Power Grid Corporation of India Limited — Q2 FY25 earnings call

Call held 8 Nov 2024

Management summary

POWERGRID had a landmark Q2 winning 8 TBCB projects including the prestigious Khavda-Nagpur HVDC project. H1 CAPEX was ₹10,002 Crore but capitalization lagged at ₹4,000 Crore. PAT growth was muted at 1-2% due to ₹600 Crore annual CERC O&M reduction and EESL JV losses. Management outlined an ambitious ₹3+ lakh crore CAPEX vision through 2032.

Highlights

  • H1 FY25 standalone income ₹22,234 Crore, PAT ₹7,123 Crore; consolidated income ₹23,126 Crore, PAT ₹7,517 Crore

  • Q2 standalone income ₹11,383 Crore, PAT ₹3,711 Crore; consolidated income ₹11,846 Crore, PAT ₹3,793 Crore

  • H1 CAPEX of ₹10,002 Crore; H1 capitalization ₹4,000 Crore

  • Won 8 out of 13 TBCB projects in Q2 including Khavda-Nagpur HVDC (₹24,000 Crore NCT)

  • 78% share in annual tariff, 75% in NCT cost, 62% in project numbers in Q2

  • Works in hand ₹1,43,295 Crore; total pipeline outlook of ₹3,35,000 Crore by 2032

  • EESL JV loss of ₹100 Crore in H1; CERC O&M reduction impact ~₹300 Crore in H1

  • Gross Fixed Assets ₹2,78,983 Crore; Net Worth ₹92,061 Crore; D/E 57:43

Concerns

  • CERC O&M normative reduction of ₹600 Crore annually

  • H1 capitalization of ₹4,000 Crore vs ₹18,000 Crore full year target

Key financials

3 periods

Headline

  • Net Worth
    ₹92,061 Cr
  • Gross Fixed Assets
    ₹2.79L Cr
  • Debt
    ₹1.22L Cr

Q2

  • Income (Standalone)
    ₹11,383 Cr
  • PAT (Standalone)
    ₹3,711 Cr
  • Income (Consolidated)
    ₹11,846 Cr
    YoY +3%
  • PAT (Consolidated)
    ₹3,793 Cr
    YoY +0.3%

H1

  • Income (Consolidated)
    ₹23,126 Cr
  • PAT (Consolidated)
    ₹7,517 Cr
  • CAPEX
    ₹10,002 Cr
  • Capitalization
    ₹4,000 Cr
  • EPS
    8.08 Rs per share

What they filed

Q1 FY27: revenue up 2.7%, net profit down 0.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue11,278 11,233 12,275 11,196 11,476 +2%12,395 +10%11,666 −5%11,497 +3%
EBITDA9,597 9,533 10,194 9,102 9,055 −6%10,607 +11%5,303 −48%9,430 +4%
Net profit3,793 3,862 4,143 3,631 3,566 −6%4,185 +8%4,546 +10%3,598 −1%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Transmission
    ₹21,543 Cr H1 Charges (Consol)₹19,000 Cr H1 Billing
  • Telecom
    ₹267 Cr Q2 Income
  • Consultancy
    ₹134 Cr Q2 Income

Guidance & targets

Capital Expenditure

  • FY25 CAPEX Capital Expenditure · FY25 · High confidence >₹20,000 Crore

    Previously ₹18,000 Crore → >₹20,000 Crore

    The CapEx planning for FY24-25 is about ₹18,000 crore, but it is likely to increase to more than ₹20,000 crore

    — R.K. Tyagi

  • FY26 CAPEX Capital Expenditure · FY26 · High confidence ₹25,000-30,000 Crore
    CapEx also, it will be between ₹25 to 30 thousand, next year, FY25-26

    — R.K. Tyagi

Capitalization

  • FY25 Capitalization Capitalization · FY25 · Medium confidence ₹18,000 Crore
    This year, we are targeting about ₹18000 crore capex as well as for capitalization

    — R.K. Tyagi

  • FY27 Capitalization Capitalization · FY27 · Medium confidence ₹35,000-40,000 Crore
    our capitalization should be about ₹35,000 to ₹40,000 crore each year, from the next year

    — R.K. Tyagi

Business Outlook

  • Total CAPEX by 2032 Business Outlook · 2032 · Medium confidence >₹3,00,000 Crore
    our outlook will be at least Rs. 3 trillion worth projects or CapEx by 2032

    — R.K. Tyagi

Risks & concerns

  • CERC O&M normative reduction of ₹600 Crore annually

    high

    New CERC FY25-29 tariff regulation reduced O&M norms by ~₹600 Crore annually, directly impacting profitability and explaining muted PAT growth.

