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

Good afternoon, everyone. Welcome, ladies and gentlemen, to the Power Grid Corporation Half Yearly and Q2 Results Analysis and the Analyst Meet. Thank you for taking your time out coming over here. I would now like to begin the proceedings and call up the Company Secretary, Mr. Satyaprakash Dash, to initiate the proceedings.

Good afternoon, ladies and gentlemen. On behalf of Power Grid, I extend a very warm welcome to all of you for this Analyst and Institutional Investor Meet of Power Grid Corporation of India Limited. First of all, today, our senior management team is there to discuss the company's business and share the performance outlook of Power Grid. That is after the post declaration of the Q2 and half year ended 30th September 2024 financial results. It's my pleasure to introduce senior management team of Power Grid. We have with us Shri R.K. Tyagi, our Chairman and Managing Director; Shri G. Ravisankar, who is Director of Finance and CFO of Power Grid; Shri Naveen Srivastava, Director Operations; and B. Vamsi Mohan, OSD projects. Thank you. I now invite -- before inviting CMD, I would like to have some corporate presentation -- corporate video. [Presentation]

Now I would like to invite our Chairman, Mr. R.K. Tyagi, to make the opening remarks and presentation, after which the floor will be open for question and answers. Chairman, sir, please.

Good afternoon, everyone. Welcome to Power Grid's Analyst meet today at Mumbai. As you have seen the operations of Power Grid through video, I will just give brief -- about some details of various operations. My presentation will cover overview, major highlights, performance highlights, growth outlook, then sustainability and awards. Today, we are one of the Maharatna companies in India. We became Maharatna in 2019, with 64 subsidiaries and 12 joint venture companies. As given in video, we have footprints in 23 countries. Telecom network also is there, about more than 100,000 kilometers. We have about 150-plus domestic and international 25 numbers of consultancy projects, cross-border interconnection with Nepal, Bhutan, Bangladesh, Myanmar, we have a capacity of 4,874. Our rating -- international and domestic rating is at par with the sovereign rating of the nation. Our transmission line towers and transmission lines are spread across various part of the countries. It includes 1,515 transmission lines, 280 substations, interregional capacity, that makes 1 nation, 1 grid, 1 frequency by the portion, which we have 99,580 out of about 1,18,000 megawatt. Our operations are good. We have transmission system availability about 99.80%. We are transmitting power through state-of-the-art technologies like HVDC at 800 kV level, 500 kV level. Then transmission network of AC level 765 kV. We have 63 substations. 400 kV substations, we have 168 numbers. Then for dynamic reactive power compensation, we have SVC and STATCOMs, 20 numbers, 64 GIS stations. And transmission line towers, which are located on the top of hill in rivers in various parts of deserts and in plain areas, it more than 2,90,000 transmission line towers. Transformers, we have more than 3,800 numbers. We have become L1 bidder in TBCB projects. In Q2, total, we have about 8 numbers projects we have won out of 13 projects, which includes 78% in terms of annual tariff, 75% in terms of NCT cost and about 62% in terms of numbers. That includes dynamic reactive power compensation project at Khavda, transmission system at Bikaner-III and Bhadla-III. Then Khavda area, we have Phase 4 Part B for transmission network. Then Jam Khambhaliya in Gujarat, Jaisalmer, Barmer in Rajasthan. Then one of the very prestigious project, HVDC project between Khavda to Nagpur. So these projects we have won in quarter 2 and up to -- till date, we have again won in October and November. Out of 6 projects, we have won 4 projects. That includes Shongtong Karcham [indiscernible] in Himachal Pradesh, then in Bikaner, Rajasthan, then another Part B -- Part A, Part B in Rajasthan, then Kudankulam transmission system also. This is also one of the projects which we have won. Some of the performance highlights. These are the assets which have been commissioned in quarter 2. That includes 1,500 MVA 765 kV ICT at Phadge. Then 1,500 MVA capacity at Fatehgarh-II, 1,500 MVA ICT at Bhadla II, 500 MVA upgradation of 315 MVA transformers at Nagarjuna Sagar in Southern Region 1. Then Subhashgram in West Bengal, 500 MVA. Then Jind in Haryana, 500 MVA. Mysore, 500 MVA. Pune, 500 MVA. Then Bikaner, 500 MVA ICT. Then in Navi, Mumbai, this station was ready for so many years. Now it has been commissioned where we charge 2 numbers of 315 MVA 400 kV ICTs. Then in Ara, Bihar, 