Top 5 Energy Stocks by Growth

India's peak power demand hit a record of 250 GW in May 2024 as northern India again grappled with heatwave conditions. The growing demand follows the increasing use of cooling appliances amid the rising temperatures.

Amid the surging power demand, the government has decided to ramp up capacity addition of thermal power plants and operate all gas-based power plants at full capacity.

India's power sector is poised for robust growth in the FY25, with expectations of a healthy demand growth of 6%, albeit moderating from the previous year.

Demand growth in the first two months of FY25 was over 10% supported by a favorable base.

FY24 had witnessed a significant upturn in electricity demand, marked by a 7.6% increase on a year-on-year (YoY) basis, fuelled by resilient economic activity and weather-related loads.

India ranks as the world's 3rd-largest electricity producer with an installed power capacity of 417 GW.

Given the sector's continual expansion and changing scenario, many investors have eyed investing in energy stocks in India.

Below are some of the top-performing energy stocks based on their growth.

#1 IOCL (Indian Oil Corporation Limited)

Indian Oil Corporation Ltd is a Maharatna company controlled by the Indian government. It has a leadership position in the oil refining & petroleum marketing sector of India.

It has business interests in the entire hydrocarbon value chain - from refining, pipeline transportation, and marketing of petroleum products to R&D, exploration and production, marketing of natural gas and petrochemicals.

The company's sales have grown at a compounded annual growth rate (CAGR) of 44.8% over the last three years while its profit has grown at a CAGR of 25.6%.

In 2023-24, the company operated at the highest-ever capacity utilisation of 104.5%, exceeding the previous best of 103.8% in 2018-19.

In 2023-24, the revenue from operations was Rs 8.6 trillion (tn) as compared to Rs 9.3 tn in the previous financial year. The decrease in revenue can be primarily attributed to a decrease in product prices in the international market.

The net profit for 2023-24 was Rs 396.1 billion (bn) as compared to Rs 82.4 bn during the previous year. The increase in the operating margin and net profit margin was due to normalised marketing margins and lower exchange losses during the year as compared to the previous year.

In 2023-24, the company's EBITDA margin was 8.5%, the operating profit margin was 6.3%, and the net profit margin was 4.5%. This was a significant increase as compared to the previous year when the EBITDA margin was 3%, the operating profit margin was 1.1%, and the net profit margin was 0.8%.

In FY24, the company delivered dividends of 50% amounting to Rs 5 per share. The total dividend payout for FY24 was 120% amounting to Rs 12 per share, which was the highest payout by IOCL ever.

Looking ahead, Indian Oil aims to strengthen EV mobility infrastructure by setting up charging points and battery-swapping facilities at its fuel stations.

The company has also signed a binding term sheet with a Panasonic Group company to form a JV for manufacturing battery cells in India.

IOCL is set to commission various projects over the next two years, driving further growth. Refinery projects, currently underway, are expected to be completed as follows: Panipat refinery (25mmtpa) by December 2025, Gujarat refinery (18 mmtpa) by October 2024, and Baruni refinery (9 mmtpa) by December 2024.

#2 Adani Green Energy

The company is the holding company of several subsidiaries in the business of renewable energy within the group.

The company's sales have grown at a compounded annual growth rate (CAGR) of 43.4% over the last three years while its profit has grown at a CAGR of 90.6%.

Adani Green Energy reported a 33% YoY increase in revenue, Rs 77.3 bn, in FY24. The renewable energy firm had reported a top line of Rs 58 bn in the financial year 2023.

The growth in the sale of solar energy was backed by 2,418 MW of capacity addition, while the growth in wind energy sales was on the back of 430 MW of capacity addition an improvement in the capacity utilisation.

The company's total operational capacity was up 35% at 10,934 MW.

Looking ahead, AGEL is expected to clock an operational capacity CAGR of over 30% to reach more than 50 GW of capacity by 2030.

It has announced an ambitious plan to invest Rs 1.3 tn in 2024-25 to expand its capacity across its portfolio companies and will raise Rs 250 bn in equity this financial year to fund the projects.

#3 BPCL (Bharat Petroleum Corporation Limited)

Bharat Petroleum Corporation a public sector company is engaged in refining crude oil and marketing petroleum products.

The company's sales have grown at a CAGR of 35.6% over the last three years while its profit has grown at a CAGR of 15.8%.

