Power Grid Corporation of India Limited — Q4 FY26 earnings call

You are partly right in your question itself. You have been asking whether the EBITDA pattern is because of assets completing 12 years. Yes, to the extent of that the structure of the regulated tariff has a trajectory wherein after the 12 years which you are aware, there is a dip in those projects which it is there. So, this is a natural transition which happens over a period of time. And this is one of the major transitions which has happened for a major project. As far as the service accounting part of it, yes, these projects are under the BOOT method, the new projects which are being floated under the BOOT method, and the financial lease model is being followed for these projects.

Analyst inquired about the reason for EBITDA decline, and management confirmed it's partly due to the natural dip in regulated tariffs after 12 years of asset life, and clarified the BOOT/financial lease model for new projects.

See, BESS is coming on two fronts. One is by the VGF being given by the government. So, states have been rushing to float a good number of tenders on the BESS front over there. POWERGRID also is participating so that we understand the kind of model, mode and what kind of an ecosystem is there in trying to put up these systems. So, as I said, one of the projects which we have, this will give us a good opportunity for having an insight into the BESS projects. That is one part of it. That is under the 63 model if I say. And when we come to the 61 and 62 Sections under which the tariff is under the regulated model, I'm pleased to also inform that the regulator and its terms and conditions of tariff amendment which is issued recently also calls for the transmission service provider can put up the integrated storage systems. As part of it, the exercise what has to be done, the kind of documents what have to be furnished, the locations which have to be selected, the cost benefit analysis, all these things have to be done, and we have already done this. In terms of northern region, we have already submitted all our details, and we see a very positive traction on that front. And for the other regions also it will follow suit. And given the massive requirement of the storage requirements, we feel that Section 62 would be a very conducive way to create the ecosystem so that eventually these projects or these systems can be developed under the Section 63 mode. So, we see that this would be actually paving a good way for the system to be built in the countries. The OEMs will be having that much of a visibility, predictability. So, we see that moving forward, if it is gaining traction, POWERGRID will also be taking it up and we have already started it for your information.

Management outlined a dual strategy for BESS, involving participation in government VGF tenders and leveraging regulatory amendments under Sections 61/62 for integrated storage systems, indicating a significant new growth area.

Asked by Shri Puneet - HSBC

See ROW, right-of-way is always a perennial issue. Every tower is a project in itself. And it is not unique to POWERGRID, it is unique to every transmission service provider. It is not only that ROW is for a particular segment. So, it is there. Now that it is there, the government has come up with an initiative. Since 2024 and 2025 it has come up with market rate determination, because earlier the right-of-way charges were paid for a quantum of area, but the rate what was applied for that particular area was primarily the circle rate or any other rate which was known to them. But now a mechanism has been given by the central government, guidelines have also been issued saying that this will be a market rate determined kind of mechanism, wherein valuers should be identified, and the valuers will be independently valuing that area. And more than one valuer i.e. three valuers will be identified wherein they look forward that it will emerge the right rate. The moment the right rate comes, we are sure that the land owner, to a great extent, will be willing to part the land for construction of the line, both under the tower as well as the corridor.

Management acknowledged ROW as a persistent challenge but highlighted new government initiatives for market-rate determination and specific timelines to mitigate these issues, which could improve project execution.

Asked by Shri Puneet - HSBC

Sure, sure. So, I would say that we have been in this sector for quite some time, initially under the cost-plus mode and it is more than now 14 years since we are into the tariff-based bidding. So, while undertaking the bids, we take into the quantum of risk-return framework of that particular project and then we go ahead, so that we are able to create value for our stakeholders. Keeping that in mind, whatever projects we are picking up, by and large would be in that focusing on that to make sure that the value for the stakeholders is ensured always. That's what I should say.

Management emphasized its long experience in TBCB and its disciplined approach to bidding based on a risk-return framework, aiming to create stakeholder value rather than solely focusing on market share percentage.

Asked by Shri Namit Arora - InGrowth Capital

It's not far-fetched. As and when these things materialize, understand transmission is an offshoot of the generation and load. I would have said few years ago it is generation, but I would say it is an offshoot of generation and load. The quantum of transmission evolution depends upon how much of generation is happening and how much of new load centres are coming up. So, as and when those are materializing, it is no option, but transmission will have to happen. Because as I said to you, transmission is the only way how electricity can move. You cannot take it in a tanker. So, I'm sure that as and when the generation comes up in new locations and the load centres coming, it is a common denominator for everything, whatever be the nature of generation, including nuclear power or whatever it is, because electricity is a fungible good and transmission is a neutral carrier.

Management confirmed that a significant increase in annual CapEx (e.g., to ₹50,000-70,000 crores) is not far-fetched, linking transmission growth directly to the inevitable growth in generation and load centers.

Asked by Shri Archit Singhal - Bajaj Alternate Investment Management Limited

As I've said, we are in this business for the last many decades. And in the transmission, TBCB also, we are proud to state that we are more than a decade now. For almost 14 years, we are into this. So, while undertaking this, we do factor these aspects as to what is the probable increase in it. There are provisions taken care for that. Having said that, in case there is a surprise which comes, which cannot be factored into a typical bid, they are well claimable under the change in law, which is provisions which are available in the Transmission Service Agreement. So, keeping this in view, we make sure that wherever we are bidding, whatever we are doing, we are able to protect the returns for the stakeholder. We are doing that.

Management assured that rising costs are factored into bids and that provisions for 'change in law' in the Transmission Service Agreement protect equity IRRs, and TBCB model allows for better returns through efficiencies.

Asked by Shri Nikhil Nigania – Bernstein

Let me tell you, the transmission projects are not guided by a calendar year or a financial year, okay? They are guided by the quantum of work which is involved in it. So, maybe a project is taking about 18 months, 20 months, 24 months, and that could happen in this financial year, or it could happen in next financial year. I just wanted to use this question to answer or to clear thoughts that why it is happening here, moreover it is happening less here. It depends upon the project which is started off and when it is ending. Hopefully, number of projects may converge on a particular quarter, so you see something magic has happened. No, magic was happening right from the beginning. So, it only culminated on a particular quarter over there.

Management clarified that CapEx and capitalization are project-driven, not strictly calendar-year bound, and while FY26 saw a back-ended surge, future quarters are expected to have a more even spread, subject to project timelines and external factors.

Asked by Shri Mohit Pandey - Citi Research

The capacity stands at about 300 GVA and the demand is much higher than that. 400 plus GVA in a particular year. I am talking in terms of the transformation capacity for both transformers and reactors. Having said that, for the couple of years what we are seeing in terms of the challenges in procuring these units, a good amount of capacity expansion has also been undertaken by the OEMs. That is happening on one front. And we are going for bulk procurement, which is taking away the project specific procurement, giving enough lead time for the OEM also to supply the equipment. So, that is the reason you could see 72,000 MVA being added in one single year. Massive amount of capacity which has been added to that. Other thing what has happened which I would like to also mention here is that the timeline, which was earlier, about 18 months for implementing a project, that was putting stress not only on the entire project but also on the OEMs as well. But with that being rightly recognized, and now the timelines have been recently increased to about 26 and 30 plus months, so that is giving enough room for the OEMs also to deliver. So, I see that multiple things which are happening, the timelines being increased and more predictability in terms of the orders which are there, capacity expansions which are happening, so all these things we look forward, we will try to ease down that particular situation, hopefully.

Management acknowledged the demand-supply gap for critical equipment but highlighted OEM capacity expansion, bulk procurement strategies, and extended project timelines (26-30+ months from 18 months) as measures to ease supply constraints.

Asked by Shri Shirom Kapur - Jefferies