Analysts at Bernstein said that artificial intelligence-driven data centre expansion could raise India's annual power demand growth from about 5.5% to 6%, according to Nikhil Nigania of Bernstein, who outlined his view of the sector in comments aired by CNBC-TV18. India has been positioning itself as a hub for AI and data centre investment, with technology firms and cloud providers announcing large-scale capacity buildouts, and Bernstein's estimate points to how that compute buildout translates into electricity consumption.

Nigania noted that a recent renewable energy tender priced below comparable thermal power represents a notable shift in India's power sector, signalling the increasing competitiveness of solar and other renewable sources relative to coal-based generation. For power producers and industrial groups such as NTPC, JSW Energy, and Adani Green, cheaper renewable tariffs affect the economics of new capacity decisions, while data centres — large, always-on loads — are typically anchor customers for such capacity. India's electricity demand has been setting records in recent years, driven by economic growth, electrification, and rising consumption during peak summer months, and the emergence of large-scale AI data centres is expected to add a new layer of demand on top of this trend.

He also flagged pressure on the loan books of Power Finance Corporation (PFC) and REC Ltd, the two state-owned power sector lenders, pointing to stress among distribution companies that borrow from these institutions. Distribution companies (discoms) in several Indian states have a long history of financial losses tied to under-recovery of costs and aggregate technical losses, a structural issue that has repeatedly required government-backed revival schemes; stress among these borrowers matters for lenders because discom loans are a significant part of PFC's and REC's portfolios.

Among companies in the sector, his top picks include Larsen & Toubro (L&T), JSW Energy, NTPC, and Adani Green Energy. L&T, as a major engineering and construction group, is among the companies seen as exposed to the capital expenditure cycle that grid and generation buildout entails, alongside the pure-play power producers on the list.

The comments come as India's peak power demand has repeatedly touched new highs, with grid operators projecting further records through 2026, underscoring the need for additional generation capacity across thermal, solar, and other renewable sources. How the gap between rising demand and discom financial health is managed — through tariffs, reform programmes, and financing — is likely to shape the pace of the capacity addition Bernstein describes.

Source: CNBC-TV18