Power Grid Corporation of India Limited (POWERGRID) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining us for the Q4 and FY '22 post result Virtual Meeting of Power Grid Corporation of India Limited, On behalf of ICICI Securities, we would like to welcome the Power Grid senior management. Thank you for your time for this meeting. From the management, we have with us Mr. M. Taj Mukarrum, Director Finance and CFO; Mrs. Seema Gupta, Director Operations; Mr. Sunil Agrawal, VP, Corporate Planning. I would like to hand over the floor to the management who will give a detailed presentation, post which we will have a Q&A session. Thank you, and over to you.

Very good morning for all, and welcome to the investor meet today of Power Grid Corporation of India for the FY '22. My name is Taj Mukarrum, I'm Director Finance here. And I'd like to give you a brief presentation about the financial results and the performance of our company during FY '22. My presentation will cover Power Grid's overview, major highlights during the year, performance key points, and then we'll look at what is the business outlook for our power sector. And within power sector, this is how we'll go. To start with, as you all know, Power Grid Corporation of India is in Maharatna, CPSE, government of India undertaking with the ownership of government of India and government of India at 51.34%. Within CPSE in India, we are the third largest in terms of gross block. First in we're top 5 TBCB companies last FY. Now we have -- the group entity has 24 subsidiaries, and we are partnered with 10 companies in joint venture. As far as international presence is concerned, we have footprint in 23 countries, majorly Africa and near neighboring countries. Power Grid Corporation of India credit rating is AAA rating. All the 3 domestic rating agencies, CRISIL, ICRA and CARE. And international rating Moody's, S&P and Fitch have given us on par sovereign rating of Baa3 and [indiscernible]. As far as our size is concerned, Power Grid Corporation of India has a total 1.7 lakh circuit kilometers of transmission lines, numbering about 1,350 lines, with substation operational assets of 265 substations, covering 4.75 lakh MVA. Power Grid Corporation of India's share in the entire country's power flow is approximately 45% to 50%. And within that interregional capacity Power Grid Corporation of India is the leader -- of the total 112,000 megawatts of country's interregional power flow, Power Grid covers almost 97,000 megawatts, sharing about 85% of the interregional capacity. Next slide. This year's major highlights are as you all know, we have already informed to our investors up to Q3, the driver Raigarh-Pugalur-Thrissur-HVDC scheme has already been commissioned fully. And we are during this Q4, we have incorporated a new subsidiary towards focusing our growth on consultancy engineering consultancy services called -- power Grid Energy Services Limited. And this year, first year, Power Grid has monetized total operational assets worth INR 8,370 in 2 tranches, one INR 7,700 during May 2021, and another INR 600 crores has been monetized towards 26% of the one off the TBCB companies which has been monetized last year. Out of the 18 TBCB subsidiaries that Power Grid has now of netting the 5 TBCB companies which have been already monetized, 6 have been commissioned during FY '22. The names are given here on the slide. and balance 12 TBCB companies are under various advanced stages of transaction. In addition to that, Power Grid has acquired 3 new subsidiaries Power Grid has won this year, Aligarh Sikar transmission, Bhadla transmission too and Sikar transmission. This is that this data transmitting is up to 31st March. We are happy to inform you that last week, Power Grid has won Mohanlalganj one more intrastate UP, which actually was won last year, FY '22, but the letter of intent has been issued by UP government last week only. We'll come to the project execution. During construction, Power Grid has made a capital expenditure of INR 9,000 crores on a consolidated basis. And on a commissioning, we have achieved a total of INR 20,695 crores of commissioning, which includes INR 5,600 TBCB-based companies commissioning and INR 15,000 crores regulated assets commissioning. This is for the full year. As far as Q4 is concerned, the CapEx figures on consolidated base stand at INR 1,872 crores and INR 2,100 crores. Next slide. In addition to what has been the cumulative figure, the exact FY '22 project execution highlights are we have commissioned more than 5,000 circuit kilometers of transmission lines with an MVA capacity of 43,564 MVA and 7 substations have been commissioned during this current year FY '22, resulting in an interregional capacity of more than 7,200 megawatts. This has been the remarkable construction performance target during FY '22. Now coming to the operational performance of our corporation, this has been a record year again in terms of both availability of the huge transmission operational assets as well as the reliability, which is measured in terms of trippings per line. As you can see, the operational performance has been more than 99.83% during FY '22, which is above the benchmark of 99.75% to become eligible for the incentive. So Power Grid has managed to maintain 93 -- 99.83%, and the reliability trippings per lines also have been coming down through various measures that have been taken by Power Grid which we'll explain in the next slides. And it is only 0.33 trippings per land during FY '22. There are various operational highlights during this year which Power Grid has achieved. One of the major ESG compliant measures has been environmental friendly natural canister oil which has been commissioned. It is the world's first 400 kV reactor where at Maithon, which is in our Eastern region. And we have refurbished old HVDC systems like Vidhyanchal Back to Back and Rihand-Dadri, which were commissioned very 1 of the first HVDC systems, they have been refurbished. These are the 2 major operational highlights. Now coming to the financial performance, again, this year has been a record performance in terms of financial results also. As you can see here, on a consolidated basis, the income has recorded at INR 10,942 crores during Q4 and a PAT bottom line of INR 4,321 crores. And these are the stand-alone figures, I'm sorry. And consolidated figures are income is INR 11,068 crores and PAT is INR 4,156 crores. Now we'll go drill down these financial details in the next slide. Particularly 2 measures will take, one is Q4 performance of financials and year-on-year of FY '22. If you look at financial performance of 31/3/22 on a consolidated basis, the total income -- operational income is recorded at INR 11,068 crores, which consisted of majorly 97% towards transmission charges, that is INR 10,299 crores and consultancy of INR 234 crores; telecom INR 153 crores. There is other income, which we'll explain, which is INR 382 crores. There is a growth of 25% there. Overall, on an income basis, there has been a growth of about 6% on the top line. And bottom line, there has been a growth of 8.5%. Next slide. We come to our financial performance of FY '22. Total income recorded is INR 42,698 crores, and bottom line of INR 16,824 crores on a consolidated basis. As far as the details of FY '22 top line and bottom line, transmission charges again are approximately 97% of the total income, recording a growth of 6% on year-on-year and PAT has recorded 43% growth, but this 43% growth, if we net off the one-offs, the one-offs are majorly only 2. One is the InvIT which we have commissioned, and there has been a INR 3,300 crores profit on the InvIT transaction, net of tax. And there has been last year as compared to last year, last year, there has been a INR 1,000 crores plus onetime rebate given, which amounts to about INR 890 crores net of tax. So if we take out these 2 one-offs, the growth rate is approximately PAT 7.5%. We'll come to the next slide. Cumulative figures of the gross assets, we have shown a growth of INR 22.62 lakh crores of gross block -- gross block assets as on 31/3/22 as against INR 2.41 lakh crores. Earnings per share, again, because of a huge PAT recorded INR 17,000 