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Freedom251 › Blog › BRSR

How to Screen Indian Stocks for Lower Energy Costs and Better Margins

By Freedom251 Team · · 10 min read

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To find Indian companies with relatively low energy-cost exposure, screen companies within the same industry, extract comparable BRSR energy data, normalize units and reporting periods, and then test the result against three-year EBITDA, operating margin, cash flow, and production or revenue mix. Energy intensity is a useful cost-exposure proxy—not a measure of the electricity tariff a company actually pays and never a standalone buy signal.

What the screen should actually identify

A useful shortlist contains businesses whose energy burden is manageable and whose profitability remains resilient when power or fuel costs move. That requires two linked questions:

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  • How much energy does the company use relative to its turnover and, where available, its physical output?
  • Does the company convert its operations into durable margins and cash flow despite that energy exposure?

A low energy-intensity ratio can result from high-value products, outsourced manufacturing, a favorable product mix, or a change in the reporting perimeter. A high ratio can be normal for a commodity producer that has strong pricing power. Therefore, rank peers, inspect trends, and reconcile sustainability disclosures with financial statements before drawing an investment conclusion.

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Why energy intensity is only a proxy for power cost

BRSR energy intensity generally expresses energy consumed per rupee of turnover. It shows the quantity of energy associated with reported revenue, but it does not directly reveal the price paid for each unit. Two plants can report similar energy use while having very different costs because of state tariffs, open-access charges, demand charges, fuel contracts, renewable purchase agreements, hedges, or captive generation.

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Revenue intensity also changes when selling prices or product mix change. A manufacturer that sells more premium products may show lower energy per rupee even though its factories have not become more efficient. Conversely, inflation or a temporary fall in selling prices can make the ratio rise without a physical deterioration in equipment.

Use the ratio as an exposure indicator, then read the annual report’s management discussion and notes for the mechanism: tariff changes, fuel prices, utilization, captive or renewable power, hedging, customer pass-through, and one-off shutdowns or repairs.

1. Define a comparable Indian peer set

Start with one industry

Do not rank a software company against a cement, textile, chemical, paper, or metals producer. Their energy needs, accounting perimeters, asset ownership, and pricing models are fundamentally different. Begin with one industry and, if necessary, split it further by process or product—for example, integrated versus contract manufacturing or commodity versus specialty products.

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Fix the reporting period

Use the same fiscal year for every company, normally the year ended March 31 for Indian issuers. If a company publishes a nine-month or interim figure, label it separately and do not mix it with a full-year value. Record whether each figure is consolidated or standalone; a consolidated group may include offices, subsidiaries, or plants that are absent from a standalone statement.

Document inclusion rules

  • Include listed Indian companies with a BRSR or annual-report disclosure covering the chosen period.
  • Decide in advance whether to include companies with a materially different business mix.
  • Keep a notes column for acquisitions, disposals, plant closures, commissioning, and changes in the reporting boundary.
  • Do not discard a company solely because it reports a high ratio; high energy use may be economically attractive when pricing power is strong.

2. Build the energy dataset from BRSR and annual reports

For each issuer, capture the original value, unit, period, perimeter, and source page before doing any calculations. At minimum, collect the following fields.

Field What it tells you Required note
Total energy consumed Overall energy demand reported for the entity Record the unit (GJ, MJ, kWh, or another stated unit)
Renewable electricity Portion sourced from renewable generation or purchases Identify whether it is on-site, captive, open-access, a power-purchase agreement, or certificates when disclosed
Non-renewable electricity Grid or other fossil-linked electricity exposure Check whether purchased and self-generated power are combined
Fuel consumption Direct thermal and transport-energy exposure Record fuel type and whether the figure is estimated
Energy intensity per rupee of turnover Energy exposure relative to reported revenue Confirm rupee, million-rupee, or crore denominator and whether turnover is consolidated
Physical-output intensity Energy needed for a tonne, unit, litre, or other output measure Capture the output definition and production boundary
Assurance status Confidence and review level for the disclosure Separate reasonable or limited assurance from unaudited management data

“Energy intensity per rupee of turnover” is a required comparison field in the cited BRSR-style disclosures. A Bombay Burmah Trading Corporation annual-report footnote for 2024–25 states that its calculations follow Part A, Section 1(I) of the December 2024 Industry Standards Note on BRSR Core and SEBI Circular SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122. Treat that wording as a description of the calculation framework, not proof that every issuer has identical boundaries or data quality.

3. Normalize units and reporting boundaries

Keep the source unit and a normalized unit

Do not silently convert GJ, MJ, and kWh. Convert only when the issuer supplies, or the cited standard clearly establishes, the conversion basis. Preserve the original unit in a notes column so another analyst can reproduce the calculation.

