Power Grid Corporation of India Limited analyst Q&A

Should we begin with the question and answer session sir?

Please carry on.

Thank you. Ladies and gentlemen we will now begin the question and answer session. We'll take our first question from the line of Mahesh Patil from ICICI Securities. Please go ahead.

Yes hi sir. Thanks for the opportunity. S ir my first question is on the capitalization number. Given that we had achieved around 46 billion of capitalization in the first half and we have guided about 220 billion for the full year. Do we still maintain that target a nd second related question is what are the challenges we are facing to get this number up and what are you doing to kind of accelerate the execution?

Okay so as far as capitalization is concerned we are committed for increasing capitalization or commissioning of our projects. Mainly we are facing problems from RoW from landowners and Government of India is very positive. They are helping us. We have got one guideline issued by Government of India on this 21st March, 2025 for increasing land compensation rates as against 30% for RoW in urban areas from 30% to 60% and 45% in semi-urban area. And earlier RoW and land compensation was paid based on circle rates. Now it is based on the actual market rate. For market rate there is also methodology given in the guideline that there will be three valuers. First valuer will be selected by farmers. Second valuer will be selected by POWERGRID and third valuer will be selected by District Magistrate. Then first valuer of farmer and second valuer of POWERGRID they will submit the report. Then average of these two will be considered as the base value for market rate. If difference is more than 20% in that case the third valuer rate will be opened and if third valuer is closer to farmer's valuer then it will be average of farmer's valuer and the third valuer. If rate is closer to POWERGRID valuer, the average of these two valuers will be taken. So this methodology is being used by Delhi, Haryana, and now other states. So based on the Government of India guidelines issued in March , 2025, the state of Haryana and Delhi have issued somewhere in June and July and other states are also issuing such guideline. So, Government of India guidelines are being adopted by various states and based on those guidelines the rates by valuers is being finalized which are being adopted or notified by respective DMs and based on that , we are working in various lines. So this has taken some considerable time because of that some projects have been delayed which are likely to be commissioned in Q3 and Q4. So we are still targeting about Rs. 20,000 crores projects to be capitalized by this financial year 25-26. By March 2026, we should be in position to commission up to Rs. 20,000 crores projects.

Okay sir, thanks for the detail updates. My second question is on the equipment ordering. Have we tied up f or the equipment for the next 2 years, 3 years of our execution and is there any shortage in terms of transmission equipment, HVDC etc.?

Yes, you are right that there is a shortage of some equipment like transformer, GIS, and HVDC equipment. For transformer , especially delivery time is more than one year because manufacturing and testing itself takes more than one year. So , what we are doing, we are procuring these transformers and reactors well in advance as bulk procurement and these procured transformers and reactors are allocated for various projects which we win in future so that this constraint of transformer supply is not there. As far as HVDC equipment are there, they cannot be procured in advance because they are specific to a specific project. For that, the Government of India is giving us 4 years to 5 years for commissioning. So, in that period, we are able to get this HVDC equipment also. So similarly GIS also, there is a shortage, but still we are getting these equipment on time and we will be able to commission our projects on time. Thank you.

Okay, sir. And so my last question is, sir, have you started tendering for the Leh Ladakh HVDC project?

Leh Ladakh HVDC project, actually we have gone to the market. We came out with a tender and we also got one bid, but that bid was not acceptable to us because there were so many queries and we came to a conclusion that HVDC project may not be f easible in this Leh to Kaithal project. Now, Government of India is considering this project to be replaced by AC project. So, we will have 400 kV transmiss ion line from Leh -Pang to Kaithal and that project is under discussion and very shortly, we will get some information about that.

Okay, sir. Thank you so much.

Thank you. Next question is from the line of Puneet from HSBC. Please go ahead.

Thank you so much. My first question is just on Leh Ladakh, when you move from HVDC to AC, will your commissioning timeline increase or reduce and your capex goes up, goes down or should one think about this?

Actually, this project when we considered HVDC project about three years back, that time cost was about Rs. 20,000 crores and now considering this supply chain constraint, even if we consider that this is a feasible project, we took even cost estimate from our various bidders. Now, cost is coming about Rs. 42,000 crores, considering various challenges and constraints shown by manufacturers or suppliers, So, it may not be possible for us to continue with HVDC and we have already done detailed studies. So, AC is another option which we are considering and cost of AC will be in the range of about, it will be close to Rs. 30,000 crores. So, capex will not be less as compared to earlier estimate of Rs. 20,000 crores. It will be more than that.