crores. Upon the shares, earnings per share is INR 24 as against INR 17 last year on a consolidated basis. And book value also has impressively grown from INR 100 to INR 109. Due to nondrawal of fresh loans during the year and as well as repayment of debt servicing, the CapEx earlier used to be in terms of INR 20,000 crores and above. But last 2 years, we have seen a tapering on the capital expenditure. Thereby, the debt equity position also has become very comfortable. Now it is 63:37. And return on net worth, again, the PAT INR 17,000 crores has seen that the return on net worth, which is a ratio of PAT to net worth has shown a 5% growth from 17% to 22%. In addition to these, in the next slide, talks about other critical key financials. There has been a reduction in the surcharge because the receivables, commercial performance of the corporation during the year has been very good. We have maintained receivables of 43 days as against credit period prescribed by our regulator at 45 days. This has incidentally resulted in a reduction in the surcharge because during March, and during the year also, the receivables have shown a good performance and all the discounts have paid major of their overdues as well as some of the discounts have paid even the current dues also. So that has resulted in a reduction of surcharge. And other highlights are self-explainable, which are available on the next slide. We'll come to the shareholders' return in terms of dividend in absolute terms of rupees as well as dividend payout. We are again happy to reiterate the fact that we have started the practice of paying interim dividends instead of paying a lump sum dividend at the end of the year as per the government of India guidelines. We have paid 3 interims, one in terms of INR 4 we paid first and then INR 7, which consisted of INR 3 special dividend. And then we paid a third interim dividend of INR 5.50. The management has come out with a proposal that there should be a final dividend during the current year of INR 2.25, subject to the approval of the AGM which is scheduled in the month of August. So if that's subject to the approval of shareholders, the total dividend amounts to INR 14.75 at to our INR 697 crores shareholders, which is working out to be just above 60% of the PAT. It is also one of the highest for our corporation, as well as a market benchmark. So after covering the construction highlights, operational highlights and financial highlights, now we'll come to our other segment performance during the year. Incidentally, telecom performance has not been very impressive, majorly because of, one, we had to offer to liquidate BSNL dues. We had to give them a special rebate. That is how we could liquidate their dues. And second, because of the huge competition in the rates, there has been a reduction in the income of our telecom during current year from -- it has reduced from INR 708 crores to INR 580 crores. But in contrast, our consultancy performance, there has been a record growth from INR 434 crores of consultancy and project management income. From INR 434 crores, it has jumped to INR 671 crores. The major contributor has been the consultancy charges on our Northeastern region project, which is the government of India project, including comprehensive scheme of Andhra Pradesh and Sikkim. Consultancy. International, also, we are making -- trying to make inroads. We have entered 2 new countries in addition to the 23 countries in which we already have presence, Moldova and Guinea. We have entered our footprint with small 2 orders. During FY '22, we have received 6 new orders. Totally, we are having 15 ongoing assignments beyond our country's borders. In addition to that, there are opportunities of 26 exploration of interest have been submitted by Power Grid. They are at various stage of discussion and finalization. Domestic also we have received 21 new orders during the year. And presently under the operation and at various stages of implementation or 68 assignments as far as within India consultancy projects are concerned. We are happy to note that in view of the taper CapEx, Power Grid Corporation has been exploring the various serious opportunities to increase its CapEx numbers in order to utilize the huge 14,000-plus internal resources as well as the noncash depreciation. So the funds are utilized more productively. There is a great opportunity in one area through the help of government of India initiative. The total size of smart meters in India is estimated at 25 crores meters. Considering that, we have already tendered for procurement of 1 crore smart meters, and we are parallelly at various stages of discussions with specific states to kind of obtain business to implement end-to-end smart meter solution for various states. There is 1 more opportunity, great opportunity. Of course, it's at a very initial stage, which is battery energy storage systems. This is going to be a next big CapEx trigger for the power sector in terms for both generators, as well as transmission, as well as it can be a project on its own. SECI has recently come out with setting up on ISTS connected pilot project on a board basis. And it is estimated that aggregated storage capacity, with the aggregated capacity of 1,000 megawatts, that is 500-megawatt into 2 hours. Coming to the next slide. We are trying to explore an opportunity to enter into solar generation. And we are already at the advanced stage of setting up Power Grid's first commercial solar PV project of approximately 100 megawatts at Nagda substation where we have a spare land in Madhya Pradesh. There are some activities and exploration going on in rooftop solar systems also. In addition to this, Power Grid Corporation of India is very actively participating and improvising its compliances of sustainability, ESG. And the report of Power Grid's 7 Sustainability report for 2019 to '21 biannual report is available on the company's website. Coming to the other highlights, as we have already mentioned that this year, commercial performance has been very good. Out of the billing of INR 36,000 crores billing, we have realized INR 35,295 crores, which is approximately 98%. And thereby, the total receivables at the end of the year has stood at 43.69 days. Of course, there are a few states which where we have a slight difficulty in collecting dues, majorly J&K. But J&K is a major kind of defaulter in terms of paying us our dues, which is more than -- standing at more than INR 1,500 crores. Other states where we are trying, finding slight difficulty, but of course, we are able to liquidate are Uttar Pradesh, Tamil Nadu and Maharashtra. Other than this, rest of the discounts have been regularly paid and that's how we have been able to achieve these kind of record receivables. Coming to the business outlook, future plans not very attractive, but present works in hand are about half a lakh of crores out of which INR 6,700 crores are various advanced stages of implementation and expected to be commissioned during this year and next year. In addition to -- about INR 6,700 crores. In addition to that, as you all know, Pang-Kaithal HVDC has been given to Power Grid on nomination basis the Government of India, approximately at INR 26,000 crores and another INR 4,000 crores-plus project has been given to Power Grid at Navsari in Gujarat. And various TBCB projects, which approximately amount to INR 15,000 crores. So these 3 put together, we have a work-in-hand value of approximately INR 54,000 crores which includes various projects under implementation, as well as given to Power Grid. But not yet implementation is at very initial stages. This also includes the Mohanlalganj's intrastate UP project that I mentioned and the Narela also. Upcoming opportunities. In addition to the present order book, there is another immediate opportunity of approximately INR 31,000 crores seen in the TBCB area, which has a breakup of ISTS approximately INR 30,000 and a INR 2,000 of intrastate. This is very clearly indicating that even though there is a huge potential in the intrastate space. But various stages -- states are not very actively forthcoming. Presently, only there are 2 projects under bidding. I think these are MP.