1 200 MVA capacity ICT has been commissioned. Then for RE evacuation in Rajasthan, Fatehgarh-II to Bhadla-II, a very prestigious line has been commissioned, which is almost 405 circuit kilometer. Then the transmission line at Navi Mumbai. These were commissioned on 16th September. Our CapEx in up to September 2024 was INR 10,002 crores. And on capitalization, we have INR 4,000 crores worth projects have been commissioned up to September 2024. In operational front, we have been always achieving operational benchmarks higher than the incentive we get at 99.75%. So we have been achieving transmission system availability more than 99.75%. In this year, we have achieved 99.80% till Q2. And in case of reliability, it is 0.17 trippings per line in Q1, Q2. Then financial performance. On a stand-alone basis, income is INR 11,383 crores. Profit after tax, INR 3,711 crores. On consol base, which includes our most of the operations of TBCB projects, we are INR 11,846 crores as against INR 11,530 crores last year. And profit after tax has become INR 3,793 crores against INR 3,781 crores last year. Then up to half year September Q1, Q2, we have a stand-alone basis INR 22,234 crores against INR 22,094 crores, and profit is INR 7,123 crores. On consol basis, which is INR 7,517 crores against INR 7,379 crores profit after tax. And revenue or income is INR 23,126 crores against INR 22,788 crores. These are the details of various heads of our financial performance. Transmission charges in Q2, INR 10,877 crores in up to half year, INR 21,543 crores. Total income, INR 23,126 crores, up to first half year and profit after tax, as I told, INR 7,517 crores. This is on a stand-alone basis. These are the details. The gross fixed assets as of 30th September 2024, on a consol basis, it is INR 2,78,000 crores. Work in progress, INR 25,391 crores. The loan debt is INR 1,22,499 crores. Net worth is about INR 92,061 crores. Earnings per share, INR 8.08 and book value per share is INR 98.96 per share. Our debt-to-equity ratio is 57.43 and return on net worth is 8.17%. These are some key financial information. Income on previous period is about INR 229 crores, interest on differential tariff, then interest from subsidiaries, incentive, dividend from joint ventures. These are the details given in this -- in tabular form. The income from telecom is INR 267 crores in Q2. New customers, we have added about 13 numbers. Our backbone availability has been 100%. In consultancy, in international, we have 16 ongoing assignments. And in Q2, 3 orders have been received. In domestic front, 77 are ongoing assignments and 2 numbers orders received in Q2. Our income in Q2 from consultancy is INR 134 crores. In commercial performance, we have built about INR 19,000 crores and realization has been more than 100% -- 100.31%. These are the details of outstanding dues for Q1 and Q2. Growth outlook is good because key drivers for growth are India to be a USD 5 trillion economy as per the Government of India vision. That requires rapid industrialization, urbanization, e-mobility, energy transition. Then 500 gigawatt installed capacity by 2030. Green hydrogen in -- for various applications, that requires power requirement of 125 gigawatt for production of green hydrogen. Then battery energy storage, pumped hydro for energy storage, daytime when sun is there. So renewable energy is available, but in nighttime, when sun is not there or renewable energy is not there, so we require energy to be stored. So battery storage and pump storage is going to help us. Then One Sun, One World, One Grid vision of our Honorable Prime Minister. That requires international interconnections between various countries. So we have some growth options there for interconnections between various countries. As per NEP, National Electricity Plan recently announced by Ministry of Power, peak demand, which is 249.85 gigawatt as on 30th September 2024, it is going to increase to 296 gigawatt by March 2027 and about 388 gigawatt by 2032 March. Installed capacity, which is about 453 gigawatt, it is likely to increase to 669 gigawatt by 2027 and 997 gigawatt by March 2032. RE capacity as of now, now it is about 201 gigawatt. And now it will increase to 537 gigawatt and 613 gigawatt by March '27 and by March '32, respectively. Transmission lines, which is about in interstate sector, which is 2,11,805 circuit kilometer, it is going to increase to 2,51,000 circuit kilometer in 2027 and 2,94,000 by 2032. Transmission capacity, MVA capacity, which is 5,29,000 MVA capacity, it is likely to increase to 9,33,000 by 2027 and 12,81,000 MVA capacity by March 2032. In intrastate transmission lines, which is about 2,77,000 circuit kilometers as of 30th September 2024, it is likely to