POWERGRID – One Nation, One Grid

Overview Powergrid is a PSU and a Navratna enterprise in power transmission sector responsible for carrying about 50% of total power generated in India. It is the 3rd largest transmission utility in the world. Extensive experience & expertise in implementing transmission projects Rated consistently “EXCELLENT” against GOI MoUs since FY 1994. Business Segments The existing business segment are Transmission, Grid Management, Consultancy, Telecom and actively looking for new opportunities like Green energy corridor, Smart Grid which is implemented in Pondicherry on trial basis. Its responsibility includes planning, coordination, supervision and control over inter-State transmission system and operation of National & Regional Power Grids. Company owns and operates about 1,01,379 ckt kms of transmission lines. This gigantic transmission network, spread over length and breadth of the country, is consistently maintained at an availability of over 99%. Unlocking the growth Low operational risk with limited exposure to general business cycles and cost plus tariff for the projects in hand enables the Company to recover its entire costs. Consulting business both in Domestic and International markets and Telecom broadband businesses experiencing steady growth by leasing transmission towers to telecom infrastructure service provider. With various UMPP and other power projects coming up near the resource (mineral) rich location and thus required generated power to transferred over long distance more need for long distance transmission capabilities. Secured first project under the ‘Tariff based Competitive Bidding’ and Management’ and a contract from ‘Ethiopian Electric Power Service Company’. Inter – regional power transfer capacity enhanced to 31,850 MW. Under the 12th year plan, theme the company adopted is ‘CAPEX” and will do a capex of Rs. 1, 10,000 crore, which will be invested in phases during 2012-17.The amount is expected to obtained in terms of 70% debt and 30% equity. Projects coming up with Renewable Energy like Solar, Wind and their uncertainty in production will be address by creation of Green Energy Corridors and with the support from foreign entities for subsidized loan. Financial Analysis The company posted a healthy revenue growth 20.69% vs. 17.52% YOY showing good demand, while the EBIDTA growth for the company stood at 22.48% vs. 18.19% YOY reflecting operational efficiency. The PAT growth is 23.41% vs. 19.11% reflecting company’s low miscellaneous expenses and book value for the company stood at Rs. 52.

The DuPont’s Analysis shows that ROE stood at 16.33% and thus offer more stable and consistent return. The current price of stock at Rs. 96 it is trading at a P/E of 10 while the industry average is 14, however considering the risk factors P/E of 12 the price comes around to be Rs.112 which looks to be an achievable target price. Disclaimer: The above views are personal opinion of the author, before making an investment please consult your investment advisor.

Financial Year FY'11 FY'12 FY'13

Transmission Charges 813780 982563 1,257,087

Consultancy 28676 28470 22680

Telecom 18720 20119 23139

Other Income 12894 13484

Total Income 861176 1044046 1316390

Total Expense 377312 438526 537785

EBIDTA 711156 869259 1121385

Profit After Tax (PAT) 267191 330299 431261

Earnings per Share 5.77 7.13 9.32

Net Profit Margin 0.31 0.32 0.33

Total Asset Turnover 0.11 0.11 0.11

Equity Multiplier 3.63 3.91 4.29

ROE 12.48% 14.01% 16.33%