One MP and one Rajasthan.

So even though we have been talking about the intrastate potential in terms of big opportunity for Power Grid to enter into, still TBCB opportunities, as you can see from this slide, are majorly in interstate only in the states of Gujarat and Rajasthan majorly. And intrastate, we are still slightly struggling. Coming to a bigger picture of sectoral growth outlook, very clearly, there are various macro level drivers of growth of power sector in terms of government of India initiatives to provide 24/7 clean power and the shift of energy transition from fossil-based or the fuel-based generation to renewable energy and decarbonization of transport and electric mobility. And there are shifting demand patterns also. And a major trigger and changer is expected to be the energy storage, both in terms of solar as well as wind. And as I already mentioned, we are dependent -- counting a lot on smart meter stake size. And Government of India also is helping us by way of coming out of ease of operation and simplification of policy reforms. There have been various policy reforms that have been already implemented, like there has been a delegation in the authorities that sanctioned the TBCB projects, earlier all the projects used to be sanctioned by government of India. But now there has been a delegation. And CTU, as well as the NCT, National Committee on Transmission, have been delegated beyond a number of more than INR 500 crores. Each project, then only it will go to Ministry of Power, Government of India. So as far as the projections of growth are concerned for our sector. These are the various numbers: The installed capacity is about 400 gigawatt out of which renewable's about 110. Peak demand this year has been -- has a touched record of 203 gigawatts. The total energy requirement is 1,566 and per capita consumption is only a mere 1,208 units per capita per head in India. So from these mere small numbers, you can see the projections for up to FY '27 and FY '30. So 400 gigawatts is expected to grow more than double by FY '30 to 840 gigawatts, and installed capacity of our reshare out of this 840 gigawatt is expected to be approximately 500 gigawatts which the government has only declared. And peak demand from the present 200, it may touch even more than 340 gigawatts. And per capita income per capita consumption of energy, government of India is pushing to take it from 1,200 to 16 and 2,000 [ annual ] by FY '30 and even beyond that, up to 3,000 by FY '40. So these triggers are expected to give a potential growth to both generation and consequentially to transmission also. So within that, after FY '26, '27, sectoral growth in terms of circuit kilometers, MVA addition. And in terms of estimated investment in crores is given in this slide. So it is expected that by '26, '27, we should reach a CapEx of INR 2700 crores, which we have been doing until 3, 4 years back. So we are coming to a conclusion of my presentation. Power Grid Corporation of India has always been always in the limelight and during this year, we have been fortunate enough to have been conferred various awards and recognitions by international, as well as national organizations. Now I'll take a pause and welcome any questions and answers and clarifications that you may have. Thank you.

Thank you, sir for the detailed presentation. We will now begin the Q&A session. So Divya from our team will be coordinating it for us. Thank you, Divya, and over to you.

[Operator Instructions] The first question is from Mohit Kumar.

Thank you, sir, my first question is, what is your commissioning guidance for FY '23 and FY '24, given the dwindling CapEx and commissioning numbers?