increase to 3,20,000 circuit kilometer by 2027 and 3,53,000 circuit kilometer by March 2032. Similarly, transformation capacity in MVA, which is 7,47,000 MVA capacity on 30th September 2024, it is likely to increase to 11,30,000 MVA capacity. If we add this transformation capacity, 12,81,000 and 11,30,000, so it becomes more than 24 lakhs MVA capacity by 2032. So it requires a large number of transformers. And interregional capacity, which is 1,18,000, it will increase to 1,42,000 and 1,67,000 MVA capacity. So these are the drivers for growth of transmission network in India. And Power Grid is playing a very important role, and it will continue to play important role in building nation, building transmission system in India. So definitely, the prospects or outlook of Power Grid is very bright. As per this NEP, total INR 9,16,000 crores are to be spent up to 2032. So -- which is from '22 to '27, it will be INR 4,25,000 crores. From '27 to '32, it will be INR 4,90,000 crores. So out of which almost INR 3,30,000 crores projects have been already -- some have been already executed. Some are under execution. Some are already have bid out and balance are to be bid. So if we consider this growth that will require execution of many HVDC projects and AC projects, HVDC projects being very high CapEx intensive. So it will require a lot of CapEx utilization in various projects like 320 kV, 500 megawatt between Paradeep to Andaman. Then Khavda area between KPS3, Khavda-3 to South Olpad 2,500 megawatt at 500 kV. Then Barmer II to South Kalamb, it will be 6,000 megawatt at 800 kV LCC. There is a possibility of HVDC link between India and Sri Lanka. Then Bhadla to Fatehpur, 6,000 megawatt. Then 6,000 megawatt between Bikaner V to Begunia in Odisha. And some planned cross-border between India and Bangladesh, 765 kV HVDC -- sorry, AC double circuit line, link is there, between Katihar to Parbotipur and Bornagar. Then India, India, this Imphal to Myanmar at 400 kV, India, Sri Lanka, 500-megawatt HVDC linkage there. If we consider all the projects which we have in hand, then as on today, we have INR 1,43,295 crores worth projects in hand. and which includes RTM projects of about INR 8,896 crores, TBCB projects of INR 93,000 crores and others like metering and other area, about INR 3,300 crores. And new RTM projects like offshore wind and Leh, Kaithal HVDC link, that includes INR 38,008 crores. The CapEx planning for FY '24, '25 is about INR 18,000 crores, but it is likely to increase to more than INR 20,000 crores. So it will have about RTM of INR 4,000 crores RTM projects and TBCB projects more than INR 12,000 crores, others about INR 1,000 crores. So project under bidding, about INR 84,000 crore projects are under bidding. And another new projects as per NEP, about INR 3 lakh crore projects are yet to be bid out. So if we consider that and consider winability of Power Grid, about 50%, so about INR 1,92,000 crore projects are likely to be won by Power Grid in addition to 1,43,000. So put together, it will be more than INR 3,35,000 crore projects execution by 2032. So our outlook will be at least INR 3 trillion projects or CapEx by 2032. In sustainability and awards, we are committed for 50% electricity consumption by 2025 from RE. Net water positive organization by 2030, zero waste to landfill status by 2030 and net zero by 2047. So we are taking various actions to achieve these targets. Awards, which we have won in various areas, CMD, Power Grid got Lifetime Achievement Award category. Then Power Grid in Grid Edge Award category. Then Power Grid in Corporate Impact Award, Comprehensive Portfolio category by Platts Global Energy Awards 2024 finalist. So this is the finalist list basically in Platts. Then awards and recognition, CMD, Power Grid was conferred with Economic Times Energy Leadership Award 2024 for significant contribution in energy sector. Our Director of Personnel, Power Grid has been conferred with CHRO PRIDE Award by Top rankers Management Club during 24th National Management Summit 2024. Power Grid was conferred with prestigious Dun and & Bradstreet Award 2024 in Power Transmission Central PSU category. Power Grid also was conferred with Transmission Company of the Year Award 2024 by Bharat Electricity Powering India Awards 2024. Power Grid was also conferred with Gold Award by The SKOCH Award-India for its CSR project farmer-centric integrated watershed management project at Kalahandi District of Odisha. Power Grid was adjudged the Green Ribbon Champion of Sustainable Development by News18. Then also Power Grid was conferred with prestigious SHRM HR Excellence Award 2024 in the category Excellence in Learning and Development. Thank you. Thank you, everyone, for your time. Thank you.

