Power Grid Corporation of India LtdQ2 FY23Power

Power Grid Corporation of India Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→POWERGRID expects robust business growth driven by a strong pipeline of approved and bidding projects, particularly in transmission linked to the 500 GW renewable energy target by 2030.
→Estimated CapEx in transmission over the next 8-10 years is around ₹1.88 lakh crore, with interstate transmission forming a major portion (~₹1.16 lakh crore).
→CapEx is expected to increase progressively, peaking around ₹25,000 crore annually by FY 25-26 and beyond, supporting growth in volumes and revenues.
→Smart metering investments of about ₹4,000 crore for 69 lakh meters are underway, with mid-teens RoE expected, signaling steady revenue from metering services.
→Telecom and consultancy services are developing new revenue streams, though consultancy revenues may take 1-2 years to rebound.
→Overall, POWERGRID anticipates mid-teens IRR in smart metering and early double-digit returns in transmission, reflecting strong growth and profitability expectations.

Category 3

→CapEx is expected to increase gradually, crossing ₹10,000 crores in FY24 and trending up to around ₹20,000-25,000 crores by FY25-26, supporting growth.
→BUSINESS outlook is robust with a strong pipeline for RE integration and transmission projects aligned with the 500 GW by 2030 target.
→Operational performance remains strong with improved system availability and reduced tripping.
→Despite some one-offs affecting recent profits, the core operations show steady improvement.
→The company aims to maintain or increase its market share (~50-55%) in interstate transmission projects.
→Mid-teens IRR expected in smart metering investments.
→With new project approvals and simplified processes, earnings and profitability are likely to improve in line with increasing CapEx and project execution.
→Overall, earnings, operating earnings, profits, and EPS are expected to improve steadily over the coming years aligned with the CapEx growth and project pipeline.

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→The company plans to raise funds optimally through the securitization route by leveraging TBCB cash flows, which is compliant with the National Monetization Pipeline (NMP) framework (Page 7).
→No explicit mention of raising equity in the near term; focus remains on debt through securitization.
→Given the large CapEx pipeline (₹1.88 trillion over the next 9-10 years), financing with a mix of debt and internal accruals is implied but not explicitly detailed.
→Debt-to-equity ratio has improved recently (from 62:38 to 59:41), indicating controlled leverage (Page 4).
→No explicit future equity fundraising announcements were made, indicating a preference for debt and internal funding routes for planned growth.
→Ongoing CapEx is expected to increase, with a conservative annual CapEx run rate of ₹20,000-25,000 crores by FY 25-26, which will be funded accordingly (Pages 11-13).

Yes

→Current projects under bidding amount to ₹55,000 crores.
→An additional ₹81,000 crores worth of projects expected to come up for bidding in the next 1 to 1.5 years.
→The Fatehpur-Bhadla bid is already out, with bidder selection targeted by September.
→The business has a robust pipeline with projects approved and in bidding stages.
→Overall interstate CapEx opportunity considered to be ₹1,16,500 crores over the medium term.
→Market share for interstate transmission projects is around 50%+.
→Intrastate project opportunities are present but difficult to predict due to varying state-level progress.
→At a broader level, PowerGrid estimates a total investment opportunity of about ₹1,88,000 crores over the next nine years across transmission, solar, smart metering, and data center businesses.

Yes

→POWERGRID plans ₹1.88 trillion investment over the next 9-10 years, with ₹1.71 trillion in Transmission and ₹17,000 crores in solar, smart metering, and data centers.
→Interstate transmission CapEx opportunity is ₹2.44 trillion; POWERGRID targets ~50-57% market share, approximately ₹1.16 trillion (₹13,000 crores annually).
→CapEx is expected to rise gradually, crossing ₹10,000 crores in FY 23-24 and reaching up to ₹20,000-25,000 crores by FY 25-26.
→Smart metering projects estimated at ₹15,000 crores over nine years; initial Gujarat order involves ₹4,100 crores for 6.9 million meters.
→International projects in Africa (Kenya, Tanzania, Nigeria) and Bangladesh-Nepal joint ventures are under evaluation.
→Some delay and risk due to construction and right-of-way challenges, but government committed to 500 GW target by 2030 ensuring transmission project continuity.

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