POWER GRID CORPORATION OF INDIA : IN A POWERFUL POSITION
The establishment of clean and green electricity generating capacities bundled with the development of related transmission and distribution infrastructure is crucial for India’s energy security and therefore provides ample and sustainable opportunities for the perpetual long-term growth of the sector. As such, Power Grid Corporation of India finds itself poised for long-term benefits
Power Grid Corporation of India Limited is an Indian government electricity board and a Maharatna public sector undertaking which is owned by the Ministry of Power, Government of India and is headquartered in Gurugram, India. The company is mainly engaged in the transmission of bulk power across different states of India. It possesses 1,72,154 circuit kilo metres (ckm) transmission lines along with 262 sub-stations and 4,46,940 MVA transformation capacity. The company provides transmission-related consultancy to more than 150 domestic clients and has its global footprint in 20 countries, catering to more than 25 clients.
In the telecom segment, the company owns and operates approximately 66,922 km of telecom network. It has a point of presence in 714 locations and intracity network in 206 cities across India. Since 1993 the company has been paying a dividend and has 51.34 per cent holding by the Government of India and the balance of 48.66 per cent by the public. The company bears in-house expertise for domestic as well as international transmission sector consultancy. It has been diversifying the telecommunication business using existing transmission assets coupled with investment in energy efficiency and investment in smart grid.
Sector Overview
Power is a key and crucial infrastructure requirement and ingredient for economic growth and also for the attainment of high quality of life. Electricity being an essential requirement for all aspects of our life has been recognised as a basic human need. India stands to be the third-largest producer of electricity in the world and ranks well below the global average in electricity consumption as well as in share of electricity in primary energy. The power sector in India has observed a paradigm shift over the years as a result of the constant efforts of the government to create more capacity for electricity from clean sources.
This also includes the effort to provide energy access to its citizens and to improve on its energy security by prioritising domestically available energy resources. India has witnessed a significant increase in the power sector in terms of installed capacity in the country during the last five years, driven largely by additions in both thermal and grid-connected renewable energy, mainly wind and solar. In view of the consistency in policy push for renewable energy by the government and its aim to have 40 per cent of the total installed capacity by the year 2030 based on non-fossil fuel sources, the renewable energy sector is poised for a quantum jump.
Peak demand and energy requirement for 2030 have been pegged at 340 GW and 2,325 BU, respectively.
Financial Overview
The financial performance by the company shows that on a consolidated quarterly basis the net sales and other operating income increased to Rs 10,510.23 crore in Q4FY21 as compared to Rs 10,148.26 crore in Q4FY20, bagging gains of 3.57 per cent. The operating profit stood at Rs 9,601.64 crore in Q4FY21 as against operating profit of Rs 8,862.64 crore in Q4FY20, registering an increase of 8.34 per cent. Q4FY21 recorded net profit of Rs 3,471.99 crore as compared to net profit of Rs 3,265.59 crore in the same quarter in the previous year, gaining 6.32 per cent. On an annual basis, its net sales and operating income rose by 5.02 per cent from Rs 37,743.54 crore in FY20 to Rs 39,639.79 crore in FY21. The operating profit rose by 6.82 per cent in FY21 as compared to FY20. The net profit jumped 8.41 per cent in FY21, recording at Rs 11,821.76 crore as compared to Rs 10,904.27 crore in FY20.
Some of the financial highlights for Q4FY21 include:
✓Commissioning of +320 kV voltage source convertor (VSC)-based HVDC terminals at a cost of Rs 5,000 crore.
✓ The company added 98 new customers with approximately 99 per cent connectivity with rural administrative bodies and service availability to approximately 97 per cent ‘gram panchayats’ and block heads in the telecom sector.
✓ Its consultancy vertical received 10 new orders in the domestic market and seven new orders in the international market in FY21.
✓Adopted latest technologies like application-based patrolling, use of drones for patrolling transmission lines and Power Grid Asset Life Management System (PALMS) portal. As regards the segment-wise performance of the company, on a YoY basis the transmission revenue recorded 1.9 per cent growth to Rs 9,787 crore backed by rising electricity demand, while consultancy revenue grew by 1.4 per cent, reaching Rs 177 crore, which was attributed to the addition of newer projects. Meanwhile, significant traction was seen in the data centre as well international long-distance bandwidth businesses which led the telecom business revenue to revamp by 3.6 per cent.
Effective cost controls have led to the expansion of margins in Q4FY21. On a YoY basis, gross margin rose by 623 bps to 94.5 per cent as a result of lower cost of sales. The EBITDA margin enlarged by 480 bps to 88 per cent, which was benefitted by higher revenue on one hand but partially offset by higher employee benefit expenses as a percentage of sales on the other. The employee benefits’ expense as a percentage of sales was recorded at 6.6 per cent in Q4FY21 as compared to 5.1 per cent in Q4FY20.
Recent Acquisitions
1. Jaypee Powergrid Limited: The company has acquired 74 per cent stake in Jaypee Powergrid Limited which is a joint venture between Power Grid Corporation and Jaiprakash Power Ventures Limited holding 26 per cent and 74 per cent equity, respectively. This JV was incorporated to evacuate power generated by the 1,000 MW Karcham Wangtoo Hydro Electric Power Project in Himachal Pradesh. The project is under commercial operation since April 2012. In terms of assets, the company has acquired transmission lines of 449 ckm.
2. Srinagar Leh Transmission System (SLTS): This is a project executed by Power Grid Corporation on a consultancy basis under the Prime Minister Reconstruction Plan (PMRP) scheme. The project provides connectivity with the national grid for uninterrupted power supply to Ladakh. With this acquisition, the company has undertaken re-designation of SLTS as Inter-State Transmission System (ISTS) upon reorganisation of the erstwhile state of Jammu and Kashmir into the Union Territory of Jammu and Kashmir and the Union Territory of Ladakh. In terms of assets, the company has acquired transmission lines of 375 ckm and new sub-stations of 300 manufacturing value-additions.
Conclusion
The establishment of clean and green electricity generating capacities bundled with the development of related transmission and distribution infrastructure is crucial for India’s energy security and therefore provides ample and sustainable opportunities for the perpetual long-term growth of the sector. Driven by years of sectoral knowledge and consisting of a large pool of experienced professionals and the confidence of the Government of India and the state governments, Power Grid Corporation has been regularly undertaking assignments in the various emerging business areas with related adjacencies to power like distribution, railway electrification, and new areas like energy efficiency, smart city, smart grid, electric vehicles fast-charging infrastructure, etc. and has undertaken pilot projects in smart grid in distribution and grid-scale battery storage.
Power Grid Advanced Research and Technology Centre, set up by the company, houses various state-of-the-art laboratories. The facility has commenced extending expert services for research, analysis, testing and calibration and expects to take this opportunity forward. The Government of India has announced a reforms-linked new power distribution sector scheme worth Rs 3 trillion for five years in Union Budget 2021-22. Hence, owing to the government’s initiative in the development of the power sector in India coupled with an efficient company like Power Grid Corporation continuously taking efforts to take India to a higher level in terms of power distribution and transmission, we recommend a BUY.