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COMPANY
MANAGEMENT
REPORT
VISIT
NOTE
NOT RATED
CMP
Rs157
We met Power Grid Corporation of India (POWGR IN). Should POWGR keep up the ante, we will
not be surprised if Govt. accords the company with Maharatna status. Further, increasing
bandwidth of work be it commissioning of worlds longest 800 kV HVDC multi-terminal or
increasing geographical footprint this company has added many feathers to its cap. However,
with 2019-2024 draft regulations due from Central Electricity Regulatory Commission, a doubleedged sword for regulated asset-base model, we discern a cautious tone.
Power
5,232
819,070
12,156
351,631
Price Performance
52-week high/low
Rs158/121
-1m
-3m
-12m
Absolute (%)
13
12
13
57.9
FIIs/NRIs/OCBs/GDR
26.3
MFs/Banks/FIs
8.5
Non Promoter
3.5
3.7
Relative to Sensex
120
110
Is POWGR on its way to be Maharatna? Arguably, yes. In FY16, POWGR has completed the
highest ever capitalization of Rs317 bn. Further, company has achieved highest ever
commissioning of 13,717 transmission line circuit kilometers. The revenue has surpassed
Rs200 bn plus threshold a critical factor for achieving Maharatna status. With steady-state
stream of revenue, thanks to long-dated infrastructure and regulated-asset base model,
POWGR is on its way to be a Maharatna. This is not to say revenue is the sole parameter.
While ticking few more boxes, we could not deny with the management that POWGR is on its
way to be Maharatna. If accorded, company gains more operational autonomy.
Increasing bandwidth of work: POWGR has achieved commendable feat in commissioning
worlds longest 800 kV HVDC multi-terminal. While making use of South Asian association of
regional co-operation, projects in Nepal and Bangladesh is completed and operational.
Notwithstanding the domestic monopoly, this paves the way for POWGR to don the cap of a
regional player. Further, with 400kV D/C Khammam Nagarjunasagar project commissioned,
TBCB route yields a promising outlook. That said, we are not a big fan of TBCB model. And
here is the reason why: In our observations, the equity IRR for non-regulated transmission
projects across industry is appalling. Yet we do not deny a sweeping generalization can
prove us wrong.
Performance in Non-core sectors: First, consultancy. POWGR is working on 13 different
assignments. Some of them includes: 2nd Block of 1x500MW HVDC B2B Stn. at Bheramara;
CASA-1000 Project; Assignments from ADB & World Bank in Nepal; Trans. Infrastructure
works in Kenya. Second, Telecom. The services in Telecom domain includes: dedicated lease
lines, Internet, MPLS-VPN, Dark Fiber. And the typical clientele includes: Telecom operators,
Government departments and IT companies. In FY16, the income is up by 43%. The total
order book is Rs21 bn.
Is POWGR the best way to play the power value chain? Perhaps, Yes. We draw comfort from
stable business model. As storm clouds loom around over private power companies saddled
with debt, discom reforms and power generation moving at a tepid pace, Power Grid
ostensibly assures a non-volatile business model. With market share over 40%, Powergrid is a
central transmission utility that commands transmission lines in excess of 127,539 kms. Substations are in excess of 248,164 MVA. Being a regulated state-owned enterprise, the scope
of value-addition significantly in excess of cost of equity is limited. Yet at the turbulent times
when rhetoric is not matched with reality, this stands as a bright spot.
Table: Financial snapshot
100
90
80
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
70
PWGR
Source: Capitaline
Sensex
(Rs mn)
Year
Revenue
FY13
131,639
106,438
41,309
8.9
17.6
13.1
16.5
8.3
FY14
156,754
126,105
80.4
42,739
8.2
19.2
12.8
14.0
8.0
FY15
176,585
143,004
81.0
44,992
8.6
18.2
12.3
12.3
7.2
FY16
213,523
186,047
87.1
60,146
11.5
13.6
8.9
14.6
9.3
EPS (Rs) P/E (x) EV/EBITDA (x) RoE (%) RoCE (%)
Sub-station
NP Kunta
Salem (Dharmapuri)
Navi Mumbai (GIS)
Kanpur (GIS)
Pandiabil (GIS)
Rajarhat (GIS)
Saharanpur
Bagpat (GIS)
Dehradun
Betul (GIS)
Chandwa (GIS)
Vemagiri (GIS)
Srikakulam (GIS)
Nizamabad
Roing
Tezu
Namsai
Alipurduar HVDC
Champa HVDC
Kurukshetra HVDC
Inter-regional Capacity
Gaya-Varanasi
Champa-Kurukshetra
Angul-Srikakulam
Wardha-Nizamabad
Biswanath-Chariyali
Alipurduar Agra
(Rs bn)
FY12-13
FY13-14
FY14-15
FY15-16
FY16-17
200
232
225
226
225
Achieved
Achieved
Achieved Achieved
Completion
Oct-16
Aug-16
Sep-16
Jul-17
Jul-18
Nov-17
Jan-18
Apr-19
Annualized levelised
Transmission Charges
(Rs mn)
990
2,310
170
590
2,110
2,900
2,570
3,590
250.0
250.0
200.0
196.1
150.0
174.3
149.8
100.0
150
200.0
184
167
150
120.8
100.0
50.0
80.6
120.8
149.8
118.3
93.0
FY13
FY14
FY15
255.3
231.7
205.9
164.8
124.5
50.0
0.0
FY12
200
150.0
96.7
63.4
250
207
192
50
100.2
106.8
115.6
129.4
0.0
FY16
0
FY12
FY13
FY14
TL ('000 ckm)
FY15
FY16
S/S Nos.
