Power Grid Corp. of India Ltd (PGCIL) delivered modestly impressive results for the quarter ended September. Total revenue increased by 25% on a year-on-year basis to Rs 2,126.63 crore, as PGCIL commissioned projects of about Rs 3,900 crore. Transmission income increased by 22% and accounted for 91% of total revenues. PGCIL’s other businesses such as consultancy and short-term open access (servicing customers other than long-term ones using idle capacity on its network, for which it can charge an above-regulated rate) grew at a faster pace, and as a result, the share of transmission income in revenues fell by 200 basis points, or 2 percentage points, compared to last year.
Growth from short-term open access and consultancy was robust increasing by 159% and 57%, respectively, but telecom income (the company operates a long distance optic fibre line) grew at a muted pace of 9%. Short-term open access charges have doubled thanks to a higher share of power trading. Overall revenue growth was better than the 16.6% growth witnessed in the June quarter. Operating income for September grew at the same pace as revenue to Rs 1,786 crore, but net profit increased at a higher pace of 41.6% to Rs 651.4 crore, thanks to lower depreciation and interest charges.
Graphic: Yogesh Kumar/Mint
But while the reported net profit growth appears high, it includes several one-off items. Analysts from Motilal Oswal Securities Ltd mention in a note that adjusted profit stands at Rs 600 crore, which represents a 16% year-on-year growth, marginally lower than their estimate of Rs 630 crore.
The company is scheduled to make a follow-on public offer (FPO) in the current quarter, wherein it will issue 10% fresh equity and the government would divest another 10% stake. This would lead to 9% equity dilution. At the current market price, the company would be able to raise about Rs 4,500 crore.
This should help PGCIL in funding the equity portion for its large capex plans. The company has plans to incur a capex of Rs 12,900 crore this fiscal and about Rs 17,000 crore in the next fiscal. But it’s important that some of this planned capacity comes into operation soon. PGCIL’s stock has underperformed the BSE-100 since the beginning of the fiscal. The performance of the stock will now depend on the growth of its non-transmission businesses and on how much capacity it commissions.