Key Points

According to Crisil, the key catalyst here is the resolution of initial implementation constraints seen under the Smart Meter National Programme (SMNP), through which the government aims to replace 25 crore conventional electricity meters with prepaid smart electric meters.

Launched in 2017, the SMNP provides a Rs 90,000 crore revenue opportunity for the industry. Under the programme, each state distribution company (discom) awards contracts for installing smart electric meters to an Advanced Metering Infrastructure Service Provider (AMISP), which procures them from smart electric meter manufacturers.

The high revenue growth will perk up the operating profitability of manufacturers by 75-80 basis points (bps) to nearly 13 per cent in fiscal 2026.

This is because smart electric meters have high margins due to increased functionality compared with conventional electric meters. This, along with rising capacity utilisation following accelerated order execution, will lead to better cost absorption, the report mentioned.

With improved cash flows limiting dependence on debt to support an increase in working capital requirements and moderate capital expenditure (capex), balance sheets will remain healthy, keeping credit profiles stable.

"Execution under SMNP will gather pace from this fiscal due to three reasons. First, the establishing of a direct debit facility (DDF) has been streamlined for AMISPs. Second, availability of semiconductors has improved following irregular supplies in the previous fiscals amid a global shortage because of Covid-led disruptions," said Nitin Kansal, Director, Crisil Ratings.

Third, the government notification to import Bureau of Indian Standards (BIS)- certified smart electric meters as part of the mandatory quality norms and to curb sub-standard imports augurs well for domestic manufacturers, he mentioned.

Tendering for more than half the target has been completed, and discoms are likely to accelerate the implementation of the SMNP to achieve the rollout in the next 4-5 years.

The target deadline of March 31, 2026, for the rollout of SMNP is likely to be extended due to the slow implementation of the scheme, as only around 2.5 crore smart electric meters were installed until March 2025 due to the initial hurdles.

"Overall, we believe cash flows of smart meter manufacturers will rise, limiting their reliance on debt to support increased working capital requirements," said Smriti Singh, Associate Director, Crisil Ratings.

- IANS