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    Power Grid Corpn

    POWERGRIDGood
    Power·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

    8

    • 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

    2

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

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

    What Changed1

    vs Q3 FY25

    Risks discussed5 → 4 (-1)
    Key financials

    Metrics

    12

    Periods

    3

    Headline

    7
    • H1 Income (Consolidated)
      ₹23,126 Cr
    • H1 PAT (Consolidated)
      ₹7,517 Cr
    • H1 CAPEX
      ₹10,002 Cr
    • H1 Capitalization
      ₹4,000 Cr
    • Net Worth
      ₹92,061 Cr

    Q2

    4
    • 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

    1
    • EPS
      8.08 Rs per share

    Segment breakdown

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

    Guidance & targets

    5
    CategoryTargetPriority
    Capital Expenditure
    FY25 CAPEX
    >₹20,000 Crore
    		High
    Capital Expenditure
    FY26 CAPEX
    ₹25,000-30,000 Crore
    		High
    Capitalization
    FY25 Capitalization
    ₹18,000 Crore
    		Medium
    Capitalization
    FY27 Capitalization
    ₹35,000-40,000 Crore
    		Medium
    Business Outlook
    Total CAPEX by 2032
    >₹3,00,000 Crore
    		Medium

    Risks & concerns

    4
    RiskSeverity

    CERC O&M normative reduction of ₹600 Crore annually

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

    high

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

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

    high

    EESL JV losses continuing

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

    medium

    RTM revenue structural decline offsetting new TBCB additions

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

    medium

    Q&A highlights

    3

    “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

    1 min read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    ₹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.

    05

    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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