Power Grid Q4FY25 Earnings: Strong Capex Growth but Weak Profit Margins
Power Grid Corporation, a major player in India’s power transmission sector, recently reported its Q4FY25 financial results. The quarter painted a mixed picture, with some positives in project wins and capital expenditure (capex) but disappointing profit numbers. Let’s break down what happened, what the management said, and what investors should watch out for.
Key Highlights from Q4FY25
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Profit After Tax (PAT) came in weak at ₹4,143 crore, despite lower tax and improved revenues from telecom and consultancy services.
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Capital expenditure was robust at ₹26,200 crore, marking a substantial 110% increase year-on-year.
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Management expects capex to increase further, targeting ₹28,000 crore in FY27 and ₹35,000 crore in FY28.
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However, valuations remain somewhat stretched, with a Price to Book (P/B) ratio of 2.4x and Price to Earnings (P/E) ratio of 13.3x on FY26 estimates.
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Based on these, Kotak Securities maintains a SELL rating on Power Grid, with a fair value of ₹275, recommending investors wait for a better entry point.
What Went Well in Q4FY25?
| Positives | Details |
|---|---|
Strong Project Wins | ₹92,000 crore worth of projects won in 2025 |
Works-on-Hand Increased | ₹1.55 lakh crore worth of ongoing projects |
Optimistic Management Outlook | Hopeful capex will lead to better asset capitalisation |
Power Grid continues to win large projects, which is a positive indicator for future revenue growth. The works-on-hand, or the total value of projects currently underway, increased to ₹1.55 lakh crore. The management expressed optimism that the healthy capex will eventually translate into higher capitalisation of assets—a key driver of revenue and profits.
Challenges and Setbacks
| Negatives | Details |
|---|---|
Losses in Joint Ventures (JVs) | Losses of ₹29.6 crore, including stake in Energy Efficiency Services Limited (EESL) |
Weak Capitalisation | Capitalisation stood at ₹1,590 crore, down 13% year-on-year and 53% quarter-on-quarter |
Land Acquisition Issues | Delays in land acquisition impacted capitalisation |
Despite the strong capex, profit was pulled down by losses from joint ventures totaling ₹29.6 crore, notably involving EESL. More concerning was the weak capitalisation figure of ₹1,590 crore—a sharp decline compared to previous periods. The management attributed this to ongoing challenges in acquiring land, which delayed asset capitalisation.
Valuation Overview
| Metric | Value |
|---|---|
Current Market Price (CMP) | ₹285 |
Fair Value (FV) | ₹275 |
Price to Book (P/B) | 2.4x |
Price to Earnings (P/E) | 13.3x (FY26E) |
At the current market price of ₹285, the stock trades slightly above its fair value estimate of ₹275. The P/B and P/E multiples suggest the stock is somewhat expensive given the weak earnings performance.
Visualising the Numbers
Quarterly PAT and Capitalisation (₹ crore)
| Quarter | PAT | Capitalisation |
|---|---|---|
Q4FY24 | 4800 | 1830 |
Q3FY25 | 4300 | 3360 |
Q4FY25 | 4143 | 1590 |
The data shows a clear dip in PAT and a steep drop in capitalisation in Q4FY25 compared to earlier quarters, highlighting the short-term operational challenges.
Capex Trend (₹ crore)
| Year | Capex |
|---|---|
FY24 | 12,480 |
FY25 | 26,200 |
FY27 (E) | 28,000 |
FY28 (E) | 35,000 |
Capex has more than doubled from FY24 to FY25, with management projecting further growth in the next two years, signaling strong investment momentum.
What Should Investors Do?
Power Grid’s Q4FY25 earnings indicate a company investing heavily in future growth, but grappling with near-term profit pressures due to joint venture losses and land acquisition delays. While the strong capex and project wins bode well over the long term, the current valuations suggest investors should be cautious.
We recommend a SELL rating at this point, suggesting investors wait for a more attractive entry price.
Wrap-Up
Power Grid’s latest quarter reflects a firm balancing act—aggressive investment in assets that should fuel growth over the coming years, tempered by immediate operational challenges affecting profits. For investors, patience may be required as the company navigates these hurdles and translates its capital spending into improved earnings.
Stay tuned to how Power Grid executes its projects and overcomes land acquisition challenges, as these will be crucial for the stock’s future performance.
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