India’s transmission and distribution (T&D) sector is poised for a sustained expansion cycle, supported by an estimated capital expenditure of around Rs 9 trillion through 2032, even though ordering activity has softened in FY26 due to temporary constraints, according to a report by Motilal Oswal Financial Services.
The report noted that the T&D value chain continues to benefit from a strong capital expenditure pipeline, stating that the investment cycle, which began in FY22–23, has already driven significant growth in order books, revenues, and profitability across industry players.
While highlighting a short-term slowdown, the brokerage observed that sector-level ordering in FY26 fell to 16 awarded schemes compared with 45 in FY25. It attributed the decline to temporary bandwidth limitations rather than any structural weakening in demand.
It further pointed out that domestic manufacturers are currently operating at elevated capacity utilisation levels and are increasingly focusing on higher-voltage transformers, which require longer production and testing cycles, thereby extending delivery timelines.
Despite near-term constraints, the report maintained a positive medium-term outlook, saying there is still scope for the cycle to continue over the next few years, supported by ongoing capacity expansions and robust demand from both domestic and international markets.
According to the National Electricity Plan, India’s transmission segment is expected to attract about Rs 9 trillion in investment, largely driven by large-scale renewable energy integration. This has already triggered a structural rise in ordering activity in recent years.
On demand trends, the report said requirements remain strong across both domestic and export markets, while transformer supply has lagged, leading to extended lead times and favourable pricing conditions for manufacturers.
Globally, it highlighted a sharp surge in transformer demand in regions such as the US and Europe, driven by renewable energy adoption, data centre expansion, industrial electrification, electric vehicle charging infrastructure, and the replacement of ageing grid assets. This has created a supply-demand imbalance, increasing dependence on imports and supporting higher prices.
The report added that this global shortfall presents an opportunity for Indian manufacturers, which are increasingly integrating into global original equipment manufacturer (OEM) supply chains.
It also flagged emerging opportunities in high-voltage direct current (HVDC) projects. Of a 32.3 GW pipeline, around 14.5 GW has already been tendered and awarded, with expectations of one to two HVDC project awards annually going forward.
While the report expects transformer companies to deliver strong earnings growth between FY25 and FY28, it cautioned that valuations are no longer inexpensive.
However, it added that the potential for earnings upgrades and expanding export opportunities could help sustain current valuation levels, keeping investor interest in the sector intact.
(With inputs from ANI)