A recent 7-8 percent selloff in shares of major Indian grid equipment manufacturers, including GE Vernova T&D India Ltd, CG Power and Industrial Solutions Ltd, Hitachi Energy India Ltd, and Siemens Energy India Ltd, has been labeled an “overreaction” by investment bank Nomura.
The market downturn followed the Ministry of Finance's decision to permit four China-origin manufacturers to bid for power tenders in India. However, Nomura argues that the actual competitive threat posed by these firms is significantly limited.
Understanding the Market Reaction
Market players interpreted the government's move as a substantial competitive threat, leading to a rapid selloff in listed power-equipment stocks. Nomura, however, highlighted that the order explicitly states it creates no precedent and is valid for only two years, signaling a targeted, time-boxed relief measure rather than a broad policy reversal.
The four exempted Chinese manufacturers are TBEA, Northeast Electric, Nanjing, and Taikai.
Nomura's Analysis: Why the Selloff is an Overreaction
Nomura's analysis points to several factors mitigating the perceived threat:
- Limited Historical Market Share: Between FY09 and FY20, these four Chinese manufacturers secured only about 9 percent of Power Grid Corporation of India Ltd (PGCIL)'s transmission-related tenders, even during periods of unrestricted bidding and despite often having a cost advantage.
- Structural Frictions: Significant barriers beyond security clearance limit achievable market share. These include stringent technical qualification thresholds, prior-supply-experience (PQR) criteria, demanding after-sales servicing expectations, rigorous testing and type-approval cycles, and a strong buyer preference for vendors with established execution track records on Indian grid specifications.
- Temporary and Non-Precedent Setting: The exemption is valid for a mere two years and cannot be treated as a precedent, according to the order's own text. This language, Nomura notes, is not used lightly by the government, indicating a specific, temporary arrangement.
- Local Manufacturing Requirement: The exemption applies exclusively to China-origin entities that already possess manufacturing units within India, not to Chinese imports broadly.
Impact on Specific Firms
Of the four Chinese firms, only TBEA Energy (India), with its large and established 20,000MVA transformer/reactor manufacturing base in Karjan, Gujarat, is likely operating at or near optimal utilization. Nomura's assessment suggests that Nanjing Electric India, New Northeast Electric India, and Taikai Electric India exhibit balance-sheet and operational signals—such as thin paid-up capitalization, small headcount, and declining revenue/profit—that are more consistent with sub-scale or underutilized operations. These firms would require fresh capital expenditure to absorb meaningful incremental order volumes.
Consequently, Nomura concludes that the effective near-term competitive threat from this notification is concentrated primarily in one name, TBEA Energy (India), rather than being spread evenly across all four Chinese firms.
Investment Ratings
In light of this assessment, Nomura has retained its 'Buy' rating on CG Power, with a target price of Rs 1,100, and on GE Vernova T&D India, with a target price of Rs 5,675. The firm does not cover Siemens Energy India and Hitachi Energy India.