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Power Grid Corp of India

With CERC approving a new tariff regime for FY10-14, the company will benefit

Close to 45 per cent of the total power generated in India goes through the Power Grid Corporation of India’s (PGCIL) transmission network and therefore, not surprisingly, it is one of the largest transmission utilities in the country.

Other than transmission of power, it has a substantial presence in the telecom and consultancy businesses. On the telecom side, it provides broadband capacity to telecom service providers. PGCIL is a key component in the government’s drive to expand the existing grid to the remotest parts of the country.

For the year FY09 the company is to spend Rs 8,100 crore on capital expenditure (CAPEX) for expansion of its grid network, which went up from 67,000 circuit kms to 71,000 circuit kms. Its plan is to invest over Rs 55,000 crore over the next five years in expanding the grid network in line with the 11th Five Year Plan.

Currently, it is mulling a follow-on offer of equity shares through which it expects to raise Rs 3,000 crore. It also has plans to float bonds worth Rs 6,000 crore to meet its FY10 target of Rs 12,000-12,500 crore CAPEX.

The company ended FY09 with Rs 1,355 crore of profit, 12 per cent more than FY08. Moreover, it has done well to increase its operating margin consistently all through the year. By taking more debt to finance its expansion plans, its interest outgo has increased, but PGCIL still has an interest coverage ratio of more than 1.5. Hence, in the near term it should face no problems in paying interest derived from cash from operations. With CERC approving a new tariff regime for FY10-14, the RoE of the company is set to go up from its current level of 18.8 per cent.

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