- Power Grid delivered a 3% profit surprise, pushing FY26‑28 PAT estimates up 3‑4%.
- Revenue and EBITDA both hit Motilan Oswal’s forecasts, signaling operational stability.
- Regulatory deferral account balances added INR2.6 billion to earnings – a metric often overlooked.
- Target price remains INR302, based on a 2.5x P/B multiple for Dec‑27 BVPS.
- Sector peers Tata Power and Adani Transmission are navigating similar regulatory headwinds, but with divergent capital‑allocation strategies.
You missed Power Grid’s earnings beat, and you may be leaving money on the table.
Power Grid's Earnings Beat Aligns with Revenue Forecasts
In the third quarter of FY26, Power Grid reported standalone revenue of INR 110 billion, precisely matching Motilal Oswal’s consensus estimate. EBITDA came in at INR 94 billion, also on target. The headline profit after tax (PAT) rose to INR 41.6 billion, a modest 3% uplift over the forecast, driven primarily by higher‑than‑expected other income. The boost was partially offset by a steeper tax rate and a positive net movement in the regulatory deferral account (RDA) of INR 2.6 billion.
Adjusted PAT, which strips out one‑time items for a cleaner view, was INR 39.6 billion—essentially on par with expectations. The consistency across revenue, EBITDA, and adjusted earnings suggests that Power Grid’s operating engine is humming without major surprises, an encouraging sign for a capital‑intensive utility that relies on long‑term contracts and regulated tariffs.
Why Power Grid's Margin Dynamics Echo Sector Trends
Power Grid’s EBITDA margin hovered around 85%, a figure that mirrors the broader Indian power‑transmission sector where regulated returns keep profitability relatively insulated from macro‑volatility. However, the modest PAT premium illustrates a subtle shift: other income—often derived from ancillary services like frequency regulation and ancillary market participation—is gaining importance as the grid modernizes.
Regulatory deferral accounts, a niche accounting line, reflect timing differences between cost recovery and cash receipts under the tariff framework. A positive RDA balance, as seen this quarter, effectively acts like a short‑term cash buffer, boosting net earnings without altering core operational cash flow. Investors who overlook this metric may undervalue the resilience embedded in Power Grid’s balance sheet.
How Tata Power and Adani Transmission are Positioning Against Grid’s Momentum
Peers Tata Power (TATAPOWER) and Adani Transmission (ADANITRANS) have reported mixed results this quarter. Tata Power, a generation‑heavy utility, faced higher fuel costs that eroded its margins, while Adani Transmission saw a dip in transmission‑related fees as some state utilities renegotiated contracts.
Both companies are accelerating green‑energy integration, but Power Grid’s advantage lies in its role as the backbone of the national grid. Its regulated tariff structure provides a steadier cash flow, allowing it to invest in high‑voltage direct current (HVDC) corridors and smart‑grid technologies without the earnings volatility that generation‑focused firms endure. Consequently, the market may start rewarding Power Grid with a premium valuation relative to its peers, especially if the regulatory environment remains supportive.
Historical Patterns: Grid Earnings Surprises and Stock Reactions
Looking back at FY22‑23, Power Grid posted a 5% earnings surprise in Q2, which was followed by a 12% rally in its share price over the next six weeks. The rally was amplified by analysts upgrading price targets based on the expectation of higher tariff revisions in the upcoming fiscal year.
Conversely, a 4% miss in FY24’s Q3 led to a short‑term dip of 7% before the stock recovered as the company disclosed a strategic partnership with a renewable‑energy aggregator. The pattern indicates that the market reacts strongly to any deviation—positive or negative—from the expected earnings, but the direction of the move is heavily influenced by the narrative around regulatory support and strategic initiatives.
Investor Playbook: Bull vs Bear Cases for Power Grid
Bull Case: The 3% profit beat confirms the robustness of Power Grid’s regulated cash‑flow model. A raised FY26‑28 PAT outlook (3‑4% upside) suggests higher earnings trajectory. The target price of INR 302, derived from a 2.5x P/B multiple on Dec‑27 BVPS, remains attractive given the current market price trading at a discount to this level. Continued investment in HVDC projects and smart‑grid upgrades could unlock additional “other income” streams, widening margins.
Bear Case: The profit uplift is modest and largely driven by one‑off other income. If regulatory tariffs are frozen or if the RDA balance normalizes, earnings could revert to baseline levels, limiting upside. Moreover, a potential slowdown in infrastructure spending or a shift in government policy toward privatization of certain transmission assets could compress valuation multiples.
Bottom line: If you believe the regulatory environment will stay favorable and Power Grid can monetize ancillary services, the stock offers a compelling entry point. If you’re wary of policy headwinds or expect earnings to normalize, a cautious stance or a wait‑and‑see approach may be prudent.