5 Stocks to Lead Centre's Power Policy Reforms

India's power sector is preparing for a major policy shift as the government pushes ahead with the draft Electricity Amendment Bill, 2025.

The proposed framework aims to bring greater accountability to power distribution companies, reduce long-standing financial stress and create a more competitive environment across the value chain.

The plan focusses on cost-reflective tariffs, timely subsidy payment, cleaner procurement and a structured path for private participation in distribution.

These measures are designed to improve efficiency and attract long-term investment into transmission, cleaner generation and modernised networks.

The reforms come at a time when electricity demand is expanding, renewable capacity additions are accelerating and companies across the sector are scaling up their capital plans.

The transition also opens opportunities in renewables, grid upgrades and modern distribution systems. There are areas where several established players already have a strong foundation.

Against this backdrop, five companies stand out for their scale, balance sheet strength and strategic alignment with the policy direction. Their financial performance in the recent quarter, capital plans for the next few years and valuation setups offer a clear view of how they may participate in the sector's next phase of reform-driven growth.

#1 Tata Power

First on our list is Tata Power.

Tata Power has grown into a diversified energy player with a strong presence across generation, transmission and distribution. The company has also built a large renewable portfolio and continues to expand its solar manufacturing and rooftop businesses. Its scale places it at the centre of India's evolving power landscape.

The draft Electricity Amendment Bill aligns closely with the company's strengths. Cleaner tariff structures and timely subsidy payments can strengthen cash flows in its distribution business. A larger role for private operators creates room for the company to expand its discom model.

Higher renewable obligations support its pipeline in solar, wind and hybrids, while clearer rules on procurement improve visibility for manufacturing and rooftop growth. The overall framework gives the company more certainty to scale its clean energy and distribution platforms.

The company reported a flat year-on-year Q2 FY26 consolidated revenue. EBITDA margin was also flat and stood near 21%. Margin support came from a higher contribution by Odisha discoms and stronger profitability in solar cell and module manufacturing. The rooftop solar segment also added scale. The impact of the Mundra plant shutdown offset part of the gains.

Going forward, the management expects the second half to be strong. Renewable additions of about 1.3 GW are targeted for H2, supported by land and transmission readiness. The company spent about Rs 73 billion (bn) in H1FY26 and the full-year plan is Rs 250 bn, with most spending scheduled in Q3 and Q4. It aims to fund the capex through internal accruals and borrowings, while maintaining leverage within AA rating guardrails. Debt increased to Rs 540 bn with a net debt to equity ratio of around 1.2.

The stock trades around 30 times earnings, compared to a long-term median close to 31 times. The valuation premium reflects the company's renewable pipeline, improving discom performance and a broader policy tailwind for private sector participation.

To know more about the company, check out its financial factsheet and latest quarterly results.

#2 Torrent Power

Next on the list is Torrent Power.

Torrent Power has built a strong base across generation, transmission and distribution, supported by gas-based plants, thermal units and a growing renewable portfolio. The company has built a differentiated position in private distribution where operational efficiency, billing discipline and low AT&C losses continue to anchor performance. This foundation gives it clear visibility as the power sector transitions toward a cleaner and more reliable supply.

The draft Electricity Amendment Bill encourages private participation and sharper accountability in distribution. Torrent Power fits well into this framework because of its consistent track record across licensed and franchise operations and its ability to scale renewable capacity while maintaining operational control.

Meanwhile, the company's second quarter results reflected steady execution. Consolidated revenue increased 10% year-on-year, and EBITDA margin stood near 19.1%, up 2% year-on-year. The margin support came mainly from higher merchant power contribution in the thermal business and year-on-year gains of about Rs 3 bn. LNG contribution remained limited. Lower finance costs provided additional support, although higher depreciation from newly commissioned renewable capacity moderated the overall increase.

Looking ahead, the management expects a busy second half. H1 capex stood close to Rs 37 bn, with Rs 25 bn spent on renewables. Torrent's full-year capex guidance remains between Rs 70 and 80 bn.

The project pipeline includes 3.6 GW of renewable capacity, 3 GW of pumped storage, 1.6 GW of thermal capacity and two transmission projects. Renewable additions of 500 to 600 MW are targeted for FY26. Most remaining projects are expected to be commissioned over the next 18 to 24 months. Funding will come through internal accruals and debt.

The stock trades near 22 times earnings, compared to a long-term median close 19 times. The market is assigning a premium because earnings visibility has improved and the company is positioned to benefit from ongoing policy-led changes.

To know more about the company, check out its financial factsheet and latest quarterly results.

#3 NTPC

Third on our list is NTPC.

NTPC has built one of the largest and most reliable generation portfolios in the country. The company runs coal, gas, hydro and renewable assets and continues to expand its capacity at a steady pace. The strong regulated business model gives it predictable returns, even when demand or plant utilisation fluctuates. The scale of its operations allows it to play a central role in India's long-term energy transition.

The policy shift works in NTPC's favour. Cost-reflective tariffs and stricter subsidy discipline improve cash flow visibility for its regulated projects. Higher renewable obligations support the expansion of its clean energy platform through NGEL. The sector's need for more long-duration capital also plays to NTPC's strength, since its balance sheet and regulated returns model allow it to take on large projects with predictable earnings. Overall, the reforms give the company a clearer environment to grow both thermal and renewable capacity.

