The next investment frontier for PE firms in India’s power sector

Actis invested $200 million in a joint venture with EDF India in February that will deploy smart meter infrastructure in the country. 

Singapore’s GIC invested ₹519 crore in Jaipur-based Genus Power Infrastructures in July 2023. They agreed to set up a platform to install smart meters and provide associated services, committing to an initial pipeline with a capital outlay of about $2 billion.

The government will invest an estimated $30 billion to install 250 million smart meters in the country, GIC and Genus said in July 2023. 

I Squared Capital invested $100 million for a controlling stake in Polaris Smart Metering in February 2023. IoT-based smart metering company Probus raised $3 million in March 2023 and $5 million in February 2025 from Unicorn India Ventures. Kimbal Technologies raised $5 million in a maiden funding round led by Niveshaay in March 2024.

Smart metering is rapidly emerging as a compelling gateway for private investment in India’s power sector, said Abhishek Bansal, a partner at Actis, a private equity firm focused on infrastructure and energy.

What’s driving the interest?

Smart meters are digital devices that provide accurate and live consumption data, allowing utilities and consumers to monitor and manage energy usage more effectively. They can improve operational efficiencies, reduce technical and commercial losses, and boost the finances of power distribution companies (discoms).

What makes the opportunity in India compelling, Bansal noted, is the way the government has structured the rollout: long-term agreements, annual payments, and an ambitious target of installing 250 million smart meters—all of which combine to create a strong foundation for investor confidence and long-term returns.

“It’s a well-structured, scalable opportunity that offers both impact and steady returns,” Bansal said.

According to Shivam Bajaj, founder of Avener Capital, an infrastructure-focused private equity advisory firm, meeting the goal of installing 250 million smart meters by March 2026 depends on two main groups of companies: advanced metering infrastructure service providers and original equipment manufacturers (OEMs).

The infrastructure service providers such as those set up by Actis-EDF India and GIC-Genus are awarded 10-year contracts by state utilities to install and maintain smart meters and associated infrastructure. They are paid annually and can also sell consumption data insights to utilities and government agencies.

OEMs, which design and manufacture the digital devices, also present significant growth opportunities over the next four to five years, Bajaj added.

“OEMs are expanding capacity, which will require fresh funding,” he said, adding that IntelliSmart, HPL, Genus and Polaris are already expanding their manufacturing units.

According to the power ministry’s 18 January update, projects covering 197.9 million smart consumer meters have been approved and about 115 million smart consumer meters have been awarded and are being installed.

“Of the 25 crore (250 million) meters that need to be replaced, installed capacity only stands at around 3 crore so far. You’ll need 3-5 well-funded OEMs capable of delivering 6-7 crore meters a year to meet targets in the next 4-5 years,” added Bajaj. “There is potential for another couple of platforms to be set up over the next couple of years and meter manufacturers are continuing to invest in capacity expansion.”

The case for smart meters

Most homes still use analog meters, which track total usage and cannot support dynamic pricing based on time of use. Electricity costs vary with demand, but without smart infrastructure that includes smart meters, utilities cannot reflect this in customer billing prices, experts explained.

To address this, the government began modernizing India’s power grid about eight years ago and started a programme to replace analog meters with smart ones. Private companies are tasked with supplying, installing and maintaining meters in assigned regions, receiving payments from the government over 10 years, they said.

Discoms, which deliver electricity from transmission networks to consumers, issue tenders, award contracts, and are responsible for making timely payments to service providers.

Discoms initially faced several challenges implementing the smart meter project, including integrating their IT systems with meter data management systems, overcoming consumer hesitation and misinformation about smart meters, raising awareness, and addressing data security concerns.

“Now that integration challenges with discoms are easing and consumer resistance is lower, adoption is set to accelerate,” said Bajaj.

However, delays or defaults in payments by discoms remain a risk for investors because they can disrupt cash flows and delay project execution. State-owned discoms had accumulated losses of ₹6.5 lakh crore by FY23, according to a Reserve Bank of India report in December.

“Implementation demands significant upfront capital, but established players in partnership with infra funds are meeting this demand,” said Prateek Jhawar, MD and head of infrastructure & real assets investment banking at Avendus Capital.

Returns and exit potential

Investors are betting that favourable smart meter policies and the execution momentum will translate into sustained growth.

“For investors, it’s a low-risk, annuity-like play, with government-backed payments over 10 years and expected annual returns of 15-16%,” Jhawar added.

According to Vipin Singhal, director at Anand Rathi Investment Banking, smart metering companies are expected to offer a return potential aligned with the sector’s robust growth, with installations projected to grow at ~25% CAGR over the next 3-4 years.

He sees companies targeting both mainboard and small and medium enterprise (SME) listings in the renewable energy and smart infrastructure space. Singhal cited the NSE SME IPO of Eppeltone Engineers, a maker of smart meters, as a case in point, highlighting how even small companies are now stepping into the spotlight.

Eppeltone Engineers shares listed at a 90% premium at ₹243.20 on the NSE SME on Tuesday.

“We see several engineering, procurement and construction/product players like GK Energy leveraging schemes such as PM-KUSUM and similar government schemes (installing solar pumps and smart water meters) to tap capital markets in the near future,” Singhal said.

PM-KUSUM refers to Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan, a scheme to promote solar energy in agriculture.

The sector is still in a nascent stage. Most companies are small and not yet ready for the public markets, and M&A activity remains limited.

“But I do expect consolidation to pick up in the next two to three years as the market matures,” Bansal of Actis noted.

For now, companies are primarily focused on securing smart meter contracts through ongoing government bids.