NHPC Eyes ₹20 Billion Bond Issuance Amid Mixed Financial Performance

State-owned hydropower giant NHPC Limited has taken a significant step toward raising capital, announcing plans to consider a ₹20 billion bond issuance through a private placement. The move, set for approval at a board meeting on April 23, 2025, underscores the company’s financial strategy amid fluctuating profitability and expanding infrastructure needs.

Key Details of the Proposed Bond Issuance

The bonds, described as unsecured, taxable, non-convertible, and non-cumulative, will be issued in one or more tranches during fiscal year 2025–26. The private placement structure targets institutional or high-net-worth investors, avoiding the broader public market. While the exact terms like interest rates and maturity dates remain undisclosed, the Key Information Document (KID) to be finalized at the board meeting will outline these details.

The funds are likely earmarked for ongoing hydropower projects, debt restructuring, or capital expenditures, though NHPC has not specified the use of proceeds. As a state-owned enterprise, NHPC benefits from implicit government backing, which may bolster investor confidence despite the bonds’ unsecured nature.

Financial Performance: A Mixed Picture

NHPC’s recent financial results present both challenges and opportunities. In the third quarter ending December 31, 2024, net profit plunged 52.5% year-on-year (YoY) to ₹231 crore, a stark contrast to the prior-year’s ₹486.7 crore. However, revenue grew 11.3% YoY to ₹2,286.8 crore, while EBITDA surged 35.8% to ₹1,021.5 crore, with margins expanding to 44.7% from 36.6% a year earlier.

The EBITDA improvement suggests operational efficiency gains, potentially from cost controls or higher generation volumes. Yet, the net profit decline highlights challenges such as interest expenses or one-time charges.

Market Reaction and Risks

NHPC’s shares closed at ₹84.98 on April 17, 2025—a 0.39% decline from the previous session—but remain up 12% year-to-date, reflecting investor optimism about its long-term renewable energy prospects. The bond issuance could alleviate debt pressure: NHPC’s debt-to-equity ratio stood at 0.5x as of September 2024, manageable for a utility with stable cash flows.

However, risks persist. The unsecured nature of the bonds places them behind secured debt in priority during defaults, potentially affecting yields. Additionally, taxable interest may reduce investor appeal compared to tax-exempt alternatives.

Why This Matters for Investors

The bond issuance aligns with NHPC’s role as a key player in India’s push for hydropower, which accounts for 12% of the country’s installed renewable capacity. With Prime Minister Narendra Modi’s target of 500 GW of renewable energy by 2030, NHPC’s projects are strategically positioned.

The improved EBITDA margins and rising revenue signal resilience, even as net profits fluctuate. The private placement avoids diluting equity, preserving shareholder control while accessing capital at potentially favorable rates.

Conclusion

NHPC’s proposed ₹20 billion bond issuance reflects a balanced approach to capital management, leveraging its creditworthiness to fund growth. While the net profit decline is a concern, the strong EBITDA performance and improving margins suggest operational stability.

Investors should monitor the bond terms post-April 23 approval, particularly interest rates and tenor, to assess the cost of capital. The private placement’s focus on institutional investors may also indicate confidence in NHPC’s credit profile. For now, the move positions the company to capitalize on India’s renewable energy boom, making it a compelling play on hydropower’s resurgence.

In a sector where long-term contracts and government backing provide stability, NHPC’s strategic financing step appears prudent—a blend of caution and ambition in an evolving energy landscape.