CapEx and commissioning numbers for FY '23 and FY '24, the guidance are same. We are projecting that the CapEx for the FY '23 is INR 8,000 crores. We are -- we'll put our best efforts to increase it by approximately 5% to 10%, but the present guidance is INR 8,000 crores. And FY '24 also approximately INR 8,000. As far as commissioning is concerned, we are expecting that the commissioning, including looking at the present scenario and the CapEx and the order book in hand, there should be approximately INR 10,000 crores for FY '23 and FY '24 also. Because there has been a government of India NIP, which estimated that by FY '25, we should have a total CapEx of INR 65,000 crores And keeping in line with that, the commissioning should be INR 10,000 crores every year for FY '23 and '24.

So is it possible [indiscernible] is between TBCB is standalone?

Yes the TBCB share, looking at the present work in hand, the TBCB share is approximately INR 18,000 crores. So for FY '23 and '24, it should be 40% TBCB and 60% RTM. But these are slightly rough numbers. There could be a slight percentage change.

So last year, the demonetization of these INR 7,000 crores worth of projects. When we see FY '24 and FY '23, FY '24 in terms of monetization, do we have -- if you can quantify the numbers, the projects in terms of crore, which is possible to be transferred to InvIT in FY '23 and '24 separately?

Yes, the national monetization plan of government of India has already declared the numbers of asset monetization for Power Grid Corporation of India. As you already know, we have commissioned more than INR 8,300 crores monetization during FY '22. There has been a kind of spillover of about INR 640 crores, which we have monetized recently during March. Considering that FY '23 target of monetization is INR 7,500 crores, out of which we have already done INR 640 crores pertaining to FY '23 in March '22. So if we consider that, we should be doing approximately the balance INR 6,900 crores monetization. We are ready with the identification of the projects, as well as our consultant has finalized the financial model. So FY '23 target should be able to met through TBCB projects and FY '24 also as I already mentioned, there are 12 -- presently 12 TBCB projects under various stages of implementation by FY '23 and for FY '24. But both the years, we should be -- TBCB projects should be sufficient in terms of value to achieve the monetization targets. FY '23 target is INR 7,500 crores, and FY '24 target is INR 15,000 crore.

Next question is from the line of Sumit.

I have 3 questions. The first question is for FY '22, in your cash flow statement, which is part of the exchange disclosures, the cash generated from operations is down year-on-year, mainly because of the increase in working capital from INR 21.5 billion in FY '21 to INR 64.8 billion in FY '22. Can you give us an expectation for the increase in working capital? That's my first question.

Yes, as you know, we are in the process of increasing dividend payout ratio, as well as the regularity of paying the dividend instead of at the end of the year, this year only, we have started off paying the dividend in 3 interims and 1 final. So in order to kind of generate the requirement of cash flow for paying of dividend, there has been -- there should -- there is sometimes a timing difference between the receivables that get liquidated. And the quarterly interim dividends that we have been declaring that we have declared during the current year. So the total dividend payout itself is approximately INR 14.25 crores into INR 700 crores is approximately INR 8,000 crores has already been paid. And in addition to that, we have been regularly paying off expensive commercial loans that are on the books since earlier years. So on and off, whenever there is our internal resources permit, we have been paying off the commercial loans. So these are the 2 major factors. The base has increased. The total top line has gone to almost INR 42,000 crores. At the same time, the size of the operational assets has also gone up. So the various transmission and administrative expenses, which include O&M has gone up because of commissioning of various assets, more than INR 2.27 lakh crores of operational assets. So these are year-on-year regular growth only. So there are no -- other than this what I have explained, there are no exceptional working capital experiments.

Just a follow-up on your answer. If I specifically look at the increase in other financial assets which was a decrease in FY '21 of INR 22 billion it has become an increase of INR 27.8 billion in FY '22. Similarly, there is a decrease in liabilities and provisions from INR 1,019 -- INR 197 crores to INR 3,200 crores. Specifically, what are the variances attributable to in working capital? Is it because the scale of operations and the scale of CapEx is falling. So the advances that you are giving to your contractors, those are also -- anyone is talking?

Can you...

Yes. So I'm looking at the BSE filing...

Yes, yes, which page?

Page 4 of 49 on the PDF, which is -- and I'm looking at the lines, which are increased in other -- increase in other financial assets and increase or decrease in liabilities and provisions.

Cash flow -- you're talking about operating activities or...

Yes, operating activities, operating profit before changes in assets and liabilities and you have adjustments for changes in assets and liability. Within that, I'm looking at increase in other financial assets and increase in liabilities and provisions.

Yes, financial assets, you are talking about INR 2789 crores versus INR 2189 crores.

Yes, sir, yes.

From INR 2189 crores to INR 2789 crores. As far as the explanation, I don't have a ready answer for the change from INR 2189 crores to INR 2789 crores. I am flagging this, and we'll be able to clarify this separately to you.

And sir, liabilities and provisions also, there is an increase from INR 1,197 crores to INR 3,218 crores.

INR 1,197 crores to INR 3,218 crores, yes.

My second question is in relation to what is the total project cost of the 6 TBCB projects where COT has been achieved? If you could also add the PPC for the 12 projects, which are under construction, those which have been acquired post Q4.

Yes, your 6 commission projects you wanted the value?

Yes, the total project cost?

INR 5,599 crores. The total value of commission projects is INR 5,500 crores. Commission during current year.

12 under construction projects?

The total value of 12 under construction TBCB projects?

Yes.

Actually, they are under various stages of implementation and the cost is not -- cannot be frozen at this cost. As we go ahead during the construction, there could be some -- because there could be some highs and lows in terms of site conditions and scope changes, as well as there could be some ROW issues also. So because these projects have been won not based on the project cost, they are basically won by Power Grid based on the tariff. It is not possible to kind of disclose the cost of the project during construction. Once they are fully commissioned, then only we'll be able to tell you. The commission value, as mentioned, it is INR 5,500 crores for the commissioned 6 projects during this year.

