HV T&D ordering plateauing after stellar execution, private capex recovery gaining momentum across data centres, metals and O&G
The capital goods and engineering sector in India has been one of the strongest performers in the market over the last two years — and Q1FY27 confirms that the execution is still strong. But Nuvama Institutional Equities’ Q1FY27 sector review introduces a nuance that investors need to hear: the High Voltage T&D trade — which has driven the lion’s share of the sector’s outperformance — is plateauing on ordering momentum, while a different set of private capex names is only just beginning to recover. The sector is rotating, and positioning accordingly matters.
The HV T&D Quarter — Outstanding Execution, Moderating Orders
The heavy voltage transmission and distribution names delivered a genuinely impressive Q1FY27. Aggregate revenue rose 41.9% year-on-year — the backlog built over the last two to three years of strong ordering is converting into revenue at pace. EBITDA margins expanded 220 basis points year-on-year to 21.5% — a level that reflects the operating leverage available on large, complex projects as they move into peak execution. These are strong numbers.
The concern is on the order inflow side. Consolidated inflows grew just 11.1% year-on-year — a sharp deceleration from the 40%+ ordering growth rates that characterised FY25 and FY26. “Power T&D ordering moderated, with consolidated inflows rising just 11.1% YoY,” Nuvama notes — and the near-term pipeline does not offer easy reassurance. Beyond the Barmer HVDC order in FY27 and the Lakadia-Alephata project in FY28, HVDC visibility is limited. The plateauing of ordering does not undermine near-term earnings — the backlog is large enough to sustain revenue growth for 18-24 months — but it does limit the case for further multiple expansion in a sector already trading at 50-60x FY28 earnings.
“Peak valuations limit room for disappointment for GVTD and Hitachi Energy,” Nuvama warns — a pointed observation that companies priced for perfection have less buffer when any metric disappoints. Within the HV T&D space, Nuvama prefers ENRIN and CG Power, where “stronger operating performance and multiple options offer scope for positive surprise.”
The HVDC Wildcard
The Barmer HVDC order — India’s next large HVDC transmission project — remains the single most important near-term catalyst for the HV T&D sector. Nuvama is explicit that this is an either/or situation: “Chunky HVDC optionality remains key near-term trigger for either GVTD or Hitachi Energy, depending on who bags the Barmer HVDC order.”
The winner gets a substantial order that provides years of high-value revenue visibility. The loser faces a valuation that was partly pricing in that win. Investors holding either stock ahead of the award announcement are taking a binary position on a procurement decision.
The demand drivers are specific and diversified: data centres, metals, oil and gas, and renewables. The RBI’s capacity utilisation figures — remaining above 75% in March 2026 — are the macroeconomic signal that private capex typically follows. H2FY26 BSE500 capex accelerated to approximately 15% year-on-year, providing early evidence that India Inc. is beginning to invest again. Management commentary across non-power companies points to improving inquiry pipelines in commercial real estate, semiconductors and electronics — categories that are at the earlier stage of the capex revival than data centres and renewables.
The near-term challenge in the non-power names is margins. EBITDA margins contracted 320 basis points year-on-year to 11% — hit by commodity inflation from the West Asia-driven supply disruptions. “Non-power names saw resurgence in demand but commodity hit-led margin compression of 320bp YoY,” Nuvama notes — acknowledging that the earnings quality in Q1 was diluted by the input cost environment even as order momentum improved.
Why VAMP
Nuvama’s preference for VAMP — Voltamp Transformers — is built on two specific advantages. First, VAMP is showing early margin recovery relative to sector peers, suggesting its input cost management and pricing discipline are ahead of the curve. Second, its growth runway extends across industrial capex, renewable energy and data centres — three of the most active capex categories in India right now — providing revenue diversification that single-theme names lack.
At 25x FY28 earnings, VAMP trades at a meaningful discount to the 50-60x multiples seen across the HV T&D leaders — a discount that Nuvama views as unjustified given the company’s growth drivers and the margin recovery already beginning to show up. “We prefer VAMP due to early margin recovery and capex-led runway of growth from a combination of industrial capex, RE and data centres,” the report states — a combination of valuation support and operational momentum that is the preferred setup.
Why BHEL
BHEL at 30x FY28 earnings occupies the other end of the capital goods spectrum — a large PSU power equipment manufacturer whose recovery story is about operating leverage on a rising revenue base rather than premium growth. As BHEL’s thermal power plant execution ramp continues — and as the pipeline of new orders in defence, nuclear and non-thermal segments builds — margins are expected to recover significantly from today’s depressed levels. “We prefer BHEL on operating leverage driven margin recovery in FY27,” Nuvama states — a thesis that does not require multiple expansion from current levels to generate returns, only earnings delivery.
L&T — Long-Term Conviction
Nuvama also finds L&T attractive — but frames it as a longer-term position contingent on West Asia crisis resolution. L&T’s Middle East business — which represents a significant portion of its international order book — has been affected by regional conflict uncertainty. As that situation stabilises, L&T’s diversified engineering capability, strong domestic order pipeline and international execution track record should drive a re-rating. For investors with a longer horizon, the current price offers an attractive entry into one of India’s most quality-consistent engineering franchises.
The Sector Positioning Summary
| Sub-Sector | Nuvama View | Preferred Names | Avoided/Cautious |
|---|---|---|---|
| HV T&D | Structurally positive, near-term plateau | ENRIN, CG Power | GVTD, Hitachi Energy (peak valuations) |
| Private Capex / Non-Power | Recovery gaining momentum | VAMP, BHEL | ABB, Siemens, Cummins (restrictive valuations) |
| Diversified Engineering | Long-term positive | L&T (post West Asia) | — |
India’s capital goods and engineering sector is in a rotation — from the HV T&D names that led the last two years of outperformance to the private capex recovery names that are only beginning to inflect. The smart positioning is not to abandon the power infrastructure theme entirely — the CEA’s 900GW roadmap and the HVDC pipeline ensure multi-year visibility — but to be selective within it, avoiding stocks at peak multiples where ordering momentum is plateauing.
Nuvama prefers VAMP at 25x FY28 earnings and BHEL at 30x FY28 earnings — both on recovering margins and execution-led growth — and finds L&T attractive on a longer horizon post West Asia crisis resolution.