New Delhi
Crisil Ratings said India’s domestic power transformer industry sales are expected to grow at a rate of 10–11% annually by the next financial year. This will increase the market size from the estimated ₹ 33,000 crore to more than ₹ 40,000 crore in FY 2025.
The main reason for this growth transmission and distribution (T&D) is rapid investment in infrastructure, which are necessary to meet the increasing power demand. The country’s installed production capacity is expected to reach 570-580 GW from 485 GW, while the maximum demand in the same period is expected to increase by more than 20 percent to 296 gWs.
Under the National Power Scheme (NEP), a target has been set to increase transformer capacity to 1,847,280 MW by FY 2027, out of which only 30% has been achieved by FY 2025 so far. This reflects the need for quick investment. Crisil Ratings Senior Director Rahul Guha said that a strong pipeline in the Power T&D sector will create a revenue opportunity of ₹ 70,000-75,000 crore for the transformer sector in the next financial year. He said that the order book would increase sales of more than one year from the current nine months, which will ensure the possibility of high sales.
Crisil also stated that capacity utilization would reach above 80%, which will increase working capital and capital expenditure, which is estimated ₹ 200 crores by the next financial year. Companies can take additional loans for this financing, but the credit profile will remain stable due to healthy balance sheets and increasing cash flow. Replacement demand will also contribute to the growth of the industry as units established during 2000–2005 are reaching the end of their average 25-year lifetime. The operational margin is estimated to be between 8–10% and is less likely to bidding aggressively.
Crisil Ratings Director Nitin Kansal said that despite high debt levels, the gearing and interest coverage ratio of his rated portfolio will remain stable at 0.6X and 4X respectively until the next financial year. However, the agency has described timely payment, speed of order allocation and aggression of bidding as an important factor for the region, which will have to be cautious.
