HG Infra Engineering's Strategic Expansion into Transmission: A New Era for EPC Diversification

In the rapidly evolving Indian energy landscape, the shift toward renewable energy and grid modernization has created a fertile ground for engineering, procurement, and construction (EPC) firms to diversify into transmission development. At the forefront of this transformation is H.G. Infra Engineering, a company that has recently secured high-profile transmission and battery energy storage system (BESS) projects through competitive bidding. This move raises critical questions for investors: Can EPC firms like HG Infra leverage their infrastructure expertise to capitalize on India's transmission boom? And what risks and rewards accompany such a strategic pivot?

A Strategic Bet on Transmission and Energy Storage

HG Infra's recent wins, including a 765kV inter-state transmission line in Odisha under a build-own-operate-transfer (BOOT) model and a 300 MW/600 MWh BESS project in Gujarat, underscore its ambition to diversify beyond traditional EPC work. These projects, awarded through competitive bidding, align with India's push to integrate renewable energy and stabilize its grid. The Odisha transmission project, with a 35-year operational lifespan and annual charges of ₹431 million, offers long-term revenue visibility. Similarly, the Gujarat BESS project, with a 12-year contract and a tariff of ₹285,600 per megawatt, reflects the growing demand for storage solutions to manage intermittent renewables.

But HG Infra's expansion is not an isolated play. The broader transmission sector in India is witnessing a surge in activity. In FY2025 alone, 45 interstate transmission schemes were awarded under the tariff-based competitive bidding (TBCB) mechanism, compared to just 23 in FY2024. Power Grid Corporation of India Ltd (PGCIL) and Adani Energy Solutions dominate this space, but smaller players like HG Infra are carving niches in storage and hybrid projects.

Regulatory Tailwinds and Market Dynamics

India's regulatory environment is a key enabler for this transition. The 2022 amendment to the Electricity Act, which recognized energy storage systems (ESS) as part of the power system, has opened doors for standalone BESS projects. Additionally, the Ministry of Power's viability gap funding (VGF) scheme for BESS, offering up to 40% capital cost support, has made storage projects more bankable. These policies align with India's goal of achieving 500 GW of non-fossil energy by 2030 and underscore the long-term viability of transmission and storage infrastructure.

However, competition is intensifying. The TBCB process has become a battleground for EPC firms, with PGCIL and Adani securing 91% of the tariff-based market in FY2025. Smaller players must differentiate themselves through innovative project structures or niche expertise. For HG Infra, its experience in both transmission and BESS positions it to bid on hybrid projects, which are becoming increasingly attractive as utilities seek integrated solutions.

Financial Health and Risk Factors

HG Infra's financials tell a mixed story. The company boasts a strong asset base (₹87.7B in total assets) and adequate interest coverage (3.5x), but its debt-to-equity ratio of 138.7% raises concerns about leverage. While its EBIT of ₹9.2B and cash reserves of ₹2B provide some flexibility, the declining EPS—from ₹82.64 in FY2024 to ₹77.55 in FY2025—highlights operational pressures. Analysts note weak returns on capital and recent executive departures as potential headwinds.

Yet, HG Infra's recent dividend hike to ₹2.00 per share and its 22% undervaluation relative to peers suggest investor optimism about its long-term potential. The company's ability to execute large-scale projects—such as the Odisha transmission line—will be critical in proving its mettle against larger rivals.

Investment Implications

For long-term investors, HG Infra's expansion into transmission and BESS offers a compelling case. The Indian transmission sector is projected to require over ₹1.5 trillion in capital investment over the next decade, driven by renewable integration and grid modernization. Companies with expertise in competitive bidding and hybrid projects are well-positioned to capture this growth.

However, the risks are non-trivial. High leverage and project execution challenges—common in the EPC sector—could pressure margins. Investors should monitor HG Infra's debt metrics, project pipeline, and ability to secure VGF-supported BESS projects. A diversified portfolio of transmission and storage contracts, combined with prudent financial management, will determine its success.

The Road Ahead

HG Infra's strategic pivot into transmission and energy storage is emblematic of a broader trend in the EPC sector. As India races to meet its climate goals, the ability to navigate competitive bidding, regulatory shifts, and technological innovation will define winners in the market. For investors, the key is to balance the sector's long-term potential with the inherent risks of capital-intensive infrastructure projects.

In the end, HG Infra's journey mirrors India's energy transition: ambitious, complex, and full of promise—but only for those who can balance vision with execution.