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Power Grid Corporation's Q1 FY25 Performance Reflects Resilience Amid Challenges

Power Grid Corporation’s Q1 FY25 Performance Reflects Resilience Amid Challenges

ABOUT COMPANY:

India’s interstate electricity transmission is primarily managed by Power Grid Corporation of India Limited (PGCIL), a major state-owned enterprise in the power sector.
The company’s main tasks include planning and maintaining the national grid, as well as providing telecom and advisory services. PGCIL also handles special projects assigned by the government. With its extensive network, the corporation plays a vital role in India’s energy distribution, helping to balance power supply across different parts of the nation.

FINANCIAL PERFORMANCE

Power Grid Q1FY25 Performance
Power Grid Corporation demonstrated steady financial performance in Q1 FY2025, with consolidated total income reaching ₹11,280 crore, marking a slight year-on-year growth of 0.20%. This modest increase underscores the company’s ability to maintain revenue streams in a dynamic market environment.

Profitability showed resilience, with consolidated Profit After Tax (PAT) at ₹3,724 crore, representing a 3.52% year-on-year increase. This growth in profitability, albeit modest, highlights Power Grid’s operational efficiency and cost management strategies in the face of market pressures.

Capital expenditure and asset expansion remained a key focus, with the company investing ₹4,615 crore in Q1 FY25. Assets worth ₹2,320 crore were capitalized, excluding Foreign Exchange Rate Variation (FERV). This strategic investment underlines Power Grid’s commitment to strengthening its infrastructure and expanding its operational capabilities.

The company’s asset base saw significant growth, with gross fixed assets on a consolidated basis reaching ₹2,77,213 crore as of June 30, 2024. Power Grid’s transmission network expanded to 1,77,790 Circuit Kilometers (CKM) of lines, supported by 278 substations and a transformation capacity of 5,28,761 MVA.

Operational excellence remained a hallmark, with the company maintaining an impressive average transmission system availability of 99.80% during the quarter. This high reliability underscores Power Grid’s commitment to efficient service delivery and network management.

Future growth prospects appear promising, with a substantial work portfolio exceeding ₹1,14,000 crore (excluding Capital Work in Progress). The company’s success in securing 6 Inter-State Transmission System (ISTS) projects through competitive bidding, with an estimated cost of approximately ₹24,855 crore, further bolsters its future pipeline.

Consolidated Financial Highlights: (Figures in Rs. Crs)

(Rs crores) Q1FY24 Q4FY24 Q1FY25 QoQ (%) YoY (%)
Total income 11,258 12,305 11,280 -8.3% 0.2%
Total expenses 6,689 7,066 6,643 -6.0% -0.7%
Profit before tax 4,564 5,301 4,666 -12.0% 2.2%
Tax 621 958 879 -8.3% 41.6%
Profit after tax 3,597 4,166 3,724 -10.6% 3.5%
Earnings per share 4.2 4.7 4.1

Power Grid continues to play a crucial role in India’s energy transition, focusing on large-scale integration of renewable energy sources into the National Grid. This strategic positioning aligns with national energy goals and sustainable development objectives. Quarter-on-quarter performance showed some fluctuations, with consolidated revenues decreasing by 8.3% compared to the previous quarter. Expenses saw a reduction of 6% quarter-on-quarter and 0.7% year-on-year, reflecting ongoing efforts in cost optimization. The company’s earnings per share (EPS) stood at 4.1 for Q1 FY25, providing a measure of its profitability on a per-share basis. This comprehensive performance overview highlights Power Grid’s resilience in navigating market challenges while maintaining its focus on strategic growth and operational excellence.

INDUSTRY OVERVIEW:

The Indian economy maintains its position as a standout performer among major global economies, demonstrating impressive fortitude and growth momentum. Despite various challenges, India’s economic engine continues to power forward, highlighting the country’s adaptability and robust fundamentals. This sustained economic vigor underscores India’s increasing significance on the world stage and its ability to navigate complex global conditions while maintaining a strong growth trajectory. Despite global headwinds, the nation’s economic trajectory remains strong, with the IMF projecting growth rates of 3.2% for FY24 and 3.1% for FY25. The outlook for FY 2023-24 is even more promising, with growth forecasts ranging between 6.5% and 7%, underlining India’s robust economic foundation. The country’s performance in FY 2024 was particularly noteworthy, with real GDP growth hitting 8% and surpassing pre-pandemic levels by 20%.