Hearty congratulations, sir, for the Platts awards, that's the industry benchmark. Platts is the global platform on which all energy companies, all the metal companies, et cetera, they get listed and enlisted. [Operator Instructions]

This is Subhadip Mitra from Nuvama. My first question is, I think in the opening remarks, you mentioned that out of the INR 9 lakh-odd crores that is planned under the NEP, about INR 3 lakh crore is already tendered out or executed. So does that mean that the balance INR 6 lakh crore odd is still yet to be tendered out?

Yes. It is yet to be -- as I told that it will be tendered out in days to come.

Understood. And of the 3...

Like let me clarify. Out of INR 9,16,000 crores in interstate, total INR 6,60,000 crore projects are to be constructed, out of which about INR 3 lakh crore projects are already being executed or already bid out and balance are yet to be bid out.

Understood. And of this INR 3.3 lakh crores, which are already under execution or bid out, is a large component of the equipment ordering also done? Or the equipment ordering is still pending?

Most of the projects are already -- whatever projects, suppose we have, say, INR 1,43,000 crores worth projects. So barring HVDC projects, which includes this Fatehgarh -- sorry, Khavda to Nagpur and Leh to Pang and offshore wind, which are yet to be awarded. Others are maybe 80% projects are already awarded and equipments are already tied up.

I understand. I understand. And for each of these HVDC projects, roughly what is the size of ordering in, let's say, rupee crore terms that you're looking let's say, for the Khavda project or for Leh project?

Like Khavda project, NCT cost is INR 24,000 crores. So -- which will include a terminal at Khavda and Nagpur. And it may be almost 70% of the -- 65% to 70% will be the cost of the terminals and about 35% cost will be for the transmission line.

Understood. And the Leh-Ladakh project is also on the annual for ordering by end of the fiscal?

We have already tendered out this project. And now we are discussing with our prospective bidders. And very shortly, OBD will happen. And by end of this financial year or maybe by February or maybe March, we are likely to award this project.

Understood.

We have to also restrict questions maybe 2 per person so that the others can also ask. But your last question, yes.

Just a follow-up on this one. The upcoming HVDCs that you see coming up for tendering beyond Khavda and Bhadla, which are the ones that you're expecting coming up, let's say, in FY '26?

Like under bidding already, Fatehpur-Bhadla is there. Then after this, this KPS3, Khavda-3 to South Olpad will come very soon for bidding. And some others will be -- follow subsequently.

Yes. No, no. The voice.

This is Mohit Kumar from ICICI Securities. My first question is, sir, when you look at your portfolio of projects, the scheduled commissioning date for almost the entire pipeline is 2 to 2.5 years, barring the HVDC, right? Is it fair to say that the commissioning will pick up and will become more than INR 400 billion in F '27, F '28? Is that a fair understanding?

Yes. Like we have about INR 25,000 crores -- this work in progress is about INR 25,000 crore projects are -- which are already -- the CapEx is already done, which are due for commissioning. Then out of INR 1, 43,000 crores or INR 1,43,000 projects, which are in hand. So barring HVDC and offshore wind project, which will be about, say, INR 22 crores plus 20 -- INR 60,000 crores. If you reduce INR 64,000 crores, maybe INR 1 lakh worth -- INR 1 lakh crore worth projects are to be commissioned in next 2.5 years. So you are right that our capitalization should be about INR 40,000 crores -- INR 35,000 crores to INR 40,000 crores each year from the next year.

