Power Grid Corporation of India (PGCIL) is a central PSU which was incorporated in 1989. It is a central transmission utility of India which has been consistently rated excellent by the Government of India. In FY18, it has again emerged as a winner with 8,837 cKM of transmission line creation.
- Asset capitalisation totalled Rs 279.28 billion was below street expectations given there were some delays in approvals in commissioning assets to the tune of Rs 10 billion.
- For FY18, the company has completed projects to the tune of Rs 290 billion.
- The capital expenditure was Rs 257.91 billion as of FY18. The management expects capitalisation at Rs 280-300 billion in FY19E-20E.
- Third successive year of capitalisation being more than Capex.
FY18 capitalisation misses a mark but one can expect the same to be made up in FY19. Capitalisation for Q4FY18 was at Rs 83.62 billion, below the estimate of Rs 100 billion. The key reason for the shortfall was that certain receipt of approvals got delayed to the tune of Rs 10 billion. Hence, the company fell short of its FY18 capitalisation guidance of Rs 300 billion and eventually ended the year at Rs 279.82 billion. PGCIL has completed projects to the tune of Rs 290 billion. Going ahead, we expect the company to witness asset addition of Rs 295 billion, Rs 300 billion in FY19E and FY20E, respectively.
Capex spend on track
The company had planned a capex of Rs 810 billion over the next 3-3.5 years. As of FY18, the company has incurred a capex of Rs 257.91 billion. PGCIL earns 15.5 per cent RoE on its capitalised asset and is largely a beneficiary of increased capitalisation. The asset base has grown at a CAGR of 16.4 per cent to Rs 1,771 billion in FY14-18. The management expects to increase the capitalisation-capex ratio to above 1.0x for FY19E and FY20E.
The current CWIP is at Rs 325 billion. Going ahead, the company has clear visibility on projects like TBCB segment (Rs 70 billion) and integration of wind capacity (30,000 MW), solar UMPPs and nuclear. The company has earned PAT of Rs 1.25 billion in TBCB projects in FY18.
Eyeing Diversification by Focusing on New Areas of Growth
In addition to the base business, the company is making an effort to diversify and take exposure to renewables by battery storage (two modes in pilot projects to be completed by December 2017), EV charging infrastructure and railways.
Opportunities Going Ahead in Emerging Businesses
- Electric Vehicle Charging.
- Battery Storage.
- Railway Electrification: Exploring investment options.
- Telecom: Signalling works through JV with Railtel-MoU signed between PGCIL and Railtel; modalities under finalisation at the government level.
- Telecom Data Centre: Leveraging Telecom Infrastructure.
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