Sustainable Development and Energy Transition: India is making significant strides in environmental sustainability and climate resilience. The country’s G-20 presidency in 2023 emphasized clean energy transitions, energy security, and the development of international energy markets. These initiatives are expected to bolster India’s position in the global sustainable energy landscape.

Power Sector: A Pillar of Growth: The power sector, encompassing generation, transmission, and distribution, remains crucial to India’s economic development. Over the past decade, the country’s energy mix has evolved significantly, with renewables now comprising over 50% of the total grid capacity. As of 2024, renewable sources account for 55.03% of the grid capacity, while non-fossil-based energy makes up 44.97%. India’s National Grid plays a pivotal role in the global electricity market, emphasizing the importance of non-fossil fuels. The renewable energy sector is poised for substantial growth between 2024 and 2030, with clean energy investments projected to reach ₹8.5 lakh crore.

Investment Landscape and Future Outlook: The power sector is increasingly attractive for foreign direct investment, particularly in green energy. The government has allocated significant funds towards green hydrogen, solar power, and renewable energy development. The National Electricity Plan 2022-32 estimates that India’s power generation industry will require a total investment of ₹33 lakh crore by 2032. Recent policy measures, including support for rooftop solar and the Pradhan Mantri Surya Shakti Yojana, further highlight the government’s commitment to renewable energy. These developments paint a picture of a dynamic and forward-looking power sector, poised to play a crucial role in India’s sustainable economic growth and energy transition.

BUISNESS UPDATES:

Telecom Business: Power Grid’s telecom sector showed strong performance in Q1FY25, marked by several key achievements. The company successfully onboarded 35 new customers during this period, reflecting its expanding market reach and customer base. Additionally, Power Grid achieved 100% backbone availability, ensuring uninterrupted service and demonstrating its commitment to reliability. The network capacity was significantly enhanced to 1.8 Tbps, positioning the company to meet growing demand and deliver high-speed telecom services. Financially, the telecom division saw an increase in income, rising from ₹191 crores in Q1FY24 to ₹219 crores in Q1FY25, indicating a growth trajectory. Power Grid’s efforts in the telecom sector have been well recognized, with letters of appreciation received from institutions such as NIT Bhopal, IIITDM Jabalpur, and the Narmada Control Authority, acknowledging the satisfactory telecom services provided.

Commercial Performance Overview: In Q1 of the 2025 fiscal year, PowerGrid’s financial performance showed notable figures. The company logged billings amounting to ₹9,262 crore, while its actual collections reached ₹8,509 crore. This translated to a collection efficiency rate of 91.87%, indicating the company’s strong ability to convert billed amounts into realized revenue during the period. The outstanding dues stood at ₹5,548 crore, a decrease from ₹7,140 crore in the same quarter of the previous year (Q1FY24). Notably, dues outstanding for more than 45 days reduced significantly from ₹4,912 crore to ₹3,295 crore, while the dues pending for less than 45 days were relatively stable. This improvement is partly attributed to the LPS (Late Payment Surcharge) Rules 2022 by the Ministry of Power, which led to the collection of ₹1,849 crore from an outstanding amount of ₹2,438 crore. Major states with outstanding dues include Tamil Nadu, Jammu & Kashmir, Telangana, and Uttar Pradesh.

Business Outlook for 2032

PowerGrid has outlined an ambitious investment plan up to 2032, with an estimated outlay of ₹2,07,500 crore. The bulk of this investment, ₹1,90,500 crore, is earmarked for the transmission business. This includes inter-state transmission projects, intra-state ventures, cross-border initiatives, and international projects, with a significant 71% allocated to inter-state projects. Additionally, ₹17,000 crore is designated for other business areas, such as solar generation, smart metering infrastructure, and data center operations. Solar generation and smart metering, in particular, account for most of this segment’s investment.