213
6.0
6.0
178
5.0
157
(Rs bn)
(Rs bn)
230
210
190
170
150
130
110
90
70
50
133
108
5.0
4.5
4.2
4.0
3.3
3.0
2.0
FY12
FY13
FY14
FY15
FY12
FY16
FY13
FY14
(Rs bn)
400
399
340
319
177
191
FY16
156
FY15
Total Revenue
Source: Company; IDBI Capital Research
450
400
350
300
250
200
150
100
50
0
100
215
210
300
200
164
129
100
150%
141%
97%
86%
318
218
172
130
178
200
50%
159
232
225
226
FY12
FY13
FY14
FY15
FY16
CWIP (Installed)
100%
69%
73%
0%
FY12
Capex
FY13
FY14
Capitalization
FY15
FY16
Capitalization-capex ration
Financial summary
Profit & Loss Account
(Rs mn)
Year-end: March
Net sales
FY13
FY14
FY15
FY16
131,639
156,754
176,585
213,523
Pre-tax profit
Depreciation
Growth (%)
Year-end: March
FY13
FY14
FY15
FY16
55,892
60,509
58,251
75,874
35,923
42,342
53,161
63,022
(10,826)
(18,114)
(13,579)
(15,728)
26.1
19.1
12.7
20.9
Operating expenses
(25,201)
(30,650)
(33,581)
(27,476)
Tax paid
EBITDA
106,438
126,105
143,004
186,047
20,565
31,554
22,559
6,036
116,897
152,225
158,001
129,203
(23,219)
Growth (%)
Depreciation
EBIT
Interest paid
29.5
18.5
13.4
30.1
(34,278)
(40,794)
(51,733)
(63,022)
72,160
85,311
91,271
123,025
(25,994)
(32,537)
(40,812)
(50,860)
Other income
9,727
7,735
7,792
3,708
Pre-tax profit
55,892
60,509
58,251
75,874
(14,630)
(18,114)
(13,579)
(15,728)
26.2
29.9
23.3
20.7
Net profit
41,262
42,395
44,673
60,146
41,309
42,739
44,992
60,146
33.4
3.5
5.3
33.7
4,630
5,232
5,232
5,232
Tax
Effective tax rate (%)
Growth (%)
Shares o/s (mn nos)
Balance Sheet
(Rs mn)
Year-end: March
Net fixed assets
FY13
FY14
FY15
FY16
978,426
1,243,207
1,448,723
1,408,921
Investments
5,864
Current assets
4,234
2,196
2,196
Chg in investments
CF from investing (b)
(23,219)
Equity raised/(repaid)
Debt raised/(repaid)
1,629
6,019
148,780
149,862
120,238
(96,243)
(2,964)
(3,765)
(2,961)
(2,962)
99,619
137,121
(4,325)
22,955
63,988 (100,009)
(19,858)
5,975
Financial Ratios
Year-end: March
Adj EPS (Rs)
FY13
FY14
FY15
FY16
8.9
8.2
8.6
11.5
33.4
-8.4
5.3
33.7
80.9
80.4
81.0
87.1
42.5
38.6
33.0
35.5
ROE (%)
16.5
14.0
12.3
14.6
ROCE (%)
8.3
8.0
7.2
9.3
(20,543)
(20,543)
72,457
95,157
87,038
122,726
Asset turnover
0.1
0.1
0.1
0.1
Leverage factor
3.8
3.9
3.9
3.7
31.4
27.3
25.5
28.2
Net Debt/Equity
2.5
2.3
2.4
1.9
Inventory days
15
17
15
14
Receivable days
41
38
46
48
1,405
1,505
1,726
2,555
7,137
7,390
8,482
Sundry Debtors
14,914
16,183
22,070
28,211
26,789
49,744
29,886
35,861
25,224
22,093
27,693
50,172
1,061,361
1,325,470
1,517,415
1,513,300
Payable days
Share capital
1,873
(17,129)
5,531
Shareholders' funds
2,039
4,614
Inventories
Total assets
Capital expenditure
264,031
346,979
384,387
440,768
46,297
52,316
52,316
52,316
Valuations
217,734
294,664
332,071
388,452
Year-end: March
FY13
FY14
FY15
FY16
Total Debt
692,334
842,196
962,434
866,191
PER (x)
17.6
19.2
18.2
13.6
Secured loans
663,253
771,132
901,355
811,220
2.8
2.4
2.1
1.9
PCE (x)
9.6
9.8
8.5
6.7
Unsecured loans
29,081
71,064
61,079
54,971
104,996
136,294
170,594
206,342
10.6
10.3
9.9
7.7
Current liabilities
97,028
126,387
158,831
192,302
EV/EBITDA (x)
13.1
12.8
12.3
8.9
7,968
9,907
11,763
14,040
0.3
0.3
0.3
0.4
797,330
978,490
1,133,028
1,072,533
1,061,361
1,325,470
1,517,415
1,513,300
57
66
73
84
Provisions
Total liabilities
Total equity & liabilities
Book Value (Rs)
Source: Company; IDBI Capital Research
(Rs mn)
Notes
Dealing
dealing@idbicapital.com
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Stocks:
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