India's grids are booming. Here's what investors are missing

Summary: India’s grid expansion is creating a long runway for growth, but the opportunity is more nuanced than it appears. Different players in the ecosystem carry very different risk-reward profiles, making stock selection critical for investors.

When India's grid investments make headlines, the spotlight falls on towers, substations and transmission lines. But none of that infrastructure functions without the equipment sitting inside it: protection relays that contain faults before they spiral into blackouts, automation systems giving operators live visibility, power electronics holding voltage steady and smart meters that turn electricity into actual revenue.

These components quietly absorb a significant share of every rupee directed at grid modernisation. Yet there’s something many investors aren’t aware of: capex in this space remains lower than it should be, and meaningful demand-supply gaps persist.

Most of the spending is still to come

Launched in FY22, RDSS (Revamped Distribution Sector Scheme), India's flagship power distribution upgrade programme, came with an initial outlay of Rs 3.04 lakh crore, built around two goals: pulling AT&C losses down to 12-15 per cent and closing the cost-recovery gap.

Progress has been real. AT&C losses dropped from 21.9 per cent in FY21 to 16.2 per cent in FY25. The cost-recovery gap narrowed sharply, from Rs 0.69 per unit to Rs 0.11 per unit over the same period.

But execution has lagged. Bureaucratic friction, tender delays and patchy state-level delivery forced a deadline extension from FY26 to March 2028. An additional Rs 2.83 lakh crore in sanctioned funds is yet to be deployed.

The bulk of the physical rollout still lies ahead. For equipment companies, that means the demand runway is longer than the original timeline implied, even if the pace remains difficult to forecast.

Smart meters illustrate the gap most starkly. Against a sanctioned count of 20.33 crore, only 4.93 crore have been installed. Roughly 15 crore meters remain, with a multi-year pipeline, communications hardware, software and network infrastructure trailing every installation.

Two distinct bets

Listed players in this space divide cleanly into two camps: sellers of high-specification hardware and executors of government-linked programmes.

The first group trades on technical complexity and pricing power.

Hitachi Energy India is the clearest example, supplying transformers, HVDC systems and power electronics. Its order backlog stood at Rs 29,413 crore as of September 2025, with Rs 2,000 crore committed to expanding domestic capacity. Siemens carries a backlog of Rs 42,485 crore, while ABB India sits at Rs 9,895 crore, spanning utilities, industry and commercial buildings. CG Power plays the switchgear angle (protection and control), with Rs 748 crore allocated to greenfield capacity. At higher voltages, switchgear sheds its commodity character faster than most assume.

HVDC warrants particular attention. India needs these long-distance, high-voltage links to move renewable power from remote generation sites to demand centres. Globally, only three manufacturers supply them: Hitachi Energy, GE and Siemens. The real question here isn't who wins the tender, it's whether the broader ecosystem can deliver at the speed India requires.

The second group, programme executors, carries visible order books but far less visible cash flows. Genus Power holds an order book of Rs 28,758 crore covering around 3.6 crore smart meters. HPL Electric sits at roughly Rs 3,300 crore, largely meter-driven.

The numbers may look comparable to hardware companies, but the risk profile is not. A meter company executing under RDSS is effectively taking a bet on government disbursement timelines as much as on meter demand. These contracts pay in milestones: complete a batch, trigger a payment, then wait. When disbursements slow, working capital builds and receivables accumulate. The order book is genuine, but how quickly it converts into cash depends on forces largely outside the company's hands.

What investors should ask

India's grid is scaling at a pace without precedent. Supply is still short, and RDSS completion is years away.

For those seeking exposure to this theme, the right questions are these: What genuinely differentiates one hardware company from another? Are their products technically complex enough to command pricing power, or do they drift into commodity territory where margins compress? For programme executors, the key metric is conversion speed or how efficiently orders convert into cash flows.

The companies worth owning are those where that gap is structurally narrow. Identifying them means looking beyond the order-book headline. That's precisely where most investors stop and where the real work begins.

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