The September quarter results underscore KPI Green Energy's aggressive expansion strategy, with the company successfully scaling its renewable energy portfolio whilst maintaining healthy profitability metrics. Net sales reached a record ₹634.30 crores, representing sequential growth of 5.20% from Q1 FY26's ₹602.94 crores. Operating profit before depreciation, interest, and tax (PBDIT) excluding other income climbed to ₹225.54 crores, though margin compression of 158 basis points year-on-year to 35.56% reflects the capital-intensive nature of the company's expansion phase.
The quarter's performance positions KPI Green Energy as one of the fastest-growing players in India's renewable energy sector, with the company delivering a five-year sales compound annual growth rate (CAGR) of 101.13%. However, the stock's muted response—down 1.48% on November 7—suggests investors remain cautious about the company's elevated debt burden and premium valuation multiples in a rising interest rate environment.
Financial Performance: Impressive Top-Line Growth Masks Margin Pressures
KPI Green Energy's Q2 FY26 financial performance reflects the dual narrative of robust revenue expansion coupled with rising financial costs. The company's net sales of ₹634.30 crores marked a sequential improvement of 5.20% and a substantial 76.35% year-on-year surge, driven by increased power generation capacity and favourable power purchase agreements. On a half-yearly basis (H1 FY26), the company reported revenue of ₹1,237.24 crores, representing a 74.77% increase compared to H1 FY25's ₹707.69 crores.
Operating profit (PBDIT) excluding other income reached ₹225.54 crores in Q2 FY26, up 9.44% sequentially from ₹206.07 crores in Q1 FY26 and 68.72% higher than the year-ago quarter's ₹133.68 crores. However, the operating margin (excluding other income) contracted to 35.56% from 37.17% in Q2 FY25, reflecting higher operational expenditure associated with new project commissioning and employee cost inflation, which rose 27.14% YoY to ₹15.13 crores.
The company's profit after tax (PAT) of ₹116.64 crores in Q2 FY26 reflected a 66.78% year-on-year increase, though the consolidated net profit of ₹109.11 crores grew at a slightly slower pace of 56.03% YoY. The PAT margin stood at 18.39%, down 105 basis points from 19.44% in Q2 FY25, primarily due to the sharp escalation in interest expenses, which nearly doubled to ₹43.02 crores from ₹23.15 crores in the corresponding quarter last year.
| Quarter | Net Sales (₹ Cr) | QoQ % | YoY % | Net Profit (₹ Cr) | QoQ % | YoY % | PAT Margin |
|---|---|---|---|---|---|---|---|
| Sep'25 | 634.30 | +5.20% | +76.35% | 109.11 | +4.96% | +56.03% | 18.39% |
| Jun'25 | 602.94 | +5.89% | +73.25% | 103.95 | +4.85% | +57.24% | 18.46% |
| Mar'25 | 569.41 | +24.23% | +96.78% | 99.14 | +17.33% | +130.34% | 18.30% |
| Dec'24 | 458.36 | +27.44% | — | 84.50 | +20.84% | — | 18.58% |
| Sep'24 | 359.68 | +3.35% | — | 69.93 | +5.78% | — | 19.44% |
| Jun'24 | 348.01 | +20.27% | — | 66.11 | +53.60% | — | 19.00% |
| Mar'24 | 289.36 | — | — | 43.04 | — | — | 14.87% |
Tax expenses for Q2 FY26 amounted to ₹41.11 crores, reflecting an effective tax rate of 26.06%, marginally higher than the 25.39% recorded in Q1 FY26. Depreciation charges increased to ₹31.61 crores from ₹29.50 crores sequentially, in line with the company's expanding asset base. Other income contributed ₹6.85 crores during the quarter, down from ₹11.18 crores in Q1 FY26, indicating lower treasury income or one-time gains.
