Nuclear Energy stocks slide up to 6% on US-India deal, experts warn limited role for Indian players

Renewed talks between the two leaders echo discussions from July 2005

Shares of nuclear energy-related companies such as BHEL, L&T, Kirloskar Brothers, KSB, Walchandnagar Industries, and Power Mech Projects fell by up to 6 percent on February 14 after Prime Minister Narendra Modi and US President Donald Trump announced plans to move forward with building American-designed nuclear reactors in India. This development has sparked concerns about the role of Indian companies in the nuclear energy value chain.

The civil nuclear deal, originally signed over 16 years ago, is now being revived with an emphasis on large-scale localisation and potential technology transfer.

However, while the agreement theoretically grants India access to advanced US nuclear technology and materials, enhancing the country’s energy security, the details raise concerns, according to Shlok Srivastav, Co-founder & COO of Appreciate, a SEBI and IFSCA-registered firm.

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Srivastav highlighted that the deal’s focus on US-designed nuclear reactors implies a leading role for American companies. Despite promises of localisation, core technology and design leadership may remain in US hands.

"The key issue is whether core technology and design expertise will genuinely be transferred to Indian companies," he noted.

The renewed talks between Prime Minister Modi and President Trump echo the initial civil nuclear cooperation discussions from July 2005, which stalled due to various reasons, including India’s strict liability laws. At the time, US nuclear reactor manufacturers such as General Electric and Westinghouse had expressed strong interest in establishing nuclear reactors in India.

In addition to concerns over the limited role of Indian companies in the nuclear sector, the sharp decline in stock prices also reflects stretched valuations, according to Deven Choksey, Managing Director of DRChoksey Finserv.

Similarly, Arun Kailasan, Research Analyst at Geojit Financial Services said that since these stocks have been trading at high valuations, investors have adopted a risk-averse stance.

"While orders for small modular reactors are expected to gain traction, we believe it will take a few years before they translate into actual investments and reflect in financials. Moreover, even if the technology transfer is being discussed, the scope of participation of Indian players in such orders remains a question," Kailasan added.

Currently, shares of Power Mech are trading at a 3.2x price-to-book (PB) ratio, higher than its five-year average of 2.6x. BHEL is trading at 2.7x PB, significantly above its five-year average of 1.5x, while L&T is at 5.1x PB, exceeding its five-year average of 3.7x.

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