India’s power equipment sector is experiencing a seismic shift. The government has granted a two-year exemption to four Chinese-linked manufacturers—TBEA Energy, Nanjing Electric India, New Northeast Electric India, and Taikai Electric (India)—allowing them to bid on critical government power projects. This move, targeting essential projects worth approximately ₹25,000 crore, aims to address severe supply chain bottlenecks. Power transmission projects face a roughly 40% shortfall in transformers and reactors over the next three years, with transformer costs having doubled in the last seven years. The policy is explicitly not a precedent but a tactical response to national energy security needs.
The market reaction has been starkly divergent. Shares of international players crashed—GE Vernova T&D India slumped around 10%, Hitachi Energy India tumbled nearly 8%, and Siemens Energy India declined over 6%. In contrast, Bharat Heavy Electricals Limited (BHEL) witnessed increased institutional interest. This split stems from fundamentally different competitive positions and regulatory relationships.
BHEL’s unique positioning makes it a net beneficiary of this policy shift. Unlike its multinational competitors, BHEL received specific authorization to procure 21 types of critical equipment from China. This provides a direct margin expansion lever—analysts estimate a 200-300 basis point improvement in project-level margins and a potential 12-15% reduction in raw material costs. Furthermore, the exemption is expected to reduce project lead times by 6-9 months, alleviating execution delays that have plagued the sector since 2020.
Fundamentally, BHEL is executing a strong turnaround. For FY26, the company reported a net profit that nearly tripled to ₹1,577.95 crore, with total income reaching ₹33,782.18 crore. Its order book stands at a robust ₹2.4 trillion, marking a 22% year-on-year increase and providing over seven years of revenue visibility. This massive backlog significantly insulates BHEL from immediate competitive pressure on new order inflows. The company also boasts technology leadership, being the market leader in both subcritical and supercritical segments, and is developing Advanced Ultra Supercritical (AUSC) technology targeting 46% plant efficiency.
For international players, the threat is more direct. Chinese firms possess significant competitive advantages rooted in scale and cost structure. They benefit from mature supply chains built over two decades and lower manufacturing costs due to established infrastructure. In global markets, Chinese companies are known for aggressive pricing strategies, often underbidding competitors to secure market share.
This creates immediate margin pressure. Current operating levels are healthy—Hitachi Energy’s EBITDA margin expanded to 18.3% in FY26, GE Vernova operates in the mid-20s, and Siemens Energy is around 10%. However,
The threat is most acute in standard equipment segments like transformers and switchgear, where Chinese cost advantages are most pronounced.
The impact on order books is a critical concern. Jefferies expects transmission capex to rise 2.2x to ₹5.9 lakh crore over FY26-FY30, but the composition of winners could shift. Hitachi Energy and GE Vernova have strong order books—₹29,600 crore and ₹21,500 crore respectively—but future inflows face headwinds. GE Vernova is already seeing export weakness, with order flow falling 64% year-on-year in FY26, increasing its reliance on a more competitive domestic market.
The stock market crash reflects investor fears of sustained margin erosion and earnings downgrades. Valuations were rich before the news—Hitachi Energy trades at 152x P/E, GE Vernova at 100x, and Siemens Energy at 96x. These premiums leave little room for disappointment. Investors are rapidly re-pricing these stocks, factoring in lower growth trajectories and compressed margins. The 9-10% decline is a causal reaction to these revised earnings outlooks, with sentiment-driven selling amplifying the initial fundamental shock.
Conversely, investors view BHEL through a different lens. They see a company leveraging regulatory arbitrage to drive margin expansion while its strong order book provides a safety net. The valuation framework for BHEL is shifting from a troubled PSU to a turnaround story with policy tailwinds, potentially supporting a re-rating even as peers de-rate.
The policy decision itself is a calibrated balancing act. It addresses critical supply shortages that threaten India’s 500 GW non-fossil fuel capacity target by 2030. However, it is implemented with strict safeguards—eligibility is restricted to firms with local manufacturing units, and participation is on a case-by-case basis for essential projects only. National security concerns remain paramount, particularly for transmission equipment and grid automation, where domestic preference is likely to persist.
Looking ahead, the competitive landscape will bifurcate. Segments relying on cost competitiveness, such as standard transformers, will see intense pricing battles. High-technology segments like HVDC and smart grid, where Hitachi Energy holds a 49% market share and GE Vernova 23%, offer more protection due to technical barriers. Success will depend on operational excellence, technology differentiation, and the ability to navigate this new, more complex regulatory environment. For BHEL, the path is clearer; for its multinational rivals, the challenge has just begun.