So when you say that the works in hand for TBCB are about INR 14,800 crores, I'm assuming that the total project cost of roughly for these 12 under construction projects, plus whatever you have won post Q4 is in that number.

Yes, yes, that can be drawn, but that will be a ballpark figure.

Last question, what is Power Grid Energy Services Limited? What is the mandate? And how do you plan to scale up the business in this particular unit?

Yes, as I already mentioned, our business is segmented majorly 97% growth is business sizes from transmission. And balance 3% is shared equally between telecom is 1.7%, and consultancy is only less than 1.5%. So in order to focus more in terms of providing escrow services as well as possible investment in the consultancy, we have decided that it is better that it is identified as a 100% owned subsidiary so that there could be a total 100% focus and special efforts can be made. So this is only a beginning. The smart metering initiative that we are tendered for 1 crore meters, and solar energy, which we have also tried to venture, we'll be operating through our 100% subsidiary, energy-efficient services limited.

Next question is from Akhilesh Bhandari from IPRU MF.

So my first question is on the Leh-Ladakh project. So by when would the CapEx begin by FY '24? And what would be the phasing of the CapEx for this project, if you can give an idea about that?

Yes. As far as the in-principle approval of government of India is concerned, the Pang-Kaithal is the starting point, Leh is Pang. And in Haryana, there is a place called Kaithal. So this Pang-Kaithal project is estimated cost is approximately INR 26,000 crores, including 1 gigawatt of storage. So out of this INR 26,000 crores, it is estimated that it will be -- government of India is considering to give a grant of approximately 40% because of the high cost of the transmission project in terms of complexity and technology challenges, government of India has not yet finalized the grant, but it is estimated that approximately 40,000. Approximately INR 9,000 crores will be the grant. So the net project cost will work out to approximately INR 17,000 crores. So these INR 17,000 crores, you are right, the initial works will start during FY '24.

FY '24, but we are turning out the transmission line in the next month. For the -- when we are ready so that before that -- as soon as the company approval comes, we can start. But there is a limited working season available and government of India in the project report itself has given 5 years for the completion. So the major investment will be coming in FY '24 onwards only.

Onwards only and that too the major expenditure, the expenditure is bifurcated between HVDC terminals and transmission lines. And as you know, the HVDC terminals substations will take lesser time. So they will be coming in the back end out of these 5 years. So even though you can roughly say that the annual CapEx should be approximately INR 3,000 crores to INR 4,000 crores. But during the second half of this -- second half of this project execution of 5 years, the major expenditure should occur. We have, however, started the tendering activities for the transmission systems already.

Okay, sir, and tendering for substations will happen later. Is that understanding correct?

You're right. You're right.

Again the storage will be coming in the last phase only.

Yes, 1 gigawatt storage also is there included and it will also come in the latter part of the project because the gestation period is relatively less as compared to the transmission lines.

And sir, my second question is with respect to the ISTS expansion plan, which you had shown in the slide, so whatever projects Power Grid is until now you have, I think, received 2 projects and a nomination. So all those like Leh-Ladakh project and other Navsari project, which you had mentioned -- all that is included in this -- in the INR 27,000 crores to INR 29,000 crores number which you are mentioning, right? There is something excluded from this number.

You're right.

And sir, your best guess estimate of what can be the CapEx in the -- at the intrastate level, if you can give an idea about that as well.

Intrastate, we are trying to involve various some selected states like Gujarat, Himachal, Maharashtra and down south out of Telangana. For various discussions for the -- there are -- there can be any possible -- whether Power Grid will make an investment and there can be a JV route also. So we have been at various stages of discussions. But as I already mentioned, there has not been a very keen response from the states. However, government of India is pushing the possible development in the intrastate through various commercial incentives. So even though we don't have anything concrete in hand, it is expected that the potential being very high, it is expected to be INR 1.9 lakh crores as per the government of India estimates. However, we have not yet fructified any deal with any of the states. However, it is at various advanced stages of -- that is one more reason why we have formed our subsidiary Energy Efficiency Services Limited which will kind of focus through a dedicated expert manpower and we'll approach various states and kind of explore various possible models of joining hands.

Understood. And sir, just one last clarification on this ISTS plan assumes what renewable capacity addition? So the expansion plan, where you're talking about INR 27,000 crores kind of CapEx, what is the kind of renewable capacity addition which has been assumed to happen in the industry for assuming for this CapEx to actually play out?

See, out of the 500-megawatt renewables by 2030.

500 gigawatts.

500 gigawatts renewables. 230 gigawatt renewables transmission lines have been cut. And for the balanced things, still the potentials are being identified by the MNRE and depending on the source from where the renewals be coming, the transmission planning will be done by the CTUIL and the scale and what the figures Taj has already told for the next 5 years is based on the CTUIL rolling plant, which has just come in the month of March.

So this is for -- we are protected till 230 gigawatt. Beyond that, the planning is yet to happen.

Yes.

Next question is from the line of Apoorva Bahadur from Investec.

Sir, you highlighted that your work in hand includes the Leh-Ladakh line. I wanted to know if that is net of the government support or gross of the government support.

I'm sorry, can you please come again, sir.

So your work in hand number of -- does it include full INR 26,000 crore CapEx for Leh line?

Yes, the breakup is given in the slide. If you can look at the slide, there is a breakup given that -- the INR 53,300 crores, there is a breakup that presently under execution projects is approximately INR 7,000 crores and new projects, which is even at INR 31,800, this includes majorly 2 projects. That is Leh-Ladakh HVDC line and Navsari and there could be some augmentation small, small value. And the third one is TBCB projects INR 14,800 crores. All these 3 put together, it's INR 53,000 crores work in hand.