And timeline?

Timeline we will be able to maintain as of now , because all 400 kV and these technologies are already available in the market except synchronous condensers which may take some time. So still we are expecting that by 2029, this project can be commissioned.

Understood. And on your standalone accounts, you in a way end up paying effective tax rate of 20% or even less than that. How long will that benefit last?

I request Director (Finance) to reply.

Pardon. Please, can you come again?

Yes. So, the effective tax rate when I look at on your standalone balance P&L comes to less than 20% over the last few quarters, almost eight, nine quarters. When do you think, this will go to normalize 25%?

It will, see, it will come to normal when the capitalization comes down and when the income tax profit is more than your profit as per the CERC rates. But again, we don't foresee that because once the capitalization picks up again, we'll be going into the same MAT and then the profit as per Income Tax, it will come down and then again, we'll be switching over to the MAT only.

Understood. That's helpful. And lastly, any progress on the Rajasthan JV on the trans mission side?

Can you repeat?

Rajasthan JV.

Yes. Rajasthan JV, Joint Venture Company. Yes. Actually, their regulator has put some limit on the projects which are to be considered on nomination basis, beyond which they are considering under TBCB. So, they were trying to take some exemption so that those projects can be executed by this JV company. But so far, we have not got any communication from Rajasthan Government. So as of now, there is no progress.

Okay, that's helpful. And lastly, your participation on the battery side, last time you said you would look at it as it progresses. Any further thoughts there?

Battery energy storage participation.

Understood. That's very helpful. Thank you so much and all the best.

Thank you. We'll take our next question from the line of Ketan Jain from Avendus . Please go ahead.

Thank you. Good evening, sir. Thank you for the opportunity. Sir, my first question is on the other expenses. We've seen an increase by 77% of other expenses, O&M expenses. What is the primary reason for this and is this passed on or how is it?

The other expenses actually include the FERV, which is the pass-through. So that is covered in the net movement of the regulatory deferral. And then also you see now we are in the business of the smart metering where we are doing the accounting through the service concession agreement where it is shown as the income side as well as the expenses side. The expenses side in the consol around Rs. 450 crores is included in that. So, corresponding to that, we have an income also. So, that is why it is appearing to be on the higher side, but not like that.

Understood. And also, sir, I have a question. Do we have any O&M expense impact from the new C ERC regulations, which cap the O&M expenses and we are actually incurring more expenses? Is there any impact from that?

Last time there was impact that we got less O&M charges for O&M recovery, what we got from various constituents as per the new regulation. But this year there is no change from the last year. So, the impact was only last year. This year it is only incremental change because of increased DA and other normal expenditure will increase every year. So, it is only nominal expenses which have increased. Otherwise, there is no impact of CERC regulations.

Understood. So going forward, we will be recovering all the O&M expenses. There will not be any additional under-recoveries on that? Am I right, sir?

Yes, yes.

Sir, also what is your guidance on capitalization for 2026, you told Rs. 20,000 crores, but what would be that for '27 and '28? Any guidance?

Like last year we did capex of about Rs. 26,000 crores. This year we are expecting about Rs. 28,000 crores and next year it will be about Rs. 35,000 crores. So , from capex to capitalization, there will be a gap of about 2 years. So, like this year, we will have Rs. 20,000 crores projects are likely to be commissioned, capitalized. And next year it will follow like it may be about Rs. 25,000 crores, Rs. 26,000 crores because last year we got CAPEX of Rs. 26,000 crore. So, we expect that about Rs. 25,000 crore work projects will be capitalized next year. And similarly, in '27, '28 also, it will be around Rs. 28,000 crores. So, it will be in that range. Rs. 25,000 crores next year, Rs. 28,000 crores next to next year.

Understood. Just one last question, sir. Just one last question.

Ketan, I request you to join back the queue, please, as we have other participants waiting for their turn.

Okay.

Thank you. We'll take our next question from the line of Dhruv Muchhal from HDFC AMC . Please go ahead.

Yes, sir. Thank you so much. S ir, in the consolidated numbers, the other income for last year was about Rs. 560 crores and this year is about Rs. 190 crores, a sharp drop. So, anything abnormal probably in this quarter or last year quarter?

I could not get why this is breaking?

Dhruv, can you use your handset mode, please, and repeat the question?

Yes. So, in the consolidated numbers, the other income last year same quarter was Rs. 560 crores and this year quarter is about Rs. 190 crores. There is a sharp drop here. So, anything abnormal probably in the last year quarter or this quarter?

