Power Transmission Segment Set for Growth Amid Rising Demand: Motilal Oswal

Motilal Oswal Securities Limited (MOSL) has expressed optimism about the future of companies operating within the power transmission and distribution (T&D) sector. The brokerage highlighted that firms with a strong foothold across the transmission landscape could experience inflows and revenue growth in the range of 15 to 20 percent. This positive outlook is underpinned by a combination of factors including rising demand, increased capital expenditure, and stable commodity prices.

According to a recent report from MOSL, improvements in tendering activities, the pipeline of projects announced by the Central Electricity Authority, and encouraging statements from company management are expected to drive momentum in the T&D industry. Over the last few quarters, key players in this segment have recorded notable improvements in both revenue and profitability. Analysts attribute this upturn to robust demand, sustained order inflows, better pricing strategies, and steady costs for essential raw materials.

Several prominent companies such as Siemens, Voltamp Transformers, Transformers and Rectifiers (India), and CG Power and Industrial Solutions have reported higher capacity utilization rates and have outlined plans to expand their manufacturing capabilities. This enhanced capacity usage is a sign of growing market activity, as businesses adjust to meet increased power infrastructure needs.

In addition to capacity gains, profit margins across these firms have improved. This is partly due to a shift towards a more favorable product mix combined with commodity price stability. The report from MOSL notes that industry participants anticipate this positive trend will persist, supported by clear visibility in project pipelines within the power T&D space.

Expansion in generation capacity is expected to further stimulate demand for transformers, as existing supply lines are currently limited by high utilization levels. This increased demand is not just domestic; international markets are also expected to contribute to growth prospects. An ongoing shift towards larger-scale projects is viewed as beneficial for companies throughout the value chain, with several firms confirming that tender activity has increased significantly over the past year compared to the previous five or six years.

Government initiatives, such as the production-linked incentive (PLI) scheme, are also likely to provide support. This program targets raw materials like specialty steel, particularly cold-rolled grain-oriented (CRGO) steel, much of which is imported. Such measures are intended to boost local manufacturing capabilities and reduce reliance on imports. Despite these benefits, the sector remains exposed to risks related to raw material price fluctuations. These risks are partially mitigated through variable pricing clauses tied to indices developed by the Indian Electrical and Electronics Manufacturers' Association.

From an investment perspective, Motilal Oswal maintains a positive stance on several companies within the power transmission segment. The brokerage has issued buy recommendations for ABB, Siemens, Kalpataru Projects, and Larsen & Toubro (L&T). Conversely, it has a sell rating on Hitachi Energy and a neutral rating for KEC International. Analysts foresee opportunities for margin improvements in the near term, particularly for Siemens, Hitachi Energy, GE T&D, ABB, and transformer manufacturers.

The power transmission and distribution sector plays a crucial role in supporting India’s broader energy infrastructure. As the country continues to add generation capacity and upgrade its grid, the demand for efficient transmission solutions grows. The sector’s health is therefore a vital indicator for investors and policymakers alike, reflecting trends in industrial growth, energy consumption, and infrastructure modernization.

Investors and stakeholders are advised to consider expert guidance and conduct thorough due diligence before making investment decisions. The views expressed by Motilal Oswal and other market experts provide useful insights but should be weighed alongside independent analysis.