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Thursday, June 26, 2008

POWERGRID CORPORATION OF INDIA (PGCIL) - Research report

POWERGRID CORPORATION OF INDIA (PGCIL)
BSE CODE: 532898
NSE SYMBOL: POWERGRID
Current : 105,
Target : 250 in 1 year


POWERGRID was incorporated in October, 1989 with the mission of “Establishment and Operation of Regional and National Power Grids to facilitate transfer of electric power within and across the regions with Reliability, Security and Economy, on sound commercial principles”.Transmission assets and manpower from the constituent central sector undertakings namely NTPC, NHPC, NEEPCO, NLC, etc were progressively transferred to POWERGRID. POWERGRID is engaged in Construction and Operation & Maintenance of inter-State transmission system and operation of Regional Power Grids and has been notified as the Central Transmission Utility of the country.

· PGCIL has plans to invest INR 550 bn in transmission projects for the Eleventh Plan(FY08-12). This will include increasing the inter-regional power transfer capacity to more than 37,000 MW by 2012 from 17,000 MW currently. During the nine months ending December FY08, projects of INR 52.6 bn were commissioned, including INR 19 bn in Q3FY08. The company is expected to commission projects of INR 30 bn in Q4FY08. In FY09, it is expected to spend ~INR 85 bn for investment in various transmission projects. PGCIL is expected to invest ~INR 350 bn during FY10-12E.

· This year, the company has increased its inter-regional power transfer capacity from 13,700 MW to 17,000 MW. It has added about 4,800 ckt kms, 8 new sub-stations, and around 7,200 MVA of transformation capacity.



· The company is expected to have net profit of INR 20,343 mn in FY09E and INR 26,022 in FY10E, after inclusion of profits from telecom and Consultancy. From the telecom business, PGCIL is expected to have profits of INR 1,297 mn and INR 2,847 mn in FY09 and FY10, respectively, including profits from leasing of fibre optic bandwidth and usage of transmission towers as mobile towers.

· PGCIL currently has an overhead optic fibre network of 20,000 km, spanning 100 cities in the country. The company has order of over INR 3,000 mn from various telecom players for leasing the optic fibre bandwidth. It also holds license for national long distance dialing (NLD) and offering services as internet service provider (ISP); the company has been generating revenues from both these segments over the past two quarters.

· PGCIL is in talks with telecom players for leasing its transmission towers as mobile towers,it is expected to lease close to 23,000 transmission towers to mobile operators in the next three years.

· Power Grid Corporation of India Ltd (PGCIL) said its revenue increased to a whopping 62 per cent to Rs 125 crore during FY08. This is the first time the Company's foray into telecom business garnered such a sizeable amount in revenues. 'The company is serving major telecom players in mobile and National Long Distance Operator (NLDO) segment and is also planning to tap customers in the entertainment and broadcasting industry.

· It is planning to spread its business overseas, reports Business Line. The company is eyeing opportunities in West Asia and the African markets, with consultancy forays in Nigeria and Dubai on the anvil. The company is in talks with Dubai Electricity and Water Supply (DEWA) to operate consultancy business. Power Grid has already received a contract for laying three transmission lines in Myanmar, while the firm has completed a pre-feasibility report on a proposed under-sea transmission between India and Sri Lanka.

· According to the Budget of 2008, PGCIL can take loan from any bank around the world on a low interest rate. As observed, 26% of expenditure of PGCIL is that of paying bank loan interest. PGCIL is in process of obtaining loans for its further expansion at a low interest rate from banks around the world.

· Power Grid Corporation of India Ltd (PGCIL) has bagged a $600 million loan from the World Bank to strengthen its electricity transmission system. Announcing the loan, which is backed by a Government of India guarantee, the Bank said in a statement that the Fourth Power System Development Project (PSDP IV) would aim to reduce transmission losses and cut the cost of energy through further investments in the utility’s systems.

· PGCIL is entering Nifty. According to shareholding pattern, only 8.4% is held by public. So within 3 months, 3% will enter in Nifty basket because of which there will be shortage of liquidity in this stock.

· Power Grid Corporation of India Limited (POWERGRID) has paid an interim dividend of Rs.176.68 Crore, for the financial year 2007-08.




· Three projects of Power Grid Corporation of India Limited (POWERGRID) have bagged the prestigious National Awards for Meritorious Performance instituted by the Government of India for the year 2006-07. POWERGRID’s 132 kV Transmission System in North-Eastern region received the Gold award while Silver awards were conferred on the 220 kV and 400 kV Transmission System in Western Region and the 400 kV D/C Kahalgaon-Patna-Ballia Transmission Line.

· Power Grip Corporation of India has obtained permission to generate power from coal and gas along with transmission. It can extract gas and generate power from it by own gas block.

Share Holding Pattern (%):
Promoters : 86.4
MFs, FIs & Banks : 1.3
FIIs : 4.0
Others : 8.4

We expect Power Grid to be the best runner in future years and a strong BUY is recommended.

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