Operational Challenges: Rising Interest Burden Weighs on Profitability
Whilst KPI Green Energy's revenue trajectory remains impressive, the company's aggressive debt-funded expansion has resulted in a concerning escalation of interest costs. Interest expenses in Q2 FY26 surged to ₹43.02 crores, representing an 85.86% year-on-year increase from ₹23.15 crores in Q2 FY25 and a 12.62% sequential rise from Q1 FY26's ₹38.20 crores. This sharp increase reflects the company's growing debt burden, with long-term debt standing at ₹861.60 crores as of March 2025, more than doubling from ₹417.13 crores a year earlier.
The interest coverage ratio, measured as operating profit to interest, deteriorated significantly to 5.24 times in Q2 FY26 from 5.77 times in the previous quarter and 5.95 times in Q2 FY25. This declining trend raises concerns about the company's ability to service its debt obligations comfortably, particularly if revenue growth moderates or interest rates remain elevated. The average EBIT to interest coverage of 3.75 times over the past five years remains relatively weak compared to industry leaders, highlighting the capital-intensive nature of the renewable energy business.
⚠️ Debt Dynamics: A Double-Edged Sword
KPI Green Energy's debt-to-equity ratio has escalated to 0.34 on average over the past five years, with the company carrying ₹861.60 crores in long-term debt as of March 2025. Whilst this leverage has enabled rapid capacity expansion, the interest burden of ₹43.02 crores in Q2 FY26 consumed 19.08% of operating profit (excluding other income), up from 17.32% in Q2 FY25. The debt-to-EBITDA ratio of 3.09 times suggests moderate debt levels relative to cash generation, but rising interest rates could pressure margins further if not managed proactively.
On a positive note, the company's return on equity (ROE) remains healthy at 25.63% on average over the past five years, significantly outperforming the sector average and indicating efficient capital deployment. However, the latest ROE of 12.32% reflects the dilutive impact of recent equity capital raises, with share capital increasing from ₹60.28 crores in March 2024 to ₹98.45 crores in March 2025. The return on capital employed (ROCE) of 18.04% on average demonstrates the company's ability to generate returns above its cost of capital, though the latest ROCE of 14.44% suggests some erosion in capital efficiency.
The company's balance sheet reveals a substantial expansion in fixed assets to ₹2,360.90 crores as of March 2025 from ₹979.36 crores a year earlier, reflecting ongoing project commissioning. Current assets stood at ₹2,193.66 crores, with closing cash of ₹597.00 crores providing adequate liquidity to support working capital requirements. Trade payables of ₹420.10 crores remained stable compared to ₹416.61 crores in March 2024, indicating disciplined vendor payment management.
Industry Context: Riding the Renewable Energy Wave
KPI Green Energy operates in India's rapidly expanding renewable energy sector, which has benefited from strong government policy support, declining solar module costs, and increasing corporate demand for clean power. The company's business model focuses on developing and operating solar power projects under long-term power purchase agreements (PPAs), providing revenue visibility and stable cash flows. The sector has witnessed robust growth, with India's installed renewable energy capacity crossing 190 gigawatts as of 2025, driven by ambitious national targets to achieve 500 gigawatts of non-fossil fuel capacity by 2030.
However, the sector faces headwinds from rising module prices due to supply chain disruptions, land acquisition challenges, and grid integration issues. Additionally, the implementation of the Approved List of Models and Manufacturers (ALMM) has restricted sourcing options, potentially impacting project economics. KPI Green Energy's focus on rooftop and ground-mounted solar installations positions it well to capitalise on growing commercial and industrial demand, though competition from larger players and module price volatility remain key risks.
Competitive Positioning: Niche Player in a Crowded Market
With a market capitalisation of ₹9,941.06 crores, KPI Green Energy ranks as a small-cap player in the renewable energy space, significantly smaller than industry giants like Adani Green Energy and Tata Power Renewable. However, the company's five-year sales CAGR of 101.13% and EBIT CAGR of 76.72% demonstrate its ability to scale rapidly and capture market share. The company's average ROE of 25.63% compares favourably against peers, reflecting superior capital efficiency and project execution capabilities. Nevertheless, the company's high debt-to-EBITDA ratio of 3.09 times and weak interest coverage of 3.75 times suggest higher financial risk compared to better-capitalised competitors.