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Power Grid Strengthens Southern Grid with Successful Project Completion

Power Grid Strengthens Southern Grid with Successful Project Completion

The nation’s top power transmission provider, Power Grid Corporation of India Limited (POWERGRID), has successfully commissioned a project for “Augmentation of Transformation Capacity in the Southern Region,” marking a critical milestone. The objective of this effort is to improve grid stability and strengthen the electricity transmission infrastructure in the southern states of India.

Project Specifics and Advantages:
Power Grid has not made the project’s details available to the general public. On the other hand, we may deduce the following from the project title:

Emphasis on Transformers: It is probable that this project entailed the installation of either new or upgraded transformers. Transformers are essential for efficiently transmitting power over long distances by stepping up or down voltage levels.
Enhanced Capacity: The project intends to “augment” transformation capacity, implying an expansion of the southern grid’s total capacity to handle power. This means that more power can be sent, meeting the rising demand and making it easier to integrate renewable energy sources.

Enhanced Grid Stability: The upkeep of grid stability depends on a strong transmission infrastructure with sufficient transformation capacity. For businesses and homes in the southern area, this means fewer power outages and higher-quality power supplies.

Importance to the Southern Area: The southern part of India has grown significantly in the last several years, which has increased demand for power. In order to meet this rising need, this initiative will:

Enabling electricity Transmission: By facilitating the transmission of extra electricity from generation sources to distribution networks, the increased capacity will guarantee that customers will always have access to power.

Integration of Renewable Energy: The South has a lot of potential for renewable energy sources, such as wind and solar power. By strengthening the grid’s infrastructure, this initiative makes it possible to seamlessly include these renewable energy sources into the overall power mix.

Enhanced Power Quality and Reliability: The project will minimise power outages and disruptions by improving power quality and reliability through increased grid stability.

The Commitment of Power Grid to Sturdying the Country’s Grid

Power Grid is essential to the development and upkeep of the national transmission network in India. The accomplishment of this project successfully highlights the company’s dedication to:

Infrastructure Expansion: To fulfil the nation’s rising demand for power, Power Grid is constantly modernising and expanding the nation’s grid.
Grid Resilience: By funding initiatives that increase transmission capacity and stability and reduce the likelihood of power outages, the corporation prioritises grid resilience.
Integration of Renewable Energy: Power Grid is actively engaged in building infrastructure to enable the integration of renewable energy, acknowledging the significance of this energy source in India’s energy mix.

Financial performance of the company:
The P/E ratio of 7.66 and the P/B ratio of 1.90 indicate a moderate value for this firm. Positive valuation indicators are further shown by its P/S ratio of 3.45 and EV/EBITDA ratio of 6.83. The firm has grown steadily over the last three years, with a three-year compound annual growth rate (CAGR) of 9.89% for sales and 19.22% for net profit. The firm has strong interest coverage ratios of 4.20, while having a debt to equity ratio of 1.52. However, with a current ratio of 0.91 and a quick ratio of 0.88, liquidity ratios show some pressure. The ROCE of the firm is a commendable 12.81%. With a gross profit margin of 88.85%, an operating margin of 59.60%, and a net profit margin of 34.00%, the company is clearly exceptionally profitable. With respect to book value per share (excluding Reval Reserve), it is Rs. 119.01. Basic EPS and Diluted EPS are both Rs. 22.10. With a face value of Rs. 10, a substantial dividend of Rs. 18.75 per share is given out. With a market valuation of Rs. 251,255 crore, the business has a strong position in the market and investor trust.

The “Augmentation of Transformation Capacity in the Southern Region” project has been successfully put into service, signifying Power Grid’s dedication to fortifying the national grid and streamlining the integration of renewable energy sources. This initiative should help Power Grid’s long-term growth prospects and investor value, even if an exact valuation impact cannot be calculated without particular financial information.

India’s economic growth and energy security depend heavily on Power Grid’s efforts on modernising and expanding its grid and infrastructure. The project’s successful completion establishes a favourable precedent for next initiatives and establishes Power Grid as a major participant in India’s changing energy environment.

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