Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Power Grid Corp Of India Ltd (BOM:532898, Financial) maintains a high transmission system availability of over 99.80%, which is benchmarked internationally and considered one of the best in the world.
- The company has a strong financial performance with a revenue income of INR11,280 crores and a profit after tax of INR3,724 crores for Q1 FY25.
- Power Grid Corp Of India Ltd (BOM:532898) has won several new projects, including six out of ten projects with a total tariff of INR7,045 crores, showcasing its competitive edge in the market.
- The company is actively involved in sustainability and CSR initiatives, including projects like Vishram Sadans and participation in the Namami Gange mission.
- Power Grid Corp Of India Ltd (BOM:532898) is expanding its business outlook with a focus on data centers, smart metering, and solar generation, aiming for significant growth in these areas.
Negative Points
- The company's CapEx for FY25 is projected at INR18,000 crores, which some analysts believe could be higher given the profitability and growth opportunities in the power sector.
- There are challenges in the supply of critical equipment like GIS, transformers, and reactors, which could impact project timelines and costs.
- Despite a high dividend payout ratio of 67%, some investors question the need for such high payouts in a growth industry, suggesting that funds could be better utilized for expansion.
- The standalone profit growth appears flat due to lower dividend distribution from TBCB subsidiaries and the impact of prior period items.
- The company faces significant inflation in equipment costs, particularly for transformers and reactors, which have seen a 70-80% increase since 2017-18.
Q & A Highlights
Q: Your profitability is about INR15,000 crores, but your CapEx is only about INR18,000 crores. Why can't this be doubled? Also, why is your payout ratio so high in a growth industry?
A: We pay 67% as a dividend because the balance INR5,000 crores is sufficient to fund our CapEx. We have a shareholders' approval of INR1.8 trillion of debt but are currently at INR1.2 trillion due to lower CapEx in previous years. As CapEx picks up, the debt-to-equity ratio will naturally increase. (G Ravisankar, Director - Finance)
Q: Regarding the recent offshore wind order, does the INR13,000 crores cost include future planning for more evacuation?
A: It includes only the 1,000 megawatts, with 500 megawatts each for Gujarat and Tamil Nadu. This will serve as a benchmark for future projects. (R K Tyagi, Chairman, Managing Director)
Q: Could you specify the total NCT project cost of wins in Q1 and July so far?
A: In Q1, the levelized tariff is INR4,172 crores with NCT costs of INR3,279 crores, INR2,227 crores, and INR12,700 crores for different projects. In July, the NCT costs are INR501 crores, INR1,382 crores, and INR4,766 crores. Power Grid's share is 70% of the total tariff of INR7,045 crores. (R K Tyagi, Chairman, Managing Director)
Q: How should we think about the dividend distribution by TBCB subsidiaries to the standalone?
A: The distribution is based on the Board meetings of the SPVs. We didn't draw much dividend in the last quarter of FY23, which affected the standalone profit. However, this will be adjusted in subsequent quarters. (G Ravisankar, Director - Finance)
Q: How do you think about the CapEx and commissioning in FY26, given the current pipeline?
A: We have INR1,14,000 crores of work in hand, with significant projects like Leh to Kaithal HVDC and Fatehpur Bhadla. We expect to complete around INR70,000 crores to INR80,000 crores in the next 24 to 30 months, targeting INR25,000 crores plus in FY26 and around INR30,000 crores plus in FY27. (R K Tyagi, Chairman, Managing Director)
Q: What is the inflation rate for equipment in tight supply?
A: For transformers, reactors, and GIS, costs have increased by 70% to 80% since 2017-18, with an annual inflation rate of about 10%. We are procuring these items in advance to mitigate supply challenges. (R K Tyagi, Chairman, Managing Director)
Q: Can you tell us about the capitalization expected in FY25, '26, and '27?
A: We have around INR70,000 crores of projects to commission in the next three years. This year, we target INR18,000 crores, with around INR25,000 crores to INR30,000 crores in FY26 and FY27. (R K Tyagi, Chairman, Managing Director)
Q: Why are the standalone numbers flattish despite regulatory equity going up?
A: The standalone numbers appear flat due to lesser dividend drawn from SPVs and a one-time order impact of INR150 crores in the previous Q1. Additionally, telecom operations were carved out into a separate SPV. (G Ravisankar, Director - Finance)
Q: What is the status of the equipment ordering for Bhadla and Leh-Ladakh projects?
A: For Leh to Kaithal, we tendered out on July 17 and expect to award by January or February. Fatehpur Bhadla is almost ready for award and can be awarded anytime. (R K Tyagi, Chairman, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
