NTPC Q1 Preview: Weak Demand and High Interest Costs May Weigh on Earnings Despite Strong Capacity Growth

Softer summer, early monsoon dent power demand

NTPC Ltd, India’s largest power generation company, is expected to report a mixed set of results for the first quarter of FY26 on July 29. While analysts are projecting modest growth in revenue and margins, the profitability may come under pressure due to sluggish electricity demand, declining generation volumes, and elevated borrowing costs.

A Moneycontrol poll of six brokerages projects NTPC’s net profit to rise 14–20% year-on-year (YoY), with estimates ranging between ₹4,741 crore and ₹5,275 crore, compared to ₹4,511 crore in the same quarter last year. This growth is largely supported by regulated returns and capacity expansion, though the full impact of higher interest costs and weaker power offtake could moderate these gains.

Demand Weakness and Generation Decline

The quarter saw a softer summer and early onset of the monsoon, which led to reduced demand for electricity across the country. This directly impacted coal-based power generation, a major segment for NTPC. Kotak Institutional Equities estimates a 12% YoY fall in NTPC’s generation, while Axis Securities flags weaker demand and lower offtake as key concerns. Equirus also reported a 7% YoY decline in all-India coal power generation, estimating NTPC’s revenue might even decline by 5%.

Revenue Growth Still Possible

Despite the decline in generation volumes, some brokerages believe that NTPC might still post marginal revenue growth, aided by better tariffs and new capacity additions. For instance, Motilal Oswal expects standalone revenue to grow 2% to ₹45,300 crore, while Axis Securities projects stable sequential performance.

Operating Margins Improve, but Interest Costs Pinch

One silver lining is the improvement in operational efficiency. EBITDA margins are likely to expand from 27% in Q1FY25 to around 29.1–29.6% in Q1FY26, thanks to stable fixed cost recoveries and incremental tariff gains.

However, rising borrowing costs could dent bottom-line performance. Axis Securities expects a sequential and YoY decline in PAT, citing increased interest expenses and lower other income. Kotak also flags the absence of prior-period sales, which had bolstered the base quarter.

Capex and Expansion Drive Long-Term Strength

NTPC’s aggressive capacity addition strategy remains a key long-term strength. In Q1FY26 alone, the company added approximately 2–2.2 gigawatts (GW), including significant contributions from thermal and renewable sources. Plants like North Karanpura and Barh contributed 660 MW each, and nearly 1.3 GW came from thermal projects.

NTPC currently has 33.7 GW under construction, comprising 16.9 GW thermal, 2.2 GW hydro, and 14.6 GW renewables. It also received board approval for ₹1 lakh crore worth of new thermal projects (8 GW), signaling strong momentum in future capacity growth.

Regulated Business Model Offers Stability

Even as near-term challenges persist, NTPC’s regulated equity base, which stood at ₹90,900 crore standalone and ₹1.087 lakh crore consolidated, continues to offer earnings stability. Under the cost-plus regulatory framework, expenses like fuel and interest are passed through to consumers with a time lag, cushioning the company against short-term volatility.