Nomura: Indian Power Stock Selloff Overblown
By ThePip Desk
Nomura believes the recent selloff in Indian power equipment stocks is an overreaction to a limited Chinese exemption, arguing it won’t significantly impact domestic players.
🔥 Main Takeaway
Nomura asserts the recent market dip in Indian power equipment stocks, including major players like GE Vernova T&D and CG Power, is an overblown reaction to a limited government exemption for a few China-origin manufacturers.
📌 What Happened?
The Indian government recently exempted four China-origin power equipment manufacturers from security clearance for two years, specifically TBEA Energy India, Nanjing Electric India, New Northeast Electric India, and Taikai Electric India.
This exemption allows these firms to bid on government and public-sector power contracts without the usual security checks under Public Procurement Order No. 4/GFR Rule 144(xi).
Following this announcement, a selloff occurred in Indian power equipment stocks, signaling investor concern over increased competition.
💰 Why It Matters
Nomura views the exemption as narrow, arguing it won’t significantly alter the competitive landscape for established Indian incumbents.
Historically, the four exempted companies collectively secured only 9% of Power Grid Corporation of India tenders between FY09 and FY20, even during unrestricted bidding periods, indicating limited competitive prowess.
Most of these exempted firms show uneven manufacturing readiness, with significant capacity primarily concentrated in TBEA Energy India, not spread across all four.
The policy is explicitly sunset-bound for two years, which Nomura believes is too short to incentivize major capacity expansion or fresh investments from these exempted players.
The exemption is also highly targeted, applying only to these four specific companies with existing Indian manufacturing facilities and limited to conventional transformers and gas-insulated switchgear (GIS).
👀 What to Watch Next
Investors should monitor if the two-year exemption truly limits capacity expansion or if any of the exempted firms make unexpected moves to scale up operations.
Keep an eye on the performance of diversified and export-oriented companies like GE Vernova T&D India and CG Power, which Nomura expects to remain well-insulated from this incremental competition.
This policy might inadvertently support faster execution of India’s transmission capital expenditure program by easing supply constraints, which could benefit the broader sector.