Sir, my second question is that the loss of INR 1 billion in the JV accounting in this quarter. Is it related to EESL, Energy Efficiency Services Limited?

Yes, we have around -- there is a loss of around INR 100 crores we have accounted this half year on account of EESL at the time of consolidation of our share.

This particular associate company is making losses for a long time, sir.

Yes, we have stopped putting equity. Last 1 year, we are not putting equity. This is -- the equity was put up. We made the equity contributions over the years basically. So -- and the last 1 year, we have also told them to take up the receivables. Basically, they have done on an annuity model, some of the businesses for which they will have -- they have put the CapEx upfront and then it is recoverable on the per month basis. So the problem is the receivables are mounting. So that's why they were taking some short-term loans for the servicing and all for the interest portion. So now they are gearing up for the collections and then they will do. So still the first was half year. On the provisional results, we have accounted INR 100 crores as our portion comparatively from the -- compared to last half year. That's one of the reasons that you will find the jump of only hardly 2% to 2.5% because this INR 100 crores will contribute another 1.5% in my jump.

So is it fair to say that these losses will stop from here on?

These losses will not occur.

Yes. We have been taking up this issue as a joint venture company. We are like 4 partners in this EESL, NTPC, Power Grid, PFC and REC. So we are taking help of our ministry to realize the use of EESL from various ULBs and various state utilities. And now they have taken up already with various state governments. And further, it is likely to be discussed in the forthcoming Power Minister's conference on 12th November 2024.

Yes, please. Just give the mic.

Sumit Kishore from Axis Capital. In first half of the year, capitalization has been about INR 40 billion at the consolidated level. Are you still on track to achieve what, INR 180-odd billion that you had spoken about on a full fiscal basis? And for the next year, given that works in hand are going to get converted part of it, would you think that, that INR 350 billion achievable in terms of capitalization for next fiscal itself? Or would that be an aspiration more for FY '27?

This year, we are targeting about INR 18,000 crores CapEx as well as for capitalization. But the next year, it will increase from INR 18,000 crores, maybe between somewhere between INR 25,000 crores to INR 30,000 crores and next year, it will go about maybe INR 40,000 crores. Not next year, it will not touch [ INR 35,000 crores to INR 40,000 crores ]...

That's what I thought.

Maybe 1 year later.

Yes. And so your CapEx next year is likely to touch about...

Well, CapEx also, it will be between INR 25,000 to INR 30,000 next year, FY '25, '26.

The second question is, you used to put a slide in terms of your CapEx target till 2032, which used to look like something like INR 1.8 lakh, INR 1.9 lakh crore on the transmission side. So that number is now moving to about INR 3 lakh-odd crores. So could you disaggregate in terms of both interstate and intrastate, what would be your expected...

Like 90% -- 85% to 90% will be interstate. Like we have some joint venture companies with -- like Rajasthan and some TBCB projects, which will come in intrastate sector, they will be done for intrastate. But we are expecting that our share from interstate will be about 90%. So if we are saying more than INR 3 lakh crore projects to be executed or our CapEx will be more than INR 3 lakh crores. So it will be about 90% will be from interstate.

Sure. So your implied win ratio in interstate will be north of 50%?

Yes. Yes. Yes.

Okay. Right. I now again request Company Secretary-sab, I think we can call it. Shekhar?

So anyone who has got a question, you can ask the question. Yes, sir, we can do that.

Sir, like somebody wants to do the -- you have a question?

We have a question.

Okay. Yes, please go ahead.

So this is Mohit Pandey from Macquarie Capital. Just wanted to get an update on the smart metering projects. Yes.

As far as smart metering projects, we are doing in Gujarat, we -- Madhya Gujarat and Uttar Gujarat, where we are going to put around 63 lakhs meters smart meters. And out of that, we have already awarded 35 lakhs will be in one Madhya Gujarat, similarly in 30 lakhs in the Uttar Gujarat, out of which 28 lakhs we have already awarded. At present, almost 2 lakhs meters have been already supplied in both the cases. So at least 4 lakhs have been supplied and we are installing. At present, the progress is around 1 lakh meters we have already installed, sir.