The renewable energy sector's growth prospects remain intact, supported by favourable policy frameworks including production-linked incentives for solar manufacturing, renewable purchase obligations for distribution companies, and increasing corporate commitments to achieve carbon neutrality. KPI Green Energy's established project pipeline and operational track record position it to benefit from these tailwinds, though execution risk and financing costs remain critical variables to monitor.
Peer Comparison: Premium Valuation Reflects Growth Expectations
KPI Green Energy trades at a significant premium to most peers in the power sector, reflecting investor confidence in its growth trajectory and profitability metrics. The company's price-to-earnings (P/E) ratio of 28.14 times compares favourably to the industry average P/E of 34 times but remains substantially higher than established players like CESC (16.03x) and Nava (16.46x). The company's price-to-book (P/BV) ratio of 3.87 times is amongst the highest in the peer group, with only Waaree Renewables trading at a comparable multiple of 1.87 times.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| KPI Green Energy | 28.14 | 3.87 | 25.63 | 0.34 | 0.14 |
| CESC | 16.03 | 0.18 | 10.17 | 0.14 | 5.99 |
| Nava | 16.46 | 2.26 | 12.75 | -0.08 | 1.01 |
| Reliance Power | NA (Loss Making) | 1.04 | 0.37 | 0.87 | — |
| Waaree Renewables | 34.88 | 1.87 | 36.64 | -0.35 | 0.08 |
| JP Power Ventures | 16.33 | 0.10 | 3.86 | -0.11 | — |
The valuation premium is partially justified by KPI Green Energy's superior return on equity of 25.63%, which significantly outpaces the peer group average of approximately 13%. The company's debt-to-equity ratio of 0.34 indicates moderate leverage compared to peers, though the rising interest burden remains a concern. The dividend yield of 0.14% is amongst the lowest in the sector, reflecting the company's preference to retain earnings for growth investments rather than distribute cash to shareholders.
Waaree Renewables, trading at a P/E of 34.88 times, represents the closest comparable in terms of growth profile and valuation premium. However, Waaree's superior ROE of 36.64% and negative debt-to-equity ratio (indicating net cash position) justify its higher multiple. In contrast, traditional power utilities like CESC offer higher dividend yields (5.99%) but lower growth prospects, explaining their discounted valuations. KPI Green Energy's positioning as a high-growth, moderately leveraged renewable player warrants a premium to traditional utilities but raises questions about sustainability at current multiples.
Valuation Analysis: Expensive Entry Point Despite Growth Credentials
KPI Green Energy's current valuation reflects optimistic expectations for continued high growth, but multiple metrics suggest the stock is trading at stretched levels. The company's P/E ratio of 28.14 times, whilst below the industry average of 34 times, remains elevated compared to historical norms and peer group medians. The price-to-book value of 3.87 times indicates the market is pricing in substantial future earnings growth and return on equity expansion, a challenging proposition given the capital-intensive nature of the business.
The enterprise value-to-EBITDA (EV/EBITDA) multiple of 17.20 times appears reasonable for a high-growth renewable energy company, though it leaves limited margin of safety should growth disappoint or margins compress further. The EV-to-sales ratio of 5.51 times reflects the market's confidence in the company's ability to maintain healthy profitability, but this metric has expanded significantly from historical levels as the stock price has outpaced revenue growth.
The PEG ratio of 0.40 suggests the stock is attractively valued relative to its growth rate, with the five-year sales CAGR of 101.13% significantly exceeding the P/E multiple. However, this metric assumes growth rates can be sustained at current levels, a questionable assumption given the law of large numbers and increasing competitive intensity. The company's valuation grade has been classified as "Very Expensive" since June 2023, with brief interludes of "Expensive" rating, indicating persistent premium pricing.
The stock's 52-week range of ₹312.95 to ₹589.00 highlights significant volatility, with the current price of ₹503.75 representing a 14.47% decline from the peak. This correction reflects broader market concerns about elevated valuations in the renewable energy sector and rising interest rate environment. Fair value estimation suggests limited upside from current levels, with the stock trading close to intrinsic value based on discounted cash flow analysis assuming conservative growth and margin assumptions.
