Transformers: industry growth, demand drivers, and market outlook

A transformer works on the principle of electromagnetic induction. It transfers power from one circuit to another at the same frequency but with a change in voltage. The device has a steel core, usually laminated to reduce losses, which provides a path for magnetic flux. It has two windings: the primary, connected to the power source, and the secondary, connected to the load. Depending on how the windings are arranged, the voltage can step up for transmission or step down for distribution.

Power transformers are used in transmission networks at high voltages such as 400 kilovolts (kV), 220 kV, 110 kV, 66 kV, and 33 kV. They operate almost continuously at rated full load because large transmission systems have minimal fluctuations. Designed for nearly 100 per cent efficiency, they are usually installed at generating stations and transmission substations. Distribution transformers, in contrast, operate at lower voltages such as 11 kV, 6.6 kV, 3.3 kV, 440 V, and 230 V. These serve end consumers and experience frequent load variations, so their efficiency is measured by all-day performance, often ranging between 50 and 70 per cent. They are commonly mounted on poles or concrete platforms, and underground installations are enclosed in steel tanks for safety.

The beginning in Mysore

India’s story with transformers began in the 1930s. In 1935, Sir Mirza Ismail, the Diwan of Mysore, invited Maurice Frydman, a Polish electrical engineer then working in Paris, to Bangalore. Frydman joined the Government Electric Factory, which Ismail had set up in 1933. In 1936, he manufactured India’s first transformers at this facility. These units were later deployed in Mysore State’s first rural electrification program, marking a turning point in India’s power sector.

The Government Electric Factory continued producing transformers and was renamed Karnataka Vidyut Kharkhana Ltd (KAVIKA) in 1976. KAVIKA remains operational and still manufactures distribution transformers, a living link to India’s earliest industrial efforts in electrical equipment.

After independence, India’s challenge was to electrify a newly industrialising nation. In the 1950s and 1960s, the country had to rely on imports for high-capacity transformers, while domestic facilities were limited to a few government-owned units producing smaller ones. Meeting the growing power demand of homes, industries, and agriculture was difficult without local capacity.

By the 1970s and 1980s, the situation began to shift. Government policies encouraged indigenous manufacturing, and both public and private players entered the field. Research institutions and companies worked on new designs. This period marked the rise of India’s first generation of transformer manufacturers and laid the foundation for an independent domestic industry.

The global and regional landscape

Today, transformers are part of a global market valued at about USD 54.5 billion in 2023. In 2024, the market rose to nearly USD 57.8 billion despite economic headwinds, and forecasts suggest a compound annual growth rate (CAGR) of 6 to 7 per cent. One analysis projects the market will reach USD 83.4 billion by 2030, while extending the trend further points to a value above USD 90 billion by 2032. This growth outpaces global GDP expansion, highlighting the central role of power infrastructure in economic development.

Asia-Pacific dominates this market. China, India, and Japan together account for close to 39 per cent of global infrastructure demand, and the region likely represents more than 40 per cent of the transformer market by value. The drivers are large-scale grid build-outs, industrialisation, and rural electrification. In India, production hubs are concentrated in Gujarat, Maharashtra, and Tamil Nadu.

North America and Europe present a different picture. Their markets are more mature, but transformers installed in the 1970s and 1980s are now reaching the end of their 40–50 year life cycles. Replacement demand is steady, while investments are directed toward grid hardening, integration of renewable energy, and interconnections. Europe’s rapid renewable expansion requires new high-voltage transformers for balancing variable generation and strengthening cross-border power flows.

India’s transformer industry today

India’s transformer industry is expanding at a fast pace. The market covers power, distribution, instrument, and specialty transformers, each designed for specific applications. Grid expansion, industrialisation, and rising electricity demand are the main growth drivers.

The utility sector is central, with heavy investment in grid infrastructure and high-capacity transformers. Renewable energy integration has created demand for inverter-duty transformers in solar projects, step-up transformers for wind generation, and high-voltage units for Green Energy Corridors. Metro rail projects, especially underground systems in Delhi and Mumbai, are driving demand for dry-type, fire-safe transformers. Rural electrification programs under Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Saubhagya continue to require small transformers of up to 10 megavolt-ampere (MVA) capacity that are cost-effective and reliable in remote environments.