    Management acknowledged

  • H1 capitalization of ₹4,000 Crore vs ₹18,000 Crore full year target

    high

    Only ₹4,000 Crore capitalized in H1 vs ₹18,000 Crore full year target, implying massive ₹14,000 Crore needed in H2.

    Analyst acknowledged

  • EESL JV losses continuing

    medium

    ₹100 Crore loss in H1 from EESL JV. Receivables mounting due to annuity model. Issue escalated to power minister level.

    Analyst acknowledged

  • RTM revenue structural decline offsetting new TBCB additions

    medium

    Depreciation step-down after 12 years and loan repayment reducing RTM revenue. New TBCB additions barely compensating.

    Management acknowledged

Q&A highlights

3 direct
PAT growth muted despite capitalization additions Direct
as per the new CERC Regulation, our O&M charges have been reduced by almost 600 crore. So for half year, the effect is almost 300 crore

CERC O&M normative reduction of ₹600 Crore annually is a material headwind explaining why PAT growth is just 1-2% despite new capitalizations

Asked by Shubhdeep Mitra

EESL JV losses and equity stance Direct
we have stopped putting equity, last one year... the receivables are mounting, so that's why they were taking some short term loans

₹100 Crore H1 loss from EESL; management has stopped equity infusion and escalated receivables issue to power minister conference

Asked by Mohit Kumar

Capitalization outlook and ramp trajectory Direct
capitalization should be about ₹35,000 to ₹40,000 crore each year, from the next year... next year it will not touch ₹35-40 thousand

Clarified FY26 capitalization will be ₹25,000-30,000 Crore range, with ₹35,000-40,000 Crore achievable only from FY27

Asked by Sumit Kishore

1 min read 5 chapters

Detailed narrative

Landmark TBCB Quarter with Khavda-Nagpur HVDC Win

Won 8 out of 13 TBCB projects in Q2 with 78% tariff share and 75% NCT cost share. Key win was Khavda-Nagpur HVDC (6,000MW, NCT ₹24,000 Crore). In Oct-Nov, won 4 more projects including Rajasthan Phase 4 parts (₹5,969 Cr + ₹5,357 Cr NCT). Total works in hand reached ₹1,43,295 Crore.

CAPEX Execution Strong but Capitalization Lagging

H1 CAPEX was ₹10,002 Crore but capitalization was only ₹4,000 Crore, implying ₹14,000 Crore needed in H2 against a ₹18,000 Crore full-year target. Key H2 commissioning expected in Gujarat (Khavda stations), Rajasthan, and AP. FY25 CAPEX target raised from ₹18,000 to >₹20,000 Crore.

Profit Growth Constrained by CERC and EESL

New CERC FY25-29 tariff regulation reduced O&M norms by ~₹600 Crore annually (₹300 Crore H1 impact). EESL JV contributed ₹100 Crore loss in H1. Combined with structural RTM revenue decline, PAT growth was only 1-2% despite new capitalizations. Management stopped further equity infusion into EESL.

₹3 Lakh Crore+ CAPEX Vision Through 2032

NEP envisions ₹9.16 lakh crore total transmission CAPEX by 2032. Of ₹6.6 lakh crore interstate component, about ₹3 lakh crore already bid/under execution. With ₹84,000 Crore under bidding and ₹3 lakh crore NEP pipeline, POWERGRID targets 50%+ win rate for ₹3.35 lakh crore total execution. CAPEX seen ramping from ₹20,000 Crore FY25 to ₹25-30K FY26 and higher thereafter.

Smart Meters Progress in Gujarat

Smart meter project in Gujarat covers ~63 lakh meters across Madhya and Uttar Gujarat. 35 lakh already awarded in Madhya Gujarat, 28 lakh in Uttar Gujarat. 4 lakh meters supplied and 1 lakh installed. Management focused on completing Gujarat before considering other states.

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