Okay. Maybe the other questions -- there is one? You started, so now you can end it.

So just a follow-up from my side. So I just wanted to understand that in this current quarter, we've seen relatively weaker numbers. Is it a function of some of the TBCB projects maybe seeing a decline in the tariffs in line with the way the bidding has been done? Are you seeing any weakness in the ROEs for some of the TBCB projects?

You are referring to which number? Can you...

So as I'm looking at the general profit after tax growth, it's not been very encouraging for this quarter. So I just wanted to understand that as we go ahead and as the share of TBCB rises, can we see some weakness in terms of the normal threshold ROEs that we see given that there is higher competitive pressure in TBCB projects?

Not really. Like we have commissioned projects worth INR 4,000 crores. So tariff for which will be realized in days to come because if you commission, say, in September or August. So we will not get tariff in, say, April, May and June and until it is commissioned. So there is incremental increase or there is increase of tariff and profit, but because of our depreciation because our -- we have the legacy assets under RTM, where the depreciation is decreasing after 12 years from 5.28%, it becomes about 2%. Similarly, our loan also, we keep paying loan also principal amount. So loan amount is reduced and interest on loan is also reduced. So effectively, our revenue will reduce for RTM projects. So when we are adding revenue in TBCB projects, then it is almost getting compensated by the decrease in RTM projects. As far as the profit is there, if you remember that as per the CRC tariff regulation for '24-'29, our -- as per the new CRC regulation, our O&M charges have been reduced by almost INR 600 crores. So for half year, the effect is almost INR 300 crores. So that -- effectively, it is positive by, say, 1% or 2%, but it is not in the same range where it should have been because there is a loss of about INR 300 crores, which is a major contributor for our profit not increasing, say, 4% to 5%. It is 1% to 2%.

Understood. And lastly, would you be able to tell us what is the regulated equity number that we have for the RTM projects?

Regulated?

Equity, equity.

Normally, for any project, it is 70%-30%, so 30% is equity and return on equity is about 15%.

Understood. But for the overall bank of projects that we have right now, is it like a INR 90,000 crores kind of a number or some number like that? -- if you can help us with...

Yes. You see, we have INR 92,000 crores as net worth. And we say that the investments in TBCBs are around INR 4,000 crores, INR 4,200 crores. So what you assume is somewhere around INR 88,000 crores to INR 90,000 crores is fair.

Well, one more question. Yes, last. The final last.

Yes. Sir, just one bookkeeping question. So for the projects won in October and November, if you could share the NCT cost, if possible?

Yes. I'll tell. You want in...

October, November.

October, November. Okay. Yes. So this is Shongtong project, NCT cost is INR 2,286 crores. Then Rajasthan Phase 4 Part A is INR 5,969 crores. Part B is INR 5,357 crores. Then Gopalpur green hydrogen project is NCT is about -- NCT cost is INR 2,898 crores. That has been won by Tata Power. Then Kudankulam, which is won by Power Grid, the NCT cost is INR 548 crores. Then Bijapur-Raichur, which was concluded yesterday, the cost is about INR 1,000 crores. It is won by G R Infra. So out of 6 projects, we have won 4 projects.

I think now any more questions? I still have a minute. Okay. May I now request Mr. Anantha Sarma-sab to come and give the vote of thanks. Followed by that, please, the Power Grid team be ready for a group photo and then followed by that is [indiscernible].

Good afternoon. I take pleasure in thanking Shri R.K. Tyagi-ji, Chairman and Managing Director, Power Grid; Shri Ravisankar-ji, Director, Finance and CFO of Power Grid; Naveen Srivastava-ji, Director, Operations and Projects, Power Grid; Shri Vamsi Rama Mohan-ji, OSD Projects. And I also take pleasure in thanking all of you, the investors and the analysts who have made it convenient to come over here and participate in the investor meet here and make the event a grand success. I would like to thank ICICI Securities for organizing this event and also Adfactors who organized everything for us here and made the event successful. I thank everyone, including our Company Secretary and all for making this event successful. Thank you so much.