Analyst Call
Power Grid sees bright prospects for projects, capex over 3 yrs
This story was originally published at 14:11 IST on 5 February 2025
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--Power Grid: Hope to win 50% of INR 520-bln worth projects due for bidding
--Power Grid: To seek orders for smart meters only on finishing Gujarat order
--Power Grid: Have orders to install 6.7 mln smart meters in Gujarat
--Power Grid: To complete projects worth INR 100 bln by March
--Power Grid: May explore global mkts, not just domestic mkt, to raise debt
--Power Grid: Face challenges in finishing transmission projects within 2 yrs
--Power Grid: May commission INR 1.76 trillion of projects in next 3 years
--Power Grid: FY26 capex likely INR 280 bln-INR 300 bln, FY27 INR 350 bln
--Power Grid: Won projects worth INR 630 bln in Apr-Dec
--Power Grid: Won projects worth INR 198.28 bln in Oct-Dec
--Power Grid: Have INR 1.47 trillion of orders in hand
--Power Grid: Plan INR 230-bln capex in FY25
--Power Grid: Spent INR 194.8 bln as capex in Apr-Dec
--CONTEXT: Comments by Power Grid management in post-earnings analyst call
--Power Grid: Debt as on Dec 31 was INR 1.29 trillion
--Power Grid: Cost of borrowing on standalone basis in Oct-Dec was 7.54%
By Sunil Raghu & Akshita Kumar
AHMEDABAD/MUMBAI – Power Grid Corp. of India Ltd. expects a rise in its capital expenditure over the coming three years, as it is hopeful of winning nearly half of the projects that are due for bidding, its management said on Wednesday.
Speaking to analysts post declaring its Oct-Dec earnings, the company's management said that while the value of current projects under works stood at INR 1.47 trillion, it hopes to bag another INR 270 billion-INR 280 billion of the INR 520 billion worth of projects that are likely to come up for bidding.
This means that the company, which spent nearly INR 194.8 billion as of Jan.31, plans to spend a total of INR 230 billion for capital expenditure during 2024-25 (Apr-Mar). With projects under implementation and expected new order inflow, Power Grid may see its capital expenditure rise to INR 280 billion-INR 300 billion in FY26 and INR 350 billion in FY27.
In totality, it hopes to complete projects worth INR 100 billion by March and worth INR 1.76 trillion over the coming three years. Of the projects it seeks to finish, it won projects worth INR 198.28 billion in Oct-Dec and INR 630 billion during Apr-Dec. The company also has orders to install 6.7 million smart meters from Uttar Gujarat Vij Nigam Ltd. The company's management said it would seek out more orders for installation of smart meters only on completion of its Gujarat order.
Power Grid has 1,518 transmission lines stretching over 179,594 circuit kilometres across the length and breadth of our country, housing 280 substations, 290,000 transmission line towers, and 3,800 transformers and reactors. Its inter-regional transfer capacity is 99,580 megawatts, which is 84% of the total inter-regional capacity of India.
Recently, several equipment makers and other developers in the power sector have reported that they are facing challenges in land acquisition and supply of equipment, especially high voltage transformers or conductors. Asked whether Power Grid was facing a similar situation, the management acknowledged the challenge in procurement. They said they were procuring such equipment in bulk irrespective of projects in hand but "accepted" that there were challenges in completing transmission projects within two years.
Talking about the company's debt, Power Grid's management said that as of Dec. 31, the company's debt stood at INR 1.29 trillion, with the interest rate on borrowing in the December quarter at 7.54% on a standalone basis. The company had recently obtained $200 million from Sumitomo of Japan at an interest rate of 1%, including the spread. With a huge pipeline of capital expenditure, Power Grid is exploring global markets to raise more debt in currencies other than just Indian rupee. It may even exercise the greenshoe option and additionally opt for another $150 million from Sumitomo, in addition to the $200 million already raised.
At 1339 IST, shares of Power Grid traded 0.5% higher at INR 287.05 per share on the National Stock Exchange. End
US$1 = INR 87.41
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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