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A practical data sheet has separate columns for original value, original unit, normalized value, conversion factor, and conversion source. If no defensible conversion basis is available, compare companies using the same original unit or mark the normalized field as not stated rather than guessing.

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Match numerator and denominator

Check that energy and turnover cover the same entity and period. A consolidated energy numerator divided by standalone revenue will create a misleadingly high ratio; the reverse will make energy look artificially low. Confirm whether turnover is stated in rupees, millions, or crores before calculating.

Separate calendar effects

Energy-intensive businesses can be seasonal. Compare a full fiscal year with another full fiscal year, or use the same nine-month window across all peers. Note extraordinary outages, monsoons, heat waves, or temporary capacity additions that could distort a single period.

4. Calculate the metrics that matter

Revenue-based intensity

Use the issuer’s reported definition wherever possible:

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Energy intensity per rupee of turnover = total energy consumed ÷ reported turnover

Keep the unit in the output, such as GJ per ₹ crore, and do not compare ratios that use different energy or revenue scales.

Physical-output intensity

When production data is available, calculate:

Physical intensity = total energy consumed ÷ tonnes (or other stated output unit)

This is often more informative for a plant business because it is less affected by selling prices and product mix. It is not interchangeable across companies that define output differently—for example, finished tonnes versus total processed tonnes.

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Renewable share

Where the components are disclosed, calculate renewable energy as a percentage of total energy or electricity, making clear which denominator is used. A high renewable-electricity share does not automatically mean low total energy cost: contracted renewable power may include transmission and banking charges, while a captive plant may carry fuel and maintenance costs.

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Three-year change

Measure direction, not just rank:

Three-year change (%) = (latest intensity − intensity three years earlier) ÷ intensity three years earlier × 100

Falling intensity alongside stable or rising margins is a stronger signal than a single-year low value. Investigate any sharp change for acquisitions, disposals, accounting-boundary changes, product mix, or unusually high or low turnover.

5. Join energy data to profitability and cash flow

Add financial measures from the same reporting periods. At minimum, capture EBITDA margin, operating margin, operating-cash-flow margin, revenue growth, capital expenditure, and net debt where relevant.

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Combination What it may indicate What to verify
Lower intensity, stable or rising EBITDA margin Possible efficiency gains, mix improvement, or effective cost pass-through Whether the change came from physical efficiency rather than price or perimeter effects
Lower intensity, falling margin Energy is not the main problem, or selling prices and utilization weakened Raw materials, demand, pricing, and fixed-cost absorption
Higher intensity, rising margin Potential pricing power or profitable expansion despite heavy energy use Contract structure, capacity utilization, and customer pass-through
Stable intensity, volatile cash flow Working capital, maintenance, or expansion may dominate economics Receivables, inventory, capital expenditure, and one-off cash items

Use sector benchmarks only as context. The National Stock Exchange of India reported nine-month FY2025–26 EBITDA margins of 20.8% for the Nifty 50 Energy sector, 16.7% for Materials, 22.4% for Industrials, 45.2% for Utilities, and 34.4% for the Nifty 50 overall, based on interim data for Nifty 50 companies through December 31, 2025. These are not targets for an individual issuer and should not be mixed with full-year company margins.

An issuer-level example shows why the causal check matters: Pioneer Embroideries reported an FY2024–25 EBITDA margin of 8.43% and discussed rising power costs as a profitability constraint. The figure does not prove that power costs caused the entire margin outcome; it illustrates why a screen must connect energy disclosures to management commentary and financial statements.

6. Investigate how the company buys and uses power

Tariffs and demand charges

Read notes for state distribution-company tariffs, time-of-day charges, wheeling, banking, cross-subsidy, and open-access fees. A company with low physical intensity can still pay more if its plants operate during expensive peak periods or are exposed to a tariff increase.

Captive generation

Identify coal, gas, biomass, solar, wind, and waste-heat systems separately. Captive generation can reduce grid exposure but adds fuel, maintenance, depreciation, and financing costs. Check utilization and outages before treating it as a structural advantage.

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Renewable purchases

Distinguish physical renewable electricity, green tariffs, power-purchase agreements, and certificates. Review contract duration, escalation clauses, banking rules, and whether renewable power serves all plants or only a subset.

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Hedging and pass-through

Search the annual report for fuel hedges, forward contracts, customer surcharge clauses, indexed pricing, and lagged pass-through. A business that can pass energy inflation to customers may preserve margins despite a high energy bill.

Utilization and product mix

Energy per unit can worsen when a plant runs below capacity because fixed consumption is spread over fewer units. Product mix can move revenue intensity even when kilowatt-hours are unchanged. Compare volumes, capacity utilization, realizations, and mix disclosures with the BRSR trend.