Normally, the other income includes some of the like interest and differential tariffs on the CERC orders and all, which are all normally used to be one time. So , on a yearly basis, the difference of variations of around Rs. 100 crores-Rs. 200 crores is the normal one.

So, nothing abnormal in the numbers, either last quarter or current quarter?

Nothing.

Okay. Okay. Because if I adjust for the other income, your consolidated part is showing a decline in Y-o-Y. But if I adjust for the other income, the PAT is showing an increase. So, I'm just wondering, it's probably all because of the other income. So just trying to understand if there is something. No worries, sir. Sir, the other thing was the awarding seems to have slowed down a bit. Any particular reason why this is happening o r probably just the tenders will happen and we'll start seeing momentum make up again?

Yes, TBCB, it is a cycle. Basically, sometimes it is very fast, sometimes it takes some time. So, it is likely to pick up.

It's not because there are already a lot of...

Okay. And the last small question is your CAPEX for first half is about Rs. 15,000 crore. Generally, I believe 2H is much better than 1H given monsoons and everything. So, is it possible that we'll exceed Rs. 28,000 crores CAPEX number or Rs. 28,000 crore is safe to assume?

It will be Rs. 28,000 crore plus. So that we can assure it may go up.

I was trying to understand the degree of plus here. How much higher than 28?

It may be somewhere between Rs. 28,000 crore to Rs. 30,000 crore.

Okay, sir. Thank you so much. That's all and all the best.

Thank you. Next question is from the line of Atul Tiwari from J.P. Morgan. Please go ahead.

Yes, thanks a lot. Sir, you gave a guidance of about Rs. 25,000 crores to Rs. 26,000 crores capitalization in FY27 and Rs. 28,000 crore in FY28. I believe in some of the previous conference calls, you have guided to Rs. 35 ,000 crores to Rs. 40,000 crore s rupees of capitalization in those years. So, is there some like persistent slowdown in the pace of capitalization that the company is seeing because of the issue or is this issue limited to this year only?

What we are saying that there is a time lag of about two years from capex to capitalization. So that is only because there will be many challenges of R oW and other things will be there. But considering that, you can assume that there will be two years of lagging. So last year, it was Rs. 26,000 crores. So, capitalization after two years will be about Rs. 25,000 crores to Rs. 26,000 crores. And since we are considering Rs. 28,000 crores capex, so I am saying that this capitalization will be about Rs. 28,000 crores.

Okay, sir. And how much of transmission awarding is yet to be done as per NEP over next three years?

So exact figure I will check, but it is somewhere about Rs. 3.5 lakh crores out of Rs. 9.15 lakh crores is still pending. So, the exact figure I can confirm after this.

So Rs. 3.5 lakh crores and all belonging to ISTS.

I request you to join back the queue.

Yes, I just have this one doubt on the answer. So , Rs. 3.5 lakh crores is the ISTS or it will take to report?

Only ISTS.

ISTS. Yes.

Only ISTS.

Next question is from the line of Sumit Kishore from Axis Capital.

Thanks for the opportunity. My first question is in relation to what is the bid pipeline at the moment for the next second half of the fiscal? And what is the status of the two HVDC projects which you had mentioned and we expected to get awarded in this fiscal? So , are they still on track or there are delays in their tendering and all? That's my first question.

Sumit, your voice is not audible. Your voice is not clear. Can you please repeat?

Sumit, please use your handset mode and repeat the question, please.

Is this better?

Yes.

Yes.

Yes. Sir, my question was in relation to the bid pipeline for the balance fiscal second half for the market for transmission and the status of the two HVDC projects that were expected to be awarded this fiscal. Is the tendering and award activity on track or is there a risk of spillover the next financial year? That's my first question.

Yes. You are talking about this Khavda to South Olpad is already finalized. And this Barmer to South Kalamb, it is likely to be completed in this financial year. So, we are expecting very soon that it is already approved in NCT and it is likely to be finalized in this financial year itself. Other projects may take some time.

Okay. And so what is the total bid pipeline now for the balance fiscal for transmission?

Let me check the figure. We will come back.

Around Rs. 45,000 crores.

We will exactly tell, but it may be around Rs. 45,000 crore worth. It may be more. Actually, considering HVDC, it will be more.

Yes.

So we will revert. We should not give wrong feedback.

Okay.

So we will look with that…

Okay. Sir, when you said the Khavda South…

Hi. Sir, my first question is on the RoW point. The process you laid out on three different valuers, I think it seems quite adverse. So , if you could tell us, how much time is it adding to a project timeline in months or so?

