NHPC Limited: Navigating Disaster to Dividend Dominance in Hydroelectric Growth

NHPC Limited’s Q4 FY2025 results reveal a compelling narrative of recovery and resilience, with a 52% surge in net profit to ₹919.63 crore, driven by insurance payouts from the Teesta-V plant disaster. While full-year profits fell 16% due to operational disruptions, the company’s strategic execution of long-term hydropower projects—most notably the recently completed Parbati-II HE Project—positions it as a contrarian investment opportunity. Investors should focus on the balance between short-term insurance gains and long-term hydroelectric growth, alongside a dividend yield that now tops 2.3%, making NHPC a standout play in India’s renewable energy transition.

The Surge in Q4 PAT: Insurance Gains Offset Operational Pain

NHPC’s Q4 net profit skyrocketed due to a ₹250-crore second insurance payout for losses from the October 2023 Teesta-V flash flood, bringing total claims to ₹400 crore. This disaster, which caused ₹1,075.97 crore in damage, temporarily halted power generation and reduced FY25 EBITDA by 5.2%. Yet the insurance inflows masked deeper operational challenges, including margin contraction to 46.5% (from 60.97% in Q4 FY2024). While the Teesta-V plant is expected to resume partial operations by March 2025, full recovery remains delayed until Q3 FY2026.

Despite these headwinds, the Q4 results underscore NHPC’s ability to leverage insurance mechanisms and cost discipline to stabilize earnings—a critical factor for investors eyeing contrarian buys in a sector prone to natural disaster risks.

Strategic Resilience: Parbati-II’s Completion Fuels Long-Term Growth

The crown jewel of NHPC’s resilience is the full commissioning of the 800-MW Parbati-II project in April 2025. This milestone, delayed for decades due to geological challenges, now adds 3,074 million units (MU) of annual renewable energy capacity. Crucially, it boosts downstream Parbati-III’s output by 1,262 MU annually, driving ₹224.70 crore in incremental revenue by FY2026.

The project’s engineering feats—India’s longest hydropower tunnel (31.56 km) and world-record inclined pressure shafts—highlight NHPC’s technical prowess. Equally important is its socio-economic impact: ₹112 crore invested in local infrastructure, 1,361 jobs created (98% local hires), and ₹4 crore for healthcare upgrades in Kullu. These efforts align with India’s renewable energy targets and NHPC’s vision to become a 50-GW player by 2047.

Dividend Yield: A Contrarian’s Anchor in Volatility

NHPC’s dividend strategy offers stability amid earnings volatility. With a final dividend of ₹0.51 per share (supplementing an interim ₹1.40), the total yield at current prices (~₹82.45) stands at 2.3%—a compelling premium over many peers in the utilities sector. For income-focused investors, this yield is amplified by the company’s track record of prioritizing shareholder returns even during operational setbacks.

The dividend’s attractiveness is further bolstered by NHPC’s aggressive capital allocation: 300 MW of solar capacity online by August 2025 and partnerships like the 50-50 joint venture with APGENCO to develop pumped storage projects. These moves signal a diversification strategy that mitigates reliance on hydropower alone, reducing risk for long-term holders.

Valuation: Undervalued Amid Growth Catalysts

NHPC trades at a P/E ratio of 14.2x (FY2026 estimates), below its five-year average of 16.5x and undervalued relative to its renewable growth pipeline. With a 50th-anniversary milestone and a 23-GW capacity target by 2032, the stock could see upward momentum as macro tailwinds materialize:

• Government support: India’s push for 500 GW of renewables by 2030 will favor state-owned players like NHPC.
• Global hydro trends: U.S. hydropower generation is projected to rise 7.5% in 2025 (EIA), underscoring global demand for clean energy infrastructure.

Conclusion: A Buy for Contrarians, a Hold for the Long Game

NHPC’s Q4 results are a mixed bag, but its strategic execution of the Parbati-II project and dividend discipline make it a compelling buy at current levels. Investors should view the FY25 net profit decline as a temporary blip, not a trend, especially as insurance payouts and hydropower growth stabilize cash flows. With a dividend yield of 2.3%, a robust project pipeline, and India’s renewable push as tailwinds, NHPC offers asymmetric upside for those willing to look past short-term noise.

Invest Now: NHPC Limited’s blend of post-disaster recovery, dividend stability, and hydropower dominance makes it a standout contrarian play in India’s energy sector. Act before the market catches up.