Right. I got it. But in this INR 31,800 crores, this includes full INR 26,000 crores for Leh line?

Yes, yes, it is a full value of Leh-Ladakh.

Okay. So fair enough. Fair enough. Sir, also if you can come to this last slide of the ISTS expansion plan, while on a CKM additional MVA addition by '26, '27, the figure declined significantly, the CapEx for expected investment is still around INR 13,000 crores, INR 25,000 crores to INR 30,000 crores. So why is this divergence?

At the end of this thing might be on there is activity system has to be planned for this -- from [ Raichur ] to the Bihari to the Haryana side, activity system has to be planned. And when this system will be coming, then there could be a huge investment things. So that's for that planning is being done by CTUIL right now.

Sir, last question from my side. I think there was a deferred tax reversal during this quarter. Any specific reason for this? Or was this a one-off? Or should we see it...

Yes, yes, deferred liability majorly on account of the -- because the -- there is 1 is we are still under MAT, Power Grid is still under MAT. And it is expected that the MAT credit is growing, but we will not be coming at a normal tax till 2027. So one is that the MAT credit is growing and second, we are not able to utilize. Then in addition, there is 1 ATIA section ATIA benefit given by government of India for the projects that have been commissioned up to March 2017. So there, there the value of assets, which have been commissioned up to March 2017, we can utilize under the infrastructure production for the next 15 years. That is up to 2032. Any 10 years profit, there, we can utilize our MAT credit, ATIA benefit. So in general, during this 15 years, from '17, we have not triggered the ATIA benefit until now. That is out of the 15 years, first 5 years, the accelerated depreciation itself kind of is enough not to avail the benefit of ATIA. This is the first year 2022 after 5 years, we have made an effort, and calculations have been modified to see whether we can avail ATIA benefit. So the ATIA estimate methodology for 2020, '21 has resulted in an increase of approximately INR 591 crores. That is one. And a similar approximately INR 570 crores has been observed during current year FY '22. So both extra provision, extra expense made in 2021, that era of INR 591 crores has come recognized during this year as well as the current year's ATIA benefit of INR 570 crores has been considered. So both of these put together, there has been a double effect of approximately INR 1,100 crores. But these are the adjustments that happened because of the tax audit takes time. 2021 tax audit has been completed only in October 21. That is why this disclosure has come this year. But this is not affecting the PAT because what happens is whatever ATIA benefit I take that is passed on to the discounts only because anyway, tax is a pass-through. So it is shown it has been passed under the deferral account. So on the net Power Grid's results, there is no impact.

And this benefit will continue for some years?

Yes, yes, yes. You're right. I'll take 1 minute. One gentleman has asked about the cash flow changes. If he is available, I would like to just clarify, this is operating profit before changes in assets and liabilities. One doubt that was asked is, what is the change in the -- decrease in the other financial assets from INR 2,100 crores to a negative of INR 2,700 crores. What happened is we have -- as you know, we have commissioned Raigarh-Pugalur project has been commissioned approximately INR 21,000 crores in various stages. And our regulator, CRC, has heard the petition, and the order has been reserved. However, approximately the tariff is expected in the range of INR 2,500 crores to INR 2,700 crores per annum. It is a contracted asset. That is how that INR 2,700 crores, even though it is order is reserved because it is commissioned, we have brought it under the increase/decrease in financial assets. That is one. That is the reason for the change from INR 2,189 crores to INR 2,789 crores negative. And the second reason the gentleman has asked is, why is there is a decrease in the liabilities and the provision from negative INR 1,197 crores to negative INR 3,218 crores. During the year, our CTUIL 100% subsidiary has been formed. And whatever liabilities are shown hitherto in the Power Grid account, those liabilities have been shifted to CTUIL. It's a separate legal entity, even though it's a 100% subsidiary. The transfer of liability on account of various transmission licenses amounting to approximately INR 3,000 crores has been moved from Power Grid books liabilities to CTUIL liabilities. I hope this answers the question. And if any further clarification is required, we'll be available.

Just 1 follow-up on the other financial assets verification. This INR 25 billion to INR 27 billion range which you said. So is this going to be a recurring item till the regulator acts on this petition?

This will definitely continue. But however, we are expecting that the order is reserved for last more than a month. So we are expecting that we have been pursuing because the number of petitions with CRC, our regulator are very high. They also have orally assured us that the order should come anytime soon during the current year. In this quarter, it should come.

But otherwise, it would be an annual tariff.

So basically -- it is an annual tariff. It's an annual tariff because of the project size, it's an annual tariff. Build monthly, of course. It is annual tariff. That is why you can always also see that there has been -- there is an increase in the unbilled income of Power Grid, which is accounted, paid tax on and dividend also is distributed. But that is another reason why we are carrying a slightly escalated burden of unbilled income on which we are both paying tax also and as well as distributing dividend also. That is one more reason why there has been an increase in the working capital during the year.

Next question is from the line of Anuj Upadhyay from HDFC Securities.

So you mentioned about the upcoming opportunities to the tune of INR 31,850 crores. Any timeline when we expect the bidding to be out for this project?

This INR 31,800 crores opportunity...

This Leh system will be able to start the work only after the cabinet approval for the...

No, no, no, opportunities, Sunil. He's talking about the opportunity.

It around INR 27,000 crores ISTS, INR 31,000 crores is under bidding already. And this INR 8,600 crores is still to come. That is the schemes have been cleared in the various NCD meetings. But for that still REC-PFC promotes the bids -- and for similarly, there are -- when the intrastate only there are 2 projects, 1 in Rajasthan and 1 in MP. And for that, again, they are always underbidding.

