corporation) for much of the last decade.
India’s largest hydropower producer has spent years investing tens of thousands of crores into dams across the Himalayas, even as earnings growth remained modest and returns on capital stayed under pressure. The market largely viewed it as a company that was forever building and rarely benefiting from what it had built.
NHPC Ltd 1-Year Share Price Chart
That perception may finally be changing. Over the past year, several long-delayed projects have started generating electricity, more are scheduled to be commissioned over the next two years and a sizeable construction pipeline is steadily moving closer to completion.
The question for investors is no longer whether NHPC can build dams. It is whether the company is finally entering the phase where years of investment begin translating into stronger earnings and cash flows.
A utility that spent years under construction
NHPC Limited is India’s largest hydropower company and a Government-owned Navratna public sector enterprise. While hydroelectric power remains its core business, the company has gradually diversified into solar and wind power. And now, it is exploring pumped storage projects that could play an important role in balancing renewable energy generation.
Unlike thermal power companies that can build plants within a few years, hydroelectric projects often take much longer. This is because of difficult terrain, environmental approvals, geological challenges and rehabilitation requirements. The result is that capital remains locked up for years before a project starts earning regulated returns.
That is exactly what happened at NHPC. The company continued investing in large projects, but investors saw little improvement in profitability because many of these assets were still under construction.
Why FY26 could mark a turning point
FY26 was the first year in which multiple large projects started contributing to operations.
Revenue from operations increased by 12% to Rs 11,615 crore from Rs 10,380 crore in FY25. Meanwhile, consolidated power generation rose 16% to 29,619 million units. Management attributed the improvement primarily to the commissioning of the 800 megawatt Parbati-II project, the phased commissioning of the 2,000 megawatt Subansiri Lower project, higher generation from Parbati-III and Uri-I and the contribution from the Karnisar solar project.
The increase in generation also helped consolidate profit after tax rise to Rs 3,766 crore from Rs 3,007 crore during the year, according to management. At the same time, several costs that remained hidden while projects were under construction also began appearing in the income statement. Interest expenses increased as newly commissioned assets stopped capitalizing borrowing costs and started charging them to the profit and loss account. Depreciation also moved higher as fresh assets entered commercial operations.
This partly explains why margins have not expanded in line with revenue growth. The operating profit margin stood at around 45% in FY26 compared with more than 52% a year earlier.
For a capital-intensive utility, however, this transition is not unusual. The first few years after commissioning generally carry higher depreciation and finance costs before assets begin generating stable regulated returns.
The real story lies in what comes next
The bigger opportunity for NHPC does not lie in what has already been commissioned. It lies in the projects that are expected to come online over the next few years.
The Subansiri Lower project remains the biggest near-term trigger. Four of its eight units have already been commissioned and the remaining four are expected to become operational sequentially by March FY27. Once fully commissioned, it will become one of India’s largest hydroelectric power stations. The anticipated project cost is around Rs 30,072 crore, of which more than Rs 26,000 crore had already been incurred by March 2026.
Beyond Subansiri, NHPC expects Rangit-IV to be commissioned by November 2026, while Kiru and Pakal Dul are targeted for commissioning during FY27. Ratle is scheduled for commissioning in 2028, Teesta-VI in 2029 and the company has already begun work on Uri-I Stage II and Dulhasti Stage II after receiving investment approvals earlier this year.
Together, these projects represent something NHPC has not enjoyed for several years: a visible pipeline of assets steadily moving from construction into operation.
Betting beyond hydropower
Hydroelectricity will remain NHPC’s core business. However, the company is also expanding its renewable energy portfolio.
Under the Central Public Sector Undertaking Scheme, NHPC has already commissioned a 300-megawatt solar project in Bikaner, Rajasthan. Another 100 megawatts in Andhra Pradesh and 600 megawatts in Gujarat are expected to be commissioned during 2026. Floating solar projects in Kerala and additional projects at Khavda in Gujarat are also progressing.
Management also highlighted another opportunity that could become increasingly important over the next decade. NHPC currently has around 18 gigawatts of pumped storage projects under various stages of planning across Maharashtra, Odisha, Madhya Pradesh, Gujarat, Chhattisgarh, Rajasthan and Andhra Pradesh. The company expects construction of the 640 megawatt Indira Sagar-Omkareshwar pumped storage project to begin during FY27.
Pumped storage projects are attracting attention because they help store surplus renewable electricity generated during the day and release it during peak demand. As India’s solar capacity expands rapidly, this segment could become an important growth area for utilities with experience in large hydro projects.
Balance sheet
Years of investing in large infrastructure projects have naturally increased NHPC’s borrowings.
The company has a debt-to-equity ratio of around 1.26 times. While leverage remains elevated, it reflects investments in assets that are only now beginning to contribute to earnings. Interest coverage remains comfortable at around 3.7 times, suggesting that current operating profits are sufficient to service finance costs.
NHPC Debt Profile FY26
| Metric | FY26 |
| Total Debt (Rs) | 52,783 crore |
| Debt-to-Equity Ratio | 1.26x |
| Cash & Cash Equivalents (Rs) | 3,651 crore |
| Interest Coverage | ~3.7x |
The balance sheet therefore needs to be viewed alongside the company’s construction cycle. If the planned commissioning schedule is broadly achieved over the next few years, a larger portion of invested capital will begin earning regulated returns instead of remaining tied up in projects under construction.
Returns are still catching up
Despite operating one of India’s largest clean energy portfolios, NHPC has not been known for high returns on capital.
Return on Equity stands at around 9.3%, while Return on Capital Employed is about 5.7%. These numbers remain below several listed utilities, largely because a significant part of the capital employed has spent years locked inside projects yet to become operational.
That equation could gradually improve as commissioned assets begin contributing for a full year and more projects move into commercial operation. Unlike businesses that require continuous expansion to maintain earnings, regulated hydroelectric assets generally generate predictable returns once operational.
Valuation
At the current market price, NHPC trades at around 21 times earnings and about 1.9 times book value. The stock also offers a dividend yield of around 2.3%, making it relatively attractive for investors seeking a combination of regular income and exposure to India’s expanding clean energy infrastructure.
The valuation is therefore not inexpensive on conventional metrics. Instead, investors appear to be pricing in the earnings contribution from projects that are gradually moving from construction to commercial operations. Whether that optimism proves justified will depend on timely commissioning, tariff approvals and the company’s ability to improve returns as its regulated asset base expands.
Risks remain
The story is far from risk-free.
Hydropower generation depends on water availability, making annual output vulnerable to weather patterns. Large projects remain exposed to geological challenges, environmental clearances and rehabilitation issues that can delay completion and increase costs. Rising borrowings also increase finance costs, while tariff approvals for newly commissioned projects can sometimes take time.
These are familiar risks for hydroelectric developers, and NHPC has dealt with many of them before. Investors should therefore track project commissioning timelines as closely as quarterly earnings.
The bottom line
For years, NHPC looked like a company stuck in an endless investment cycle. Every new project promised future growth, but the benefits always seemed several years away. That appears to be changing as multiple large assets begin moving into commercial operation within a relatively short period.
The next chapter for NHPC is unlikely to be defined by announcing more dams. Instead, it will depend on whether the company can convert a massive construction pipeline into stable regulated earnings and better returns on capital. If that happens, investors may finally begin valuing NHPC less as a builder of power plants and more as an owner of long-life electricity-generating assets.
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.
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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.
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