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Power Grid Corporation of India Ltd

| Q2 & H1 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤4th Nov 25

Summary : POWERGRID, India's leading transmission utility, reported stable Q2 results, maintaining capex targets despite project delays from RoW issues and equipment shortages, while pursuing significant growth in renewables and new technologies.

Management Perspective positive : Management expressed commitment to capitalization targets, highlighted government support for RoW issues, and assured stakeholders of their competent team to handle challenges. They also emphasized the company's strong market position and growth opportunities.

Concall Report Analysis & Insights

Business Overview

  1. POWERGRID is India's flagship power transmission utility, 51.34% government-owned.
  2. Operates the world's largest 765 kV transmission network with 1,81,000 circuit kilometers.
  3. Achieved 99.83% system availability, exceeding incentive thresholds.
  4. Maintains excellent MOU rating since 1993-94 and is a consistent dividend-paying company.
  5. Credit ratings are AAA domestically and BBB- internationally, at par with Sovereign.

Future Growth Prospects

  1. Significant opportunities in the Brahmaputra basin, estimated at Rs. 6.43 lakh crores by 2035.
  2. Targeting Rs. 28,000 crore capex for FY26, Rs. 35,000 crore for FY27, and Rs. 45,000 crore for FY28.
  3. Pursuing domestic opportunities in RE, intrastate transmission, BESS, and green hydrogen.
  4. Developing indigenous semiconductors for HVDC technology, supporting Atmanirbhar Bharat.
  5. Expanding consultancy services, driven by smart meter business and international projects.

Management Insights

  1. Committed to increasing capitalization and commissioning projects despite challenges.
  2. Government of India is actively supporting resolution of RoW and land compensation issues.
  3. Bulk procurement of transformers and reactors is done to mitigate supply constraints.
  4. EBITDA variations are influenced by one-time impacts and smart metering business accounting.
  5. Dedicated team of engineers and officials are working to improve execution efficiency.

Signs of Skepticism

  1. Capitalization guidance for FY27/28 (Rs. 25-28k cr) is lower than previous calls (Rs. 35-40k cr).
  2. Sharp drop in other income explained as 'normal variation' without specific, detailed drivers.
  3. Slowdown in project awarding attributed to 'cycle' and 'approvals' without clear timelines for improvement.
  4. Leh-Ladakh HVDC project cost nearly doubled, now considering AC, raising questions on initial estimates.
  5. Data center project delayed, indicating potential over-optimism in initial timelines.

Risk Factors

  1. Project execution faces delays due to Right of Way (RoW) and land compensation issues.
  2. Shortage of key equipment like transformers, GIS, and HVDC impacts project timelines.
  3. Leh-Ladakh HVDC project cost estimate increased significantly, now considering AC alternative.
  4. Data center commissioning is delayed to Q4 due to various issues and clarifications.
  5. Challenges in equipment supply due to high demand in the power sector.

Good To Know

  1. Commissioned Khavda II & III lines, Banaskantha-Ahmedabad 765 kV line, and Zojila Pass 220 kV underground cable.
  2. Developed insulated cross arm for 400 kV lines, reducing right of way by 20%.
  3. Deployed India's first 220 kV mobile GIS in collaboration with Toshiba for disaster response.
  4. Asset management practices benchmarked by OHROS Consulting, scoring 4.14 out of 5 (global average 3.68).
  5. Committed to environmental management with 29% green tariff power and 33% renewables share.

Key Drivers

  1. Increased capex targets for future years.
  2. New projects in renewable energy sector.
  3. Government support for land acquisition.
  4. Indigenous HVDC technology development.

Key Analyst Discussions

Competitive Environment

  1. TBCB project awarding is cyclical, expected to pick up momentum soon.
  2. Rajasthan JV progress stalled as regulator limits nomination-based projects.
  3. Chinese imports not expected to continue directly, but local manufacturing by Chinese firms is progressing.
  4. Brahmaputra projects are unlikely to be nominated to POWERGRID, expected under TBCB.
  5. Transmission awarding pipeline for ISTS is approximately Rs. 3.5 lakh crores.

Financial Highlights

  1. Management maintains FY26 capitalization target of Rs. 20,000 crores despite H1 performance.
  2. Effective tax rate below 20% is due to capitalization, expected to normalize as capitalization slows.
  3. EBITDA decline attributed to one-time impacts and smart metering business accounting.
  4. Revenue reduction in older projects due to lower depreciation and interest on fully paid loans.
  5. FY27 capitalization expected around Rs. 25,000-26,000 crores, FY28 around Rs. 28,000 crores.

Product Composition

  1. Telecom revenue increased to Rs. 570 crores in H1, with 100% backbone availability.
  2. Consultancy income rose to Rs. 821 crores, mainly from smart meter business.
  3. Participating in battery energy storage tenders, aiming to execute projects soon.
  4. Data center project (1000 racks) commissioning delayed to Q4 due to clarifications.
  5. EESL contribution to consol increased by Rs. 30 crores in H1.

Strategic Considerations

  1. New RoW guidelines from Government of India aim to accelerate land acquisition.
  2. Leh-Ladakh HVDC project may be replaced by AC project due to cost and feasibility concerns.
  3. Brahmaputra opportunity is in study stage, tendering expected to take time.
  4. Andaman HVDC project undersea still under discussion, no firm approval yet.
  5. Time lag of about two years between capex and capitalization is expected.
Power Grid Corporation of India Ltd (POWERGRID) Concall Report Analysis & Insights | Dhanarthi