NTPC's Q2 FY26 consolidated revenue was flat year-on-year, and EBITDA margin remained strong at about 29%, up 3% y-o-y. Margin support came from lower under-recoveries, higher availability across coal and gas stations and a favourable regulatory environment that rewards operational efficiency. The contribution from non-fossil assets also improved as NGEL scaled its output.

Looking forward, management expects a busy period ahead. Group capex reached Rs 231 bn in the first half, and full-year spending will continue across regulated thermal projects, renewable additions and pumped storage systems. The company is executing 33 GW of under-construction capacity (consisting of 17 GW coal, 2 GW hydro and 14 GW renewable). It has guided for 6 GW of commissioning in the current year and 8 GW each over the next two years.

Borrowing cost eased to 6.11% in H1 due to refinancing gains, and funding will continue through internal accruals and a diversified borrowing programme.

The stock trades around 13 times earnings, compared to a long-term median close to 10. The valuation premium reflects the company's regulated growth visibility, improving renewable mix and a multi-year capex pipeline supported by policy reforms.

To know more about the company, check out its financial factsheet and latest quarterly results.

#4 JSW Energy

Fourth on our list is JSW Energy.

JSW Energy has scaled into a diversified power producer with a balanced mix across thermal, hydro, solar and wind assets. The company has added substantial capacity over the past year with both organic projects and the acquisitions of KSK Mahanadi and O2 Power. This expansion has strengthened its generation base and positioned it for the next phase of sector growth. The focus on execution and disciplined capital allocation continues to guide its strategy.

The policy environment works in JSW Energy's favour. A sharper focus on efficiency, clearer tariffs and better visibility on long-term projects support companies with steady contracts. JSW Energy benefits because most of its capacity is tied up under long-term PPAs and its renewable and storage pipeline is expanding quickly.

The second quarter showed the impact of new capacity. Q2FY26 revenue rose 60% year-on-year, and EBITDA margin stood at about 58%, up 6%. The commissioning of the Kutehr hydro project, higher generation from recent renewable additions and continued benefits from tying up merchant exposure at Vijayanagar with JSW Steel helped margins. Acquired platforms such as O2 Power and KSK also contributed to the improvement.

Management expects a strong second half. Installed capacity has reached 13.2 GW. The company is building 12.5 GW of fully tied-up under long-term power purchase agreements. The target of exceeding 15 GW by year-end and to reach 30 GW of capacity and 40 GWh of storage by 2030 remains intact.

Capex will rise in H2 as project work accelerates after a slow monsoon period. Funding will come from internal accruals, refinancing gains and steady borrowings. Additionally, the battery assembly plant in Pune is expected to be operational in Q3 FY26.

The stock trades near 44 times earnings, compared with a long-term median close to 44 times. The premium reflects the company's rapid scale-up, improving execution and clearer earnings visibility from a largely contracted portfolio.

To know more about the company, check out its financial factsheet and latest quarterly results.

#5 Power Finance Corporation

Last on our list is Power Finance Corporation.

Power Finance Corporation has grown into the financial backbone of India's power sector. The company lends across generation, transmission and distribution and remains a key driver of long-term capital formation in the system. Its steady growth, improving asset quality and strong balance sheet keep it central to the ongoing sector reform cycle.

The policy shift works in Power Finance Corporation's favour. Cost-reflective tariffs, more private participation and higher renewable requirements increase funding needs across the sector. This creates more lending opportunities for the company in grid upgrades, renewable projects and distribution modernisation.

The second quarter of FY26 reflected stable momentum. Interest income grew 13% year-on-year and net interest income rose 20%. The calculated net interest margin remained firm at about 3%. Strong disbursements of Rs 498 bn in the quarter and a slight reduction in the cost of funds helped margins. Loan growth stayed healthy at 14% year-on-year and asset quality remained stable with gross NPA at 1.87% and net NPA at 0.37%.

Going ahead, the management maintained its lending outlook. Loan growth of 10% to 11% is expected for FY26 and the sanctions pipeline in the first half reached Rs 1.52 trillion. Capital adequacy of 21.62% provides capacity to scale lending, and funding will continue through domestic bonds, bank borrowings and foreign currency loans. Foreign currency exposure is largely hedged, covering 95% of the portfolio.

The stock trades near 0.97 times book, compared to a long-term median close to 0.7 times. A modest premium reflects stable asset quality, predictable spreads and a lending pipeline supported by reform-led investment.

To know more about the company, check out its financial factsheet and latest quarterly results.

Conclusion

Reform years often look exciting on paper, but they also bring periods of uneven execution. Policy timelines can shift, state-level adoption may vary and tariff discipline will take time to stabilise. Investors should be prepared for quarters where receivable cycles tighten, borrowing costs move unexpectedly or project commissioning gets pushed out.

Valuations in parts of the sector have already moved ahead of historical averages, which means expectations are high and disappointments could be punished quickly. It helps to stay focused on balance sheet health, cash flow generation and the ability to secure long-term contracts rather than chasing short-term momentum. A more selective approach is likely to work better as the sector transitions from policy announcements to on-ground delivery.

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