For this finalization of a valuer and giving report by this valuer will be somewhere about one month.

That's it. Okay.

Because we are in the learning process. So , it took more time in Delhi. But the Government of India is in the process of issuing guidelines that within one month, this should be finalized.

And other states are also close to adopting this guideline, Rajasthan, Gujarat, etc.

So, yes, we are following up with all the states, including Ministry of Power is also considering and talking with all the states to adopt similar guidelines.

Got it, sir. Sir, my second question is...

Nikhil, I request you to join back the queue, please.

Yes.

Next question is from the line of Apoorva Bahadur from IIFL Capital.

Hi, sir. Two questions. Firstly, on the equipment supply, you said it is improving and we are ordering in advance. Any chances of Chinese imports again being allowed in, especially in certain categories? And secondly, sir, we have been one of the early movers in the data center business. Any update on that now that we're finally seeing the traction over there? Any plans?

Yes. This Chinese import, as far as the present situation is there, we are not expecting it will continue. But we will have some progress, like the Chinese companies, which have set up their companies in India. So, there is some progress or there is some development in that area. So, we may have some approval for manufacturers -- Chinese manufacturers, who have developed factories in India. So, there may be some development in that area. But direct import from China, so far, we are not hearing anything.

Okay, sir. And on the data center bit?

And data center -- for data center, actually, it is a learning curve for us. There have been some issues being faced and there are so many clarifications, and it is delayed -- data center is delayed. So maybe by Q4 only, we should be able to commission this, not in Q3.

Sir, what size is this?

It is 1000 racks.

We'll take our next question from the line of Bharani from Avendus.

Yes. So, first question is a little bit conceptual. So , though we had close to Rs. 9000 crores of capitalization last year, the first half revenue, EBITDA, PAT is flat to a down minor -- in a minor way. So how should one understand it conceptually, because as a fixed cost-plus RoE model, there should be growth. So that is my first question.

Actually, so far, we have been executing projects under RTM. And now we are executing projects under TBCB. So , there is a difference in financial modeling or revenue modeling of these two projects -- two types of projects. In RTM, we used to get about 17% revenue on any project. Breakup was that we will get about 15.5% return on equity, which is about 30%. So 15.5% into 30%, which will be about 4.65%. Then there will be 70% loan. So, there will be about, say, 7%, assuming 7% interest rate. So, there will be about 4.9% will be interest on loan. And depreciation for initial 12 years will be 5.28%. Then there will be O&M charges in the range of about 1.8% to 2%. And then interest on working capital may be about 0.2% to 0.3%. So, this makes about 17% or 17% plus of revenue against any project. After 12 years, because we have projects which have been commissioned in 2010, 2011, 2012, 2013, in that range, which are getting completed 12 years of age. So, after 12 years, 5.28% depreciation will reduce to about 1.2%, 1.3%, because by 12 years, most of the depreciation has been recovered. So only balance may be about 27% in 23 years. So, making it about 1.1% to 1.2% per year depreciation as against 5.28% depreciation in initial 12 yea rs. So , there will be net difference of about 4% revenue reduction only because of this. Second point will be that interest on loan because after 12 years, we will be paying most of the loan. So, interest on loan component will also become almost zero. So , this 4.9% plus 4%, so almost 9% reduction will be there in our revenue. So , assuming that there will be say last 12 years back, we commissioned about say Rs. 15,000 crores projects. So, Rs. 15,000 crore projects into 9%, it makes about Rs. 1,350 crores revenue will reduce each year. So, this financials, also our revenue has come down because of these two reasons, depreciation, and interest on loan. Whereas whatever projects we have commissioned, so normally we will get projects because our tariff is fixed for 35 years. So, we get about 11% to 12% of project cost as revenue. So, if we commissioned projects last year, about Rs. 9,500 crores worth projects, so maybe about Rs. 900 crores will be the increase in revenue because of these commissioned projects. So , net difference will be Rs. 400 crores to Rs. 500 crores difference will be there in revenue. So , that difference you will see in our revenue also. So, these are the basic, like you can say the rough calculations, the details we can share with you.

