Powergrid Infra.Q2 FY24
Powergrid Infra. Q2 FY24 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹102P/E: 10.2Market Cap: ₹9.3K CrSector: Power
Management growth scorecard
Revenue
Category 4
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 4- Limited asset additions expected in the next 12-18 months due to commissioning timelines and regulatory requirements. (Page 5)
- Growth is envisaged primarily through acquisitions of operational power transmission assets, adhering to InvIT regulations and unitholders' interests. (Page 4)
- Planned acquisition of the remaining 26% stake in four SPVs (PWTL, PPTL, PJTL, VTL) expected to conclude by the end of FY2024. (Pages 4, 6)
- Revenue from operations has seen a year-on-year decline mainly due to tariff reductions in certain SPVs (Vizag and Kala Amb) as per transmission service agreements. (Page 17)
- Absent new acquisitions, distributions and cash flows are likely to be impacted due to declining tariffs and revenues. (Page 16)
- The Trust is open to acquiring both POWERGRID and non-POWERGRID assets for growth, depending on government policy and market conditions. (Page 7)
See what Powergrid Infra. management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- PGInvIT plans to fund the acquisition of the remaining 26% stake in four SPVs primarily through debt, leveraging a large headroom for borrowing.
- The current external borrowing stands at INR 5,712.68 million with an average cost of debt at 8.18%, linked to a 3-month T-Bill.
- The Trust has reduced the spread on its loan by 33 basis points in July 2023 and 34 basis points earlier in January 2023, leading to savings on interest costs.
- There is significant headroom for further debt-funded acquisitions as net debt to AUM is only about 1.22%.
- No specific mention of new equity fundraising was made; the focus is on funding through debt to maintain distributions.
- Cash balance of INR 198 crores (as on Sept 30) is also available for funding equity infusion in projects with ongoing accrual of revenues in SPVs.
Overall, future fundraising is expected to be debt-based rather than equity.
See what Powergrid Infra. management said on order book — free account, 30 seconds.
Capex plans
Yes- There is an ongoing investment in the under-construction substation at the Ambala line with an approved cost of approximately INR 42 crores.
- Funding for this project follows a 70:30 debt-to-equity ratio as per CREC regulations.
- As of September 30, around INR 10 crores has been incurred; additional expenses have been incurred post that date.
- Equity pending for the Ambala project is planned to be funded through existing and accruing cash balances.
- Acquisition of the balance 26% stake in four projects (Powergrid assets) is planned, with funding expected through debt.
- No significant new asset additions are expected in the next 12 to 18 months, as most under-construction projects need to commission and complete the initial operational period before transfer to the InvIT.
- Strategic asset acquisition focus includes both Powergrid and non-Powergrid assets depending on regulatory policies.
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Margin guidance
Category 3- Growth potential through acquisition of remaining 26% stakes in four projects, funded primarily via debt, though valuation-dependent (Page 6).
- Investment limits exist as per InvIT regulation, restricting the amount that can be deployed in new assets (max 10% of enterprise value) limiting aggressive expansion (Page 17).
- No explicit guidance was provided on maintaining or increasing DPU next year; decisions to be taken by year-end based on valuation and cash flow (Page 6).
- Operating profitability linked closely to tariff agreements; recent tariff reductions in certain SPVs like Vizag and Kala Amb have caused top-line revenue decline (Page 17).
- Annuity nature of the business with long-term Transmission Service Agreements (up to 35 years) provides revenue certainty and stable cash flows (Page 13).
- No specific EPS guidance given, but cash flows and distributable income visibility is prioritized for investor clarity (Page 14).
Order book
- Currently, there are around 44 projects under construction as mentioned by Nikhil Abhyankar from ICICI Securities (Page 5).
- However, no significant asset additions are expected in the next 12 to 18 months due to regulatory timelines regarding asset commissioning and transfer (Page 5).
- After the completion of initial operational periods (up to 5 years for some assets), POWERGRID may consider further selling assets to PGInvIT (Page 5).
- One specific project under progress is the Implementation of 400 kV 125 MVAr Bus Reactor at Kala Amb Substation by SPV PKATL, expected to be commissioned in FY 2023-24 (Page 3).
- Regarding equity infusion for ongoing projects, out of a total project cost of INR 42 crores, about INR 10 crores had been incurred by September 30, 2023, with further expenditures ongoing (Page 17).
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What Powergrid Infrastructure Investment Trust's management said in earlier quarters
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