Shareholding Pattern: Stable Promoter Holding, Modest Institutional Interest
KPI Green Energy's shareholding pattern reveals a stable promoter base and gradually increasing foreign institutional investor (FII) interest, though overall institutional participation remains modest. Promoter holding stood at 45.49% as of September 2025, unchanged from June 2025 and marginally lower than 45.50% in December 2024. The stable promoter stake provides confidence in management's long-term commitment, though the relatively low promoter holding compared to many Indian companies reflects the dilution from equity capital raises to fund expansion.
| Quarter | Promoter | Change | FII | Change | MF | Change | Insurance |
|---|---|---|---|---|---|---|---|
| Sep'25 | 45.49% | 0.00% | 9.16% | +0.90% | 0.26% | +0.01% | 0.30% |
| Jun'25 | 45.49% | 0.00% | 8.26% | +0.22% | 0.25% | -0.01% | 0.30% |
| Mar'25 | 45.49% | -0.01% | 8.04% | -0.23% | 0.26% | -0.06% | 0.30% |
| Jan'25 | 45.50% | 0.00% | 8.27% | -0.51% | 0.32% | 0.00% | 0.30% |
| Dec'24 | 45.50% | — | 8.78% | — | 0.32% | — | 0.30% |
Foreign institutional investor (FII) holding increased to 9.16% in September 2025 from 8.26% in June 2025, representing a sequential addition of 0.90 percentage points. This gradual accumulation by 98 FII entities suggests growing international recognition of the company's growth potential. However, the absolute FII holding remains modest compared to larger-cap renewable energy companies, potentially limiting liquidity and institutional support during market downturns.
Mutual fund (MF) participation remains negligible at 0.26%, with only six mutual fund schemes holding positions as of September 2025. This limited domestic institutional interest raises concerns about the stock's appeal to sophisticated investors who conduct rigorous due diligence. Insurance company holdings stood at 0.30%, unchanged over recent quarters, whilst other domestic institutional investor (DII) holdings declined sharply to 0.21% from 1.08% in March 2025, indicating some institutional profit-taking at elevated valuations.
Non-institutional holdings, comprising retail and high-net-worth individuals, accounted for 41.39% of equity in September 2025, down from 42.26% in the previous quarter. The high proportion of non-institutional holdings contributes to stock price volatility, as retail investors tend to exhibit higher trading activity and emotional decision-making compared to institutional investors. The absence of significant promoter pledging provides comfort regarding financial stability, though detailed pledge data was not available in the latest filings.
Stock Performance: Exceptional Long-Term Returns, Recent Volatility
KPI Green Energy has delivered extraordinary returns to long-term shareholders, with the stock generating a five-year return of 9,151.61%, vastly outperforming the Sensex's 98.76% gain over the same period. This translates to an alpha of 9,052.85 percentage points, positioning the stock amongst the top performers in the Indian equity market over the past half-decade. The three-year return of 525.45% and two-year return of 165.30% similarly demonstrate consistent wealth creation, driven by the company's rapid revenue growth and expanding profitability.
| Period | Stock Return | Sensex Return | Alpha | Power Sector |
|---|---|---|---|---|
| 1 Day | -1.48% | -0.06% | -1.42% | — |
| 1 Week | -5.93% | -0.80% | -5.13% | — |
| 1 Month | +16.69% | +1.63% | +15.06% | — |
| 3 Month | -1.80% | +3.28% | -5.08% | — |
| 6 Month | +38.34% | +3.12% | +35.22% | — |
| YTD | -6.43% | +6.56% | -12.99% | — |
| 1 Year | -3.99% | +4.68% | -8.67% | -27.02% |
| 2 Years | +165.30% | +28.21% | +137.09% | — |
| 3 Years | +525.45% | +36.09% | +489.36% | — |
| 5 Years | +9,151.61% | +98.76% | +9,052.85% | — |
However, near-term performance has been lacklustre, with the stock declining 3.99% over the past year compared to the Sensex's 4.68% gain, resulting in negative alpha of 8.67 percentage points. Year-to-date returns stand at -6.43%, significantly underperforming the Sensex's 6.56% advance. Notably, KPI Green Energy has outperformed the broader power sector, which declined 27.02% over the past year, highlighting the company's relative strength within a challenging sectoral environment.
