Smart Meter Makers Set for 20% Revenue Growth in FY26 Despite Working Capital Strain

Smart electric meter manufacturers in India are poised for another strong year, with revenues expected to grow by around 20% in the current financial year—mirroring last year’s performance—to reach approximately ₹9,000 crore. According the Crisil Ratings, The surge comes on the back of smoother implementation of the Smart Meter National Programme (SMNP), which aims to replace 25 crore traditional electricity meters with more efficient, prepaid smart meters.

The boost in revenue will eventually rise the sector's operating profitability as well. The credit rating agency also projected margins to be improved by 75-80 basis points (bps) to nearly 13% in FY26. 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. With improved cash flows limiting dependence on debt to support increase in working capital requirement 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, establishing of 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. 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,” says Nitin Kansal, director at Crisil Ratings.

Notably, the higher executions will also spike the working capital requirement by 25-30% this fiscal. The smart electric meter cash conversion cycle takes 170-180 days as it involves inspection of the goods, delivery and payment post installation. The payments are linked to completion of the formalities and conditions of AMISPs, leading to the possibility of stretched payments. While the establishment of DDF and criticality of SMNP for discoms are expected to keep payment delays in check, its implementation and the actual extent of payment delays remain monitorables.

“Overall, we believe cash flows of smart meter manufacturers will rise, limiting their reliance on debt to support increased working capital requirement. Moreover, manufacturers have no major debt-funded capex plans as they had expanded capacities in the past two years in anticipation of higher order flow. Hence, credit profiles in the segment will remain stable,” said Smriti Singh, associate director at Crisil Ratings.

Financial indicators such as gearing and interest coverage are expected to stay within comfortable ranges of 0.50-0.55 times and 3.0-4.0 times, respectively, over the next two years.

"All said, the pace of installation of smart electric meters by discoms [distribution company], timely payment collection and any geopolitical event disrupting the supply of semiconductors will bear watching," the rating agency noted.

SMNP was launched by the government in 2017, providing a ₹90,000 crore revenue opportunity for the industry. Under the programme, each state discom awards contracts for installing smart electric meters to an Advanced Metering Infrastructure Service Provider (AMISP), which procures them from smart electric meter manufacturers.

Tendering for more than half the target has been completed and discoms are likely to accelerate the implementation of 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.