Why renewable and transmission utilities are best plays on power cycle

Tata MF’s Rahul Singh equipment manufacturers face the risk of transitioning from a “peak capex” cycle.

N Mahalakshmi

August 08, 2025 / 15:42 IST

Beyond renewables and transmission, Singh added that opportunities in traditional thermal power or other parts of the sector are now largely stock-specific, with limited comfort on pricing or growth at the segment level.

Renewable energy utilities and power transmission companies remain the most compelling bets in India’s power sector, according to Rahul Singh, CIO of Tata Mutual Fund. Singh believes that while overall valuations in the utilities space have run up significantly since 2021, the structural opportunity in transmission and green utilities still offers relative comfort — particularly when compared to equipment manufacturers in the renewable value chain.

“Transmission, as a theme, is going to stay much longer than coal or renewables,” Singh said in a conversation with N Mahalakshmi on the Wealth Formula podcast. “Transmission utilities and suppliers of transmission-related capital goods are a solid place to be in… even though valuations aren’t cheap.”

While the broader utility space now trades at 2–3x book value — limiting the potential for re-rating — Singh emphasised that transmission will remain a secular story due to the ongoing expansion of renewables. By contrast, renewable equipment suppliers such as solar panel and turbine manufacturers face an imminent peak in the capex cycle. “That will get over in three to four years… and then you’ll start seeing earnings decline unless companies are smart enough to diversify,” Singh noted, adding that such transitions are not easy and require highly capable management.

Watch the discussion on power stocks here: Rahul Singh On Which Power Stocks To Bet On?

Instead, Singh said, renewable utilities — despite investor concerns around delayed PPAs — are better placed. “Some of the green utilities are actually trading at lower valuations than the equipment suppliers. That’s a disconnect,” he said, noting Tata MF’s own preference for names in the renewable utility and transmission space.
The fund’s recent portfolio actions — including trimming NTPC and increasing exposure to Adani Energy and Power Grid — reflect that strategic tilt. Singh refused to talk about specific stocks, but said, “Without getting into specific stocks, that is the approach we are taking.”