POWERGRID - POWER GRID CORPORATION OF INDIA LIMITED Share Price

In the Q1 FY 2025-26 earnings call, management provided an optimistic outlook for Power Grid Corporation of India Limited. The company is committed to supporting the Government of India's mission for renewable energy (RE) development, targeting a capacity of 500 GW by 2030. To achieve this, a robust transmission system is essential, as highlighted by their inter-regional capacity of 101 GW out of the total 120 GW.

Key financial figures shared include:

• Total income for Q1: Rs.11,444 Crore
• EBITDA: Rs.9,500 Crore
• Profit After Tax: Rs.3,600 Crore
• Net Worth: Rs.96,000 Crore
• Gross Fixed Assets: Rs.2,92,000 Crore
• Debt to Equity ratio: 58:42

Management indicated a CAPEX of Rs.28,000 Crore for FY26 with a commissioning target of Rs.22,000 Crore, further broken down into quarterly targets: Rs.3,000 Crore (Q2), Rs.7,000 Crore (Q3), and Rs.8,000 Crore (Q4). They emphasized their efficient project execution capabilities, including the recent commissioning of critical substations in high renewable energy regions, such as Khavda and Kurnool.

Looking forward, management outlined substantial growth opportunities, including:

• A pipeline of Rs.1,48,000 Crore in projects, with TBCB projects comprising about Rs.99,000 Crore.
• Future CAPEX plans of Rs.35,000 Crore for FY27 and Rs.45,000 Crore for FY28.
• Commitment to sustainability goals, including achieving 50% electricity consumption from renewable sources by December 2025 and aiming for Net Zero by 2047.

Key challenges addressed included the right-of-way (RoW) issues, acknowledged as a significant barrier but showing signs of improvement with initiatives for better compensation guidelines and the establishment of dedicated teams to resolve these issues.

Overall, management expressed confidence in meeting their targets and navigating challenges while expanding their renewable energy initiatives.

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

1. Question: Can you provide more detail on future growth levers that include BESS and Green Hydrogen, and the organization's investment in people and technical skills?

   Answer: Our core area remains transmission, and we are expanding into solar with 85MW commissioned at Nagda. For Green Hydrogen, we will generate it at our Neemrana substation using solar energy, which can then be converted back to electricity. We aim to be a significant player in BESS as we pursue a tender for 2000 MW/4000 MWh in Rajasthan. We're investing in capabilities to capitalize on these opportunities over the next few years.

2. Question: Can you elaborate on right of way (RoW) challenges and if the situation is improving?

   Answer: RoW is indeed a significant challenge in India. We've established a dedicated women's cell for resolving RoW issues and have engaged with the government to enhance compensation for affected farmers. Recent changes allow for market rate compensation, significantly higher than previous rates. While we've made progress in Maharashtra and Gujarat, we still face challenges, particularly in Delhi and Haryana.

3. Question: What updates can you share regarding the GIB issue in Rajasthan?

   Answer: The GIB issue is no longer a concern. We have ensured that current and future transmission planning avoids GIB areas. This proactive approach allows us to continue executing projects without further interruptions from this environmental concern.

4. Question: Any update on the Leh project and potential technology changes?

   Answer: There have been delays in the Leh project due to its challenges at high altitudes. Currently, only one party is interested, and they have submitted a bid. We are evaluating their queries, and a decision will be made in a couple of months regarding whether to proceed with HVDC technology or switch to HVAC based on feasibility.

5. Question: Can you specify the capitalization figure for Q1?

   Answer: Our capitalization for Q1 is approximately Rs.1,800 Crore, while we commissioned around Rs.2,800 Crore worth of projects. However, full capitalization is pending for some projects until all elements are commissioned.

6. Question: What are the capitalized projects and targets for FY27-28?

   Answer: For FY27, we expect around Rs.20,000-25,000 Crore in capitalization, with a focus on timely commissioning of ongoing projects. For FY28, this could increase to about Rs.25,000 Crore, reflecting our ramped-up project execution.

7. Question: Why has consolidated profit declined?

   Answer: Profit has decreased due to higher CSR expenditures of Rs.70 Crore compared to last year and increased losses from our joint venture, EESL, which impacted profits significantly. Although standalone profits improved, these factors contributed to the decline in overall consolidated profit.

8. Question: Can you discuss your financing strategy for upcoming capital expenditures?

   Answer: We plan to meet our financing needs through internal resources, as our profits will cover a significant portion. Additionally, we will secure loans at competitive rates given our strong balance sheet. Our strategy for TBCB projects typically involves upfront equity investment of about 20%.

9. Question: Can you share insights into supply chain challenges for transformers?

   Answer: We are indeed facing significant bottlenecks. We often receive limited bids for critical components as demand has surged. To mitigate risks, we are procuring transformers and critical components ahead of projects to ensure we meet demands without delays when projects commence.

10. Question: Does the Rs.1.48 lakh Crore project pipeline include both inter-state and intra-state projects?

Answer: Yes, the Rs.1.48 lakh Crore covers inter-state and intra-state projects. With various states initiating their own TBCB projects, we see additional opportunities for growth in the coming years.

These questions and answers encapsulate the key concerns raised during the earnings call and provide insights into Power Grid Corporation's current strategies and outlook.