During FY24, it achieved gross revenue from operations of Rs 506.9 tn, compared to Rs 533.5 tn in FY23. This was mainly because of the twin impact of falling refining margins and a pre-election petrol and diesel price cut.

The net profit (highest ever) was Rs 26.8 tn in 2023-24, against Rs 2.1 tn in the previous year. The profit before tax for the year was Rs 35.5 tn, compared to Rs 2.2 tn in 2022-23. Profit for the current year was higher than the previous year due to higher margins on certain petroleum products.

The capacity utilisation increased to a strong 112% in FY24, as compared to 109% in the previous year.

BPCL plans to invest Rs 170 tn over the next five years to grow its core oil refining and fuel marketing business as well as in 'future big bets' of petrochemicals and green energy. BPCL aims to meet 10% of India's energy needs, projected to quadruple, by 2047.

#4 GAIL

Incorporated in 1984, GAIL, a Government of India undertaking, is an integrated natural gas company in India. GAIL has wholly owned subsidiaries in Singapore and the US for expanding its presence outside India in the segments of LNG, petrochemical trading, and shale gas assets.

The company's sales have grown at a CAGR of 32.4% over the last three years while its profit has grown at a CAGR of 17.3%.

GAIL already is benefitting from strong gas demand in the country. The improved geographical reach penetration by city gas distribution companies helps improve the overall pipeline volumes of GAIL.

The company reported revenue from operations of Rs 130.6 tn during FY24. Profit before tax stood at Rs 11.5 tn, an increase of 76%. Net profit stood at Rs 8.8 tn, an increase of 67% compared to the previous financial year.

This increase in profitability was mainly due to better trading margins in gas marketing and the revision of transmission tariff by the regulatory authority.

GAIL is widening its range of products to diversify its petrochemical portfolio for robust growth. It's exploring the possibility of setting up a 'world-scale' ethane cracker, as it looks to strengthen its position as a key player in the petrochemical industry.

India's largest gas distributor signed a 10-year LNG supply agreement, starting in 2026, with Vitol Asia of Singapore and ADNOC Gas of UAE for 1 MMTPA.

#5 Oil India Limited (OIL)

Oil India Ltd is engaged in the exploration, development, and production of crude oil and natural gas, transportation of crude oil, and production of LPG. It also provides various E&P-related services for oil blocks.

The company's sales have grown at a CAGR of 31% over the last three years while its profit has grown at a CAGR of 19%.

During FY24, the company earned a total revenue of Rs 24.5 tn against Rs 24.7 tn in the previous year. The net profit margin of the company for FY24 was 25%. The company has registered a net profit of Rs 5.5 tn during FY24 as against Rs 68.1 tn in the previous year.

Oil India achieved the highest-ever EBITDA of Rs 11.6 tn in FY24, an increase of 4.1% over last year. The profit was marginally affected because of the lower price realisation and also due to an arrear tax provision of around Rs 3 tn.

Oil India (OIL) and Indra Dhanus Gas Grid (IGGL) signed agreements for connecting OIL's natural gas fields of upper Assam with the Duliajan feeder line of the North-East Gas Grid and for the evacuation of natural gas to be produced from OIL's DSF block in Tripura.

Oil India is set to raise US$ 550 million (m) in a five-year external commercial loan facility through the Bank of Baroda (BoB) to fund expansions into petrochemicals, ethanol, biogas, and renewable energy.

Conclusion

Investing in top energy stocks in India can diversify your portfolio, but it's crucial to recognise the challenges associated with this sector.

As energy stocks are influenced by various factors like global oil price fluctuations, government policies, and geopolitical risks, investors should be prepared for potential market uncertainties.

Moreover, environmental concerns present another challenge for energy companies. With increasing pressure to reduce carbon emissions and transition towards renewable energy sources, companies must adapt their strategies to meet their regulatory requirements and reduce risks.

Additionally, tensions with neighbouring countries and supply chain disruptions can impact the operations and profitability of energy companies. It's in the best interests of investors to stay informed about these risks and their potential impact on the energy sector before making investment decisions.

Various government policies are driving the growth of renewable energy in India, making energy stocks in India an attractive investment opportunity. Stay updated with market dynamics and environmental concerns when investing in this sector.

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