No. I'd like to add to this. Actually, you see in the regulatory framework, EBITDA is not actually a right parameter to monitor in the sense that when we commissioned a new project as the Chairman was explaining, the EBITDA used to be in the range of 89%. And when you complete the life for the 35 years, the EBITDA will come down to 74%. But your profit will remain same because I have a return on equity constant for the entire period. So, there is no worry that the profit is going to come down, but the EBITDA is not the right parameter to monitor. And another added to that, if you see the half year to half year, when you are comparing last half year, actually we have spent CSR of about Rs. 100 crores lesser than the current half year, which actually will get normalized over the full year. And last half year, we got an order of POWERGRID Southern Interconnector Transmission System Limited, where we appeal ed to the regulatory authorities for waiving of the penalties and where we got around Rs. 209 crores as a one-time order impact in the last half year. So , these things added to only you are showing -- you are seeing a decline of around Rs. 300 crores. So, it is only because of this one -time impact. Otherwise, as such, there is no worry that the EBITDA is coming down or something. And added to that, you see going forward also, we have a smart metering business where the EBITDA is hardly 10% to 15%. So , we are merging that in the consol. So , where the income and expenditure side, it was added. So, that is why you are seeing a lesser EBITDA of like 3% to 4%, it is declining. But as such, there is no worry that the profits are taken away by any expenditure or something like that.

Sir, my follow-up...

I request you to join back the queue, please. Next question is from the line of Anuj Upadhyay from Investec.

Yes. Hi. Sir, two questions. One is on a clarification. When you mentioned that the Leh-Ladakh project price has now been revised to Rs. 30,000 crore. So is this Rs. 30,000 crore factor in our working hand of Rs. 153,000 or it is yet to be factored in? Secondly, any further comment on the Brahmaputra opportunity, which you mentioned throws a robust opportunity, but when can we expect the tendering to be out or it would be directly allotted to the POWERGRID or it would be on a TBCB basis?

Yes. As far as Leh -Ladakh, we are still maintaining Rs. 20,000 crores only, because we have not got direction from Government of India about DC or AC. So, as we get this communication regarding AC network, then we will accordingly revise this guideline also for our CAPEX. As far as this Brahmaputra, it is still in this study stage and it is likely to take some time. And third point, what you mentioned that whether it will be nominated to POWERGRID, it is unlikely because these are normal HVDC project s in plain area and it may be under TBCB. So far, we are not expecting that it will be based on nomination to POWERGRID.

We'll take our next question from the line of Mahesh Patil from ICICI Securities.

Yes. Sir, my first question is on the FY '28 CAPEX number. You have mentioned Rs. 35,000 crore for next year. Sir, what is the estimate for FY '28?

Capex for FY '28.

FY ’28.

FY '28, we told it is Rs. 45,000 crore.

Rs. 45,000 crore.

Rs. 35,000 crores is FY ’27. FY '28 is Rs. 45,000 crores.

Okay, sir. And sir, lastly on this Andaman-Paradeep project, what is the status there? If you can share some info.

Yes. Still there are discussion and approvals being taken by Government of India and there is no firm communication. You are talking about Andaman HVDC project undersea?

Yes, sir. Yes.

Yes. So, there is no clear approval or direction from Government of India so far.

Okay. And sir, last -- yes. If I may, sir, lastly, in terms of, sir, EESL, if you can share some update, what were the losses in this quarter and what are our plans regarding EESL, Energy Efficiency Services?

Yes. I request Director (Finance).

Yes. Current half year -- around Rs. 126 crores in the half year has been included, from EESL compared to Rs. 92 crores in the last half year. And there is an additional Rs. 29 crores against the last quarter of around Rs. 58 crores, which is again on the adjustment of the final accounts. You can say that around Rs. 30 crores has been added on account of EESL in our consol.

Okay, sir.

Ladies and gentlemen, due to time constraints, we'll take that as the last question for today. I now hand over the call to management for closing comments. Over to you, sir.

Yes. So, thank you very much all investors for participation, for your valuable time. POWERGRID is committed to take care of your interest and we thank for your support in promoting POWERGRID in India. Whatever challenges we are having today because in power sector, especially in transmission business, when we go for erecting any tower in land of any landowner, there will be obvious resistance by landowner. So, we are facing on daily basis, we are facing problems everywhere, wherever we are working. But we have a very dedicated team of our engineers and POWERGRID officials to take care and to improve efficiency of our execution. As far as challenges of the supply of various equipment because of lot of demand in power sector, in ISTS, intrastate, then RE generation, and now we will be having more demand because of green hydrogen transmission network, data center transmission network. So, these challenges are going to increase in days to come. But rest assured that we are very competent -- we have very competent team to take these challenges and work for the inter est of our stakeholders. Thank you very much.

Thank you members of the management team. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.