Recent volatility has intensified, with the stock declining 5.93% over the past week and 1.48% on November 7 alone. The three-month return of -1.80% contrasts sharply with the Sensex's 3.28% gain, suggesting profit-booking by investors following the strong six-month rally of 38.34%. The stock's high beta of 1.35 indicates above-market volatility, with price movements amplified relative to broader market trends. The risk-adjusted return over one year stands at -0.09, classified as "high risk, low return," reflecting the stock's elevated volatility of 45.90% compared to the Sensex's 12.39%.
Technical indicators present a mixed picture, with the overall trend classified as "mildly bullish" as of November 4, 2025, downgraded from "bullish" previously. The stock trades above its 50-day moving average of ₹481.93 and 200-day moving average of ₹458.80, providing medium-term support. However, it remains below the 5-day moving average of ₹528.90 and 20-day moving average of ₹491.66, indicating short-term weakness. Delivery volumes have increased 81.25% over the trailing one-month period, suggesting genuine investor accumulation rather than speculative trading.
Investment Thesis: Quality Growth at a Premium Price
KPI Green Energy presents a compelling growth story underpinned by strong execution capabilities, healthy profitability metrics, and exposure to India's booming renewable energy sector. The company's five-year sales CAGR of 101.13% and EBIT CAGR of 76.72% demonstrate its ability to scale operations whilst maintaining profitability. The average return on equity of 25.63% significantly exceeds the cost of equity, indicating value creation for shareholders. The company's quality grade of "Average" reflects its solid long-term financial performance, though it falls short of "High Quality" classification due to weak interest coverage and elevated debt levels.
The financial trend remains "Positive" for Q2 FY26, with the company achieving record quarterly revenue and profitability. Key positive factors include highest-ever net sales of ₹634.30 crores, PBDIT of ₹225.54 crores, and PAT of ₹109.11 crores. However, concerning trends include the highest quarterly interest expense of ₹43.02 crores and lowest operating profit-to-interest coverage of 5.24 times, highlighting the growing financial burden from debt-funded expansion.
The technical trend of "Mildly Bullish" suggests cautious optimism, with the stock maintaining support above key moving averages but experiencing near-term selling pressure. The valuation remains "Very Expensive," with the stock trading at premium multiples across P/E, P/BV, and EV/EBITDA metrics. This expensive valuation limits upside potential and increases downside risk should the company fail to meet aggressive growth expectations or encounter operational challenges.
"KPI Green Energy's impressive growth trajectory is undeniable, but investors must weigh whether the premium valuation adequately compensates for execution risks and rising financial leverage in an increasingly competitive renewable energy landscape."