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7. Score disclosure quality before ranking companies

A precise-looking ratio is not useful if the underlying data is incomplete. Add a disclosure score or traffic-light flag with the following checks:

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  • Physical-output data: available, clearly defined, and consistent across years.
  • Boundary: consolidated or standalone perimeter stated and stable.
  • Units: energy and turnover units explicit, with conversion basis available.
  • Components: renewable, non-renewable, fuel, and purchased versus self-generated energy separated where material.
  • Assurance: assurance provider, scope, and level identified.
  • Reconciliations: unusual changes explained and broadly consistent with financial statements.

Flag estimates, missing years, unexplained perimeter changes, and disclosures that are not independently assured. Do not award a company a better efficiency rank merely because it reports less detail.

8. A practical scoring framework

After collecting at least three years where available, rank companies within the peer group on separate axes rather than collapsing everything into one opaque number.

Axis Preferred signal Penalty or caution
Revenue intensity Below-peer level with consistent boundary High-value mix or outsourcing may explain the result
Physical intensity Falling energy per tonne or unit Output definition changed or is unavailable
Three-year direction Declining intensity without margin deterioration One-year movement tied to price or perimeter changes
Margin quality Stable or improving EBITDA and operating margins Margins rely on one-off gains or temporary pricing
Cash conversion Operating cash flow broadly tracks operating profit Receivables, inventory, or capex consume cash
Energy sourcing Diversified, contracted, and economically explained supply Unhedged tariff or fuel exposure
Pricing power Documented pass-through or indexed contracts Commodity pricing with no recovery mechanism
Data quality Complete, assured, reconciled disclosures Estimates, missing physical data, or unclear perimeter

Keep the detailed axes visible. A single composite score can hide a serious weakness, such as excellent intensity but poor cash conversion or an impressive renewable share purchased at uneconomic terms.

9. Use public grid information correctly

The Bureau of Energy Efficiency lists FY2024–25 annual energy-audit reports for distribution companies including APDCL, APEPDCL, AVVNL, BESCOM, BRPL, BYPL, and others. These reports can help you understand grid losses, distribution conditions, and regional context. They are not substitutes for an issuer’s tariff, contract, plant, or energy-cost disclosures, so do not use them as company efficiency data.

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Common screening mistakes and fixes

Ranking across unrelated sectors

Problem: A utility, cement producer, and software company appear in one league table.
Fix: Create sector-specific peer groups and interpret each ratio within its production model.

Treating low revenue intensity as a cheap electricity bill

Problem: High selling prices make energy per rupee look low.
Fix: Add physical-output intensity, electricity tariffs, and product-mix analysis.

Mixing consolidated and standalone figures

Problem: The numerator and denominator cover different entities.
Fix: Match perimeter and period; flag acquisitions and disposals.

Using one year as a verdict

Problem: A temporary outage, price spike, or capacity change dominates the result.
Fix: Calculate a three-year direction and read the explanation for unusual movements.

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Confusing renewable share with profitability

Problem: A high renewable percentage is treated as proof of lower cost.
Fix: Examine contract terms, transmission and banking charges, reliability, and total energy cost.

Ignoring cash flow

Problem: Accounting margins look strong while working capital and maintenance consume cash.
Fix: Add operating-cash-flow margin, capex, and cash conversion to the screen.

Accepting unexplained disclosure changes

Problem: A ratio improves after a perimeter or methodology change.
Fix: Require a note, restate the series when possible, or mark the trend as unconfirmed.

Implementation checklist

  1. Select one Indian industry and a consistent fiscal period.
  2. List each issuer’s consolidated or standalone perimeter and note major changes.
  3. Extract total, renewable, non-renewable, and fuel energy fields from BRSR or annual reports.
  4. Record revenue-based and physical-output intensity in original units.
  5. Normalize only with a documented conversion basis.
  6. Calculate three-year changes and investigate breaks in the series.
  7. Add EBITDA margin, operating margin, operating-cash-flow margin, volumes, utilization, and capex.
  8. Read tariff, fuel, captive, renewable, hedge, and pass-through disclosures.
  9. Score assurance, completeness, boundary consistency, and physical-output availability.
  10. Use the result to create a research shortlist, then perform valuation, balance-sheet, governance, and business-quality analysis separately.

How to interpret the final shortlist

The strongest candidates are not necessarily the companies with the lowest published energy ratio. They are the peers where the metric is comparable, the multi-year direction is credible, margins and cash flow are resilient, and management explains how power is sourced and priced. A company with higher energy intensity can remain attractive when it has durable pricing power, efficient utilization, and reliable cost pass-through. Conversely, a low-intensity company can disappoint if its ratio reflects outsourcing, weak revenue, or a reporting-boundary change.

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Use the screen to narrow the universe and identify questions for deeper analysis. It cannot replace valuation, debt analysis, governance review, competitive assessment, or an understanding of the company’s end market.

Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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