India’s renewable target of 500 gigawatts (GW) by 2030—including 280 GW of solar and 140 GW of wind—has reinforced the role of transformers as a backbone of the energy transition. The Central Electricity Authority (CEA) has planned thousands of circuit kilometres of new transmission lines and over 12,000 substations by 2030, adding more than 141,000 MVA of transformation capacity, a 29 per cent increase. With India’s installed generation capacity expected to nearly double from 442 GW in FY2024 to 900 GW by FY2032, transformer demand is expected to remain strong.

Government policy and efficiency standards

Policy support has been important in shaping the industry. The Energy Conservation Act of 2002 introduced Minimum Energy Performance Standards (MEPS) and the Bureau of Energy Efficiency (BEE) labelling program. The Perform, Achieve, and Trade (PAT) scheme incentivises large industries to adopt efficient transformer designs. Together, these measures encourage domestic manufacturers to innovate and adopt energy-efficient technologies.

The National Smart Grid Mission (NSGM) and pilot projects in states such as Telangana, Assam, and West Bengal have tested smart transformers equipped with sensors and digital monitoring. These solutions promise higher grid efficiency and reliability, especially as India adopts smart meters and automated distribution systems.

Digital growth and new demand

India’s rapid urbanisation and the digital economy are adding new demand streams. Data centres, which must operate around the clock, require high-capacity, highly reliable transformers with advanced cooling and redundancy. India’s IT load capacity for data centres is about 1,000 megawatts, but investments by hyperscale players like AWS, Microsoft, and Google, alongside domestic firms, are pushing this higher.

National Informatics Centre (NIC) data centres in Delhi, Pune, Bhubaneswar, and Hyderabad already provide critical cloud services, with a Tier-III facility under development in Guwahati. Government initiatives such as the MeghRaj GI Cloud, National Knowledge Network, and the Smart Cities Mission are expanding digital infrastructure. This creates a new vertical of transformer demand in India, centred on energy-intensive, high-reliability applications.

Market outlook and financial performance

Crisil Ratings projects that sales of India’s transformer industry will cross Rs 40,000 crore by the next fiscal, growing at 10 to 11 per cent from Rs 33,000 crore last year. Strong order books equivalent to more than a year’s sales are expected to sustain margins of 8 to 10 per cent. Capacity utilisation is projected to rise above 80 per cent, pushing manufacturers to expand through capital expenditure, much of it debt-funded. Despite this, credit metrics are likely to remain stable with gearing at 0.6 times and interest coverage at four times.

Demand is also driven by the National Electricity Plan, which has set a target of increasing transformer capacity by 776,330 MVA to 1,847,280 MVA by 2027. So far, only 30 per cent of this target has been achieved, leaving significant ground to cover. Replacement demand is also emerging, with units installed in the early 2000s nearing the end of their 25-year life cycles.

Challenges remain. Long working capital cycles, elevated inventories, and payment delays weigh on financial health. Companies are expected to incur around Rs 200 crore in capital expenditure by the next fiscal year.

Capacity additions

As of August 2025, India’s total installed transformation capacity stood at 1,375,418 MVA, up from 1,269,350 MVA in August 2024. The country added 37,905 MVA in the current fiscal year up to August, compared to 18,270 MVA during the same period last year.

The central sector accounted for 541,606 MVA of the total, with 18,820 MVA added against a year-to-date target of 28,320 MVA. The state sector reached 748,640 MVA, exceeding its target with 13,425 MVA added against 12,120 MVA. The private sector contributed 85,172 MVA, meeting its target by adding 5,660 MVA.

By voltage class, the installed capacity was 336,700 MVA at 765 kV, 507,373 MVA at 400 kV, 497,845 MVA at 220/230 kV, and 33,700 MVA through high-voltage direct current (HVDC) systems at ±800 kV, ±500 kV, and ±320 kV. The expansion reflects India’s emphasis on strengthening the 765 kV and 400 kV networks, which serve as the backbone of high-capacity transmission.

In terms of system segmentation, the inter-state transmission system (ISTS) accounted for 579,205 MVA, while the intra-state system comprised 796,213 MVA as of August 2025.

Conclusion

From a handful of units built in a Mysore workshop in the 1930s to more than 1.3 million MVA of installed transformation capacity today, India’s journey reflects both industrial progress and the scale of its electricity ambitions. Transformers are no longer just background equipment but a strategic element of national infrastructure, essential for integrating renewables, powering metros, connecting rural villages, and sustaining digital infrastructure.

The featured photograph is for representation only.