Key Strengths & Risk Factors
KEY STRENGTHS
- Exceptional Growth Trajectory: Five-year sales CAGR of 101.13% and EBIT CAGR of 76.72% demonstrate consistent execution and market share gains
- Superior Capital Efficiency: Average ROE of 25.63% significantly exceeds sector benchmarks, indicating efficient capital deployment and strong profitability
- Record Quarterly Performance: Q2 FY26 revenue of ₹634.30 crores and consolidated net profit of ₹109.11 crores represent all-time highs
- Sector Tailwinds: Positioned to benefit from India's ambitious renewable energy targets and growing corporate demand for clean power
- Stable Promoter Base: Consistent 45.49% promoter holding provides confidence in long-term strategic commitment
- Rising FII Interest: Sequential increase in foreign institutional holding to 9.16% indicates growing international recognition
- Healthy Liquidity: Closing cash of ₹597.00 crores as of March 2025 provides adequate buffer for working capital and debt servicing
KEY CONCERNS
- Elevated Debt Burden: Long-term debt of ₹861.60 crores has more than doubled in one year, with interest costs surging 85.86% YoY to ₹43.02 crores in Q2 FY26
- Margin Compression: Operating margin (excluding other income) contracted 161 bps YoY to 35.56%, whilst PAT margin declined 105 bps to 18.39%
- Weak Interest Coverage: Operating profit-to-interest ratio of 5.24 times in Q2 FY26 represents the lowest level in recent quarters, raising debt servicing concerns
- Premium Valuation: P/E of 28.14x and P/BV of 3.87x leave limited margin of safety; stock classified as "Very Expensive" since June 2023
- Low Institutional Participation: Mutual fund holding of just 0.26% and declining DII holdings suggest limited domestic institutional conviction
- High Volatility: Beta of 1.35 and volatility of 45.90% indicate above-market price swings; recent 14.47% correction from 52-week high
- Minimal Dividend Income: Dividend yield of 0.14% provides negligible income support; payout ratio of 1.68% reflects growth-oriented capital allocation
Outlook: What to Watch
POSITIVE CATALYSTS
- Capacity Expansion: Continued commissioning of new solar projects driving revenue growth and economies of scale
- Margin Stabilisation: Operating margins holding above 35% despite expansion phase; potential for improvement as projects mature
- Debt Refinancing: Opportunities to refinance high-cost debt at lower rates as company establishes track record
- Institutional Accumulation: Gradual increase in FII holding suggests growing institutional confidence
- Sectoral Momentum: Government policy support and corporate sustainability commitments driving renewable energy adoption
RED FLAGS
- Rising Interest Burden: Interest costs consuming increasing proportion of operating profit; coverage ratio declining
- Valuation Compression Risk: Any growth disappointment could trigger sharp multiple de-rating given expensive valuation
- Execution Challenges: Rapid expansion increases risk of project delays, cost overruns, or operational issues
- Module Price Volatility: Rising solar module costs could pressure project economics and margins
- Institutional Caution: Low mutual fund and DII participation suggests sophisticated investors remain wary
Looking ahead, KPI Green Energy's ability to sustain its growth momentum whilst managing financial leverage will be critical. Investors should monitor quarterly interest coverage ratios, operating margin trends, and new project commissioning timelines. The company's success in refinancing debt at favourable rates and maintaining healthy cash flows will determine its capacity to continue expanding without excessive equity dilution. Any deterioration in asset quality, project execution delays, or margin compression beyond current levels would warrant a reassessment of the investment thesis.
The stock's technical setup suggests a period of consolidation, with support at the 200-day moving average of ₹458.80 and resistance at the recent high of ₹589.00. A sustained break above ₹530 could signal resumption of the uptrend, whilst a breach below ₹450 would indicate deeper correction. Volume patterns and institutional activity will provide important clues about the stock's near-term direction.
The Verdict: Solid Business, Stretched Valuation
Score: 57/100
For Fresh Investors: Not recommended for fresh purchases at current valuations. Wait for a meaningful correction towards ₹420-450 levels (15-20% downside) to establish positions. The company's growth credentials are strong, but the risk-reward equation is unfavourable at a P/E of 28.14x and P/BV of 3.87x.
For Existing Holders: Continue to hold with a trailing stop-loss at ₹450 (10% below current price). The company's operational momentum remains intact, and long-term growth prospects justify holding through near-term volatility. Consider booking partial profits if the stock rebounds to ₹550-570 levels to reduce position size and lock in gains.
Fair Value Estimate: ₹440-480 (12-5% downside from current levels)
Rationale: KPI Green Energy demonstrates strong execution capabilities, healthy profitability metrics, and exposure to a structurally growing sector. However, the premium valuation, rising debt burden, and margin compression concerns limit upside potential. The stock merits a HOLD rating for existing investors but requires a more attractive entry point for fresh capital deployment. Sustained earnings growth and successful debt management could justify current valuations, but execution risks and expensive multiples warrant caution.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