Expected time when he's asking. It is expected between 6 to 12 months.

Okay, sir. Does this area also include a site where we are already facing an issue related to GIB or this something which is a different location?

These are mostly in -- yes, there are some projects in basically Raichur also but mostly in Gujarat.

However, I would like to clarify that the GIB issue, even though we are there in the picture, but at our rating 400 and above, technically, the GIB issue does not exist. Because of the transmission projects are looked on a holistic basis on this -- on the issue but on the Honorable Supreme Court, we are also involved. And our works are also slightly delayed -- but otherwise, it is technically very clear that it is only applicable below 20 kV. So our lines are 400 kV and above only. So we should be coming clean out of this issue.

And another thing, sir, you have mentioned about a few of the smart metering opportunity with the discounts. Any progress which we have made any particular states out here?

We -- no, nothing concrete has happened. We are in discussion with, as I mentioned, 2 or 3 states, and they are very internal approvals, they are taking to give 1 or 2 discounts to begin with. So in order to prepare because there is a gestation period in the smart meter manufacturing of about 7 to 8 months. We have taken an advanced action and without having a confirmed order in hand, we have already tendered through GEM, we are in the process of tendering for 1 crore meters. So that the moment we get a confirmed order because the total size is expected to be about 25 crore meters -- so we are very confident that we should be able to strike a deal and a contract with -- because this will be implemented across India, definitely. So presently, we are in the -- out of this 25 crores, government of India also has proposed that 4 crores meter should be located to CPSUs through MoU rule. So we are trying to avail that 4 crore meter opportunity, which is reserved for CPSEs.

Any quantum or suspect you can -- would like to quantify for this opportunity of 1 crore smart meter?

Yes. approximately the total project estimate, if you are asking, it should be somewhere around INR 8,000 crores to INR 9,000 crores.

Fine, sir. Lastly, sir, on the debt equity contribution, which we are looking to invest in the Leh-Ladakh projects, and again, one clarification, would that debt equity would be on the entire INR 26,000 crores or ex the grant amount which the government has given to us?

No debt equity will be only on the INR 80,000 crores minus the government grant of 40%.

So that is INR 17,000 crores, you are saying that...

Yes, yes, for all practical purposes, the project cost, let us take it at INR 17,000 crores only. That has been an approved methodology with our regulators CRC in -- for earlier 1 or 2 projects also.

Fair enough, sir. And what would be the ratio, sir?

It is not yet finalized. It is an RTM project. So it should be normally 70/30 only. It's not a TBCB project, where we have...

Next question is from the line of Swati [indiscernible].

I had 3 questions. Firstly, regarding the 1 lakh smart meter that we have tendered, in how many months do we expect the agreement to be signed? And second, are we tendering only for smart meters? Or are we open to the AMI ISP solutions as well? And lastly, are there any plans for divestment or reduction in stake for the Power Grid Energy Services Limited subsidiary?

First of all, there is -- there are no concrete agreements, and we are not in a position to give you a specific timeline which you asked. We are only at the various stages of advanced discussions with the selected states because we also don't want to go to every state and do this business because we need to be very careful because of the slightly higher risk involved in comparison to the transmission -- interest rate transmission under RTM that we do. So payment security mechanism, credibility of the particular state and the guarantees that we can get and also the return -- rate of return that can be negotiated with the state -- these are the various parameters that will decide based on which only we'll be able to go ahead and sign. So first, we'll not be able to give you any timeline. We are only looking and exploring this at this opportunity. And we are very confident that it will definitely come out, but we don't have anything concrete now. Second, we are looking at not -- actually, thanks for correcting me. It's not just procurement of smart meters. It is end-to-end solution, including the integration and maintenance of the smart meters also will be in the scope of power grid for 7.5 years. The total project is expected to be approximately for 10 years. Firstly, 2.5 years will be spent on procurement and implementation and execution. Once it becomes operational, over a period of 2.5 years progressively, from the date of award. Next 7.5 years, we'll have to do the operation services also for these meters. At the end of the tenth year, the smart meters will become owners -- the discount will become the owner. And by that time, we would have received our money through, let us say, annuity model. So that is number two.

The only thing I will add this out of 25 crore meters, the government of India target is 10 crore meters by FY '23 and balance 15 meters by FY '25. All 25 crore meters are to be installed and commissioned by FY '25, basically. So right now, the various states have submitted their digital project reports to the nodal agency which is REMC and PFC, so -- and they are under [indiscernible] approval. So only the few states have just come out with the tenders and we are under discussion with them.

What is your third question on divestment of our energy services subsidiary? Can you come out, please?

My question was, are we planning for any divestment or any reduction in stake in future years for our Power Grid Energy Services Limited subsidiary?

There are 2 things, ma'am. One is energy services, India Limited, EESL, is a joint venture in which we are increasing our -- we have already increased our stake from 4% to 33%. So EESL is a joint venture partner in which Power Grid is 1/3 shareholder. So there, we are increasing our presence. And presently, even the operational top management deals, including Power Grid's chairman, and we are actively involved in that. Second is we have -- in the current year, we have incorporated 1 subsidiary for our own engineering efficiency and consultancy services, we have -- instead of having a business segment, we have incorporated a new company. And just have started the activities, whatever consultancy projects we'll win, we will operate through our subsidiary. So these 2 are different. There is no question of divestment anywhere.

Just a follow-up, if I can. Can you disclose any states that you are in discussions with right now regarding the tendering of meters?

