Power Mech Projects Wins ₹970 Crore Vedanta Power O&M Contract

Market snapshot: Power Mech Projects Limited has secured an end-to-end operations and maintenance (O&M) contract valued at ₹970 crore from Vedanta Power Limited. The contract spans 60 months and covers the 2x600 MW Sakti Thermal Plant in Chhattisgarh. This long-term mandate significantly enhances the company's recurring revenue stream and future visibility.

Data Snapshot

• Power Mech Projects secured a ₹970 crore O&M order from Vedanta Power Limited for the Sakti Thermal Plant.
• The project execution window is set for 60 months from the issuance of the Letter of Intent or order confirmation.
• Power Mech Projects reported a consolidated revenue of ₹1,623.68 crore for Q1 FY27, representing a 26% growth YoY.

What's Changed

• Power Mech Projects' outstanding order book stood at ₹55,398 crore at the end of Q1 FY27, providing strong execution visibility.
• The basic contract value of the new Vedanta order is ₹890 crore, with an optional provision of ₹80 crore for additional services.

Key Takeaways

• The contract establishes a steady annual revenue run-rate of approximately ₹194 crore (derived) for the company's O&M division over 5 years.
• The order does not involve any related party transactions, and the promoters have no interest in Vedanta Power.
• The contract adds a significant recurring-revenue buffer to the company's project mix, mitigating capital-intensive construction risks.
• Power Mech Projects' actual market capitalization stands at approximately ₹7,635.7 crore (as stated in the source alert; not independently verified as ₹7,800 crore).

SAHI Perspective

End-to-end O&M contracts provide high-quality, annuity-like revenue compared to cyclical construction work. O&M projects traditionally command better margins and stable cash flows. Securing a contract for a 1,200 MW thermal plant reinforces Power Mech's leadership in the core thermal services space, proving its capability to manage utility-scale installations and offset near-term cost pressures seen in civil segments.

Market Implications

This contract cements Power Mech's relationships with the Vedanta Group, building on operations at other group facilities. The order contributes to an outstanding order book which has already reached ₹55,398 crore. Investors are likely to view this steady-margin addition favorably as the company navigates short-term EBITDA compression due to high material costs seen in Q1 FY27.

Trading Signals

Market Bias: Bullish

Securing a massive ₹970 crore long-term contract provides annuity-like revenue over 5 years. This complements the company's substantial order book of ₹55,398 crore, supporting long-term growth despite near-term EBITDA margin compression.

Overweight: Power Infrastructure, Operations and Maintenance Services

Trigger Factors:

• Formal execution and start of the Sakti Thermal Plant O&M contract.
• EBITDA margin recovery in upcoming quarters of FY27.
• Announcement of new domestic civil or O&M orders.

Time Horizon: Medium-term (3-12 months)

Industry Context

The Indian power sector is experiencing a significant push to maximize the plant load factors of existing coal-based plants, which increases the demand for professional O&M services. For Power Mech, O&M is a steady, predictable business that hedges against the lumpiness of its EPC and construction segments.

Key Risks to Watch

• O&M contracts are labor-intensive; any surge in technical manpower costs or royalty payments can squeeze margins.
• Performance penalty clauses in end-to-end O&M mandates if plant availability or efficiency metrics are not met.

Recent Developments

On August 8, 2026, Power Mech Projects reported its Q1 FY27 financial results, with consolidated revenue rising 26% YoY to ₹1,623.68 crore, while consolidated net profit grew 11% to ₹89.33 crore. Additionally, the company has an upcoming final dividend of ₹1.5 per share with an ex-dividend date of September 10, 2026.

Closing Insight

Power Mech Projects continues to balance its heavy civil portfolio with high-quality O&M mandates. This ₹970 crore contract with Vedanta Power is a textbook execution of that strategy, providing the predictable cash flows necessary to support the company's broader infrastructure expansion.

High Performance Trading with SAHI.