No, ma'am. We are...

We are discussing with -- again, based on the things we are just referring with many states. So let us fortify then only we can disclose.

Next question is from the line of Swarnim Maheshwari from Edelweiss.

Yes, sir. Sir, you did mention about the plan to monetize INR 7,500 crores worth of assets in if you can also clarify what more are we going to actually look at, is it going to be through a competitive bidding? Or is it going to be on a negotiated basis?

Only I will say the last InvIT what we have done, the model which has been now specified in the NMP has been changed completely. In the last InvIT we have transferred the ownership to the PGInvIT.

On boom basis.

On boom basis. But now the present guidelines of the NMP are basically, it is ownership is to be transferred for a limited period, and it has to come back after a particular period. And right now, the basically guidelines for this -- how to move forward for the new NMPs are still under approval with the cabinet. And as soon as these guidelines will be finalized because now a lot of addition making is being given to the Secretary level committees. So once they are finalized, then we will be -- we will disclose further.

We are planning to come out with our monetization in Q3 and Q4 only. And it is not exactly INR 7,500 crore, out of which INR 640 crores is already done. So balance INR 600 crores, INR 700 crores, INR 800 crores shall be done. We have proposed a model that it should be on the similar lines as last year, but only with a change that instead of boom, the asset will come back at the end of the transaction period with the scrap value as a nominal INR 1 or something. Which fulfills the condition that the asset should come back and transaction period after the transaction period. So -- we are still awaiting for the specific approvals of cabinet, which can -- which are expected at any time.

Sir, my second question is, you mentioned about your forway into renewable generation side also. So what is your thought process over here? I mean, what's the total amount of capacity that you envisage, say, 2 years, 3 years down the line?

Basically, we have got surplus land parcels in our various subscriptions. So the bigger one was this in Naga. So we were going with the 100-megawatt solar plant in Naga, and we have identified 3, 4 more stations where we can have a potential of around 30, 40 megawatts. So we are also studying with that through our consultant, and we'll be coming out with...

Yes, there is a lot of caution that this is only a test pilot project where we are testing the ground as to how -- because of the severe competition in the generation, solar generation also. So this is because we have a spare land, and we are coming out with a test project. So looking at the competition and the maturity and the opportunities with respect to states to connect to the grid, the power that we'll generate, we'll take a step very cautiously forward.

These are all basically towards our subsidiary initiatives so that our own carbon footprint also we can reduce to them. That is also one of the things. And we may consider using this solar renewable power for our data center, what we are planning in Malisar. Yes.

So at the moment, if I understand this right, this is more pilot project and testing waters rather than a commercial entry?

Yes, yes. And also, as Sunil has mentioned, it is towards complying with the -- it's an ESG initiative and also to reduce the carbon footprint of our own will for consumption for various substations. So you are right that we are not at formed or a hedged capital aggressive investment policy for renewable generation.

We'll take 1 last question from Mohit Kumar.

So have we changed the classification of trade receivables in this fiscal? Are you putting unbilled receivable and bill under the trade receivables?

Actually, during the year, there has been a change in the policy India guidelines. Accordingly, the -- whatever on track, we are having certainty and we are having the right to bill, but there is just a passage of time. Just like for billing for the March, we have -- we do in the April. So that was going in unbilled debtors previously, but now as per new guidelines, wherever we have a undisputed right to bill, is it passage of time it will be latter...

That is why there is an increase incurred.

That is included in the receivables. So accordingly, that part has been reduced from the unbilled debtors and had gone into the receivables.

Other than that, the credit period is 45 days. So March will generally will be paid after May 15 only because it is March build on 5th of April. With a 45-day credit period. So it becomes due only on the May 20. However, because of the change in the Ind AS guidelines, just because the passage of time is the only reason where nothing else is preventing us, then because of the latest policy guideline, we have moved this amount of March billing approximately INR 3,200 crores from unbilled to trade receivables. That is why you are seeing the jump. It is in compliance with the Ind AS, which has been changed this year only.

So if I may squeeze 1 more question, sir. Do you think the upside risk to the CapEx target and the CUIL plant because we -- because I see that in the very soft tapering in FY '26 and FY '27. Circuit kilometer and MVA town, CUIL plan.

So again, it is a rolling plan. What I've told there is still around 270-gigawatt renewable substation planning is still done. So that is a material this 1 will come in every 6 months. In the next plan, when in December comp for the future years, it may -- it will increase. Okay. As soon as the generation resources for the 270 gigawatts or parallel.

What is happening is earlier, the generation used to be on a traditional, which had a gestation period of more than 2 to 3 years. But presently, there is a shift from [ Power Grid ] project execution to renewables the gestation is very less. It's about 10 to 12, 13 months generation come for a solar or a wind project. That is why the visibility is not very extensive, it's not beyond more than 1, 1.5 years.

And there is a more thing. Now it's a big focus on the storage also. So when the investment towards the storage will be coming up, the investment in that transformation will be opportunity source the cost for all the renewable transmission line can it differ to 7 power if the sufficient storage will be provided at that end. So that is also thinking going on. So roughly around 27 gigawatt storage is planned for 2030. So with all that things, this -- in the next plan, we will be getting a more clear picture.

I would like to thank the management for the time for this excellent call. We've had a long discussion. I hope all the queries have been satisfied of the investors. For any further queries, you can write to the company or to me, and we can forward it. I would like to thank the entire management of Power Grid for their time today. Over to you Mr. Taj.

Thank you. Best wishes to all. We are always available. And thanks once again, all investors reposing so much confidence and supporting us. Thank you.

Thank you, everyone. You may now disconnect.