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BW Businessworld

BW Real 500: Power Mode On

The company, Power Grid Corporation Of India, is ready to set new milestones and break a few records as it delivers electricity

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The announcement for entry of private players in the inter-state power transmission in 2011 did not do much to slow down this Navratna’s growth and dominance.

Timely project completion and commissioning, which holds the key to the company’s solid revenue and earnings growth, have fared well in previous and current fiscals. In FY15-16, it commissioned projects worth nearly Rs 31,790 crore — 46 per cent more than in the preceding year. The impact of this is reflected in the company’s robust revenue and profit growth. In fiscal 2015-16, the company displayed an impressive financial performance with a net profit of Rs 6,014.56 crore, 19.2 per cent higher than the previous year. Its total assets were at Rs 1,90,172.44 crore in FY15-16, as against Rs 1,69,905.26 crore in the previous year. During the year, the shares of Power Grid Corporation of India rose as much as 2.8 per cent to a record high of Rs 183.10.

This is remarkable for a company that faced tremendous flak in India and public ridicule in global media when the entire grid in northern India had collapsed in July, 2012. At that time, it was a matter of serious concern if Power Grid Corporation was ready and prepared to face the formidable challenges that lay ahead. To its credit, it has recovered wonderfully well from that one time, and sudden blow.

For funding, the company’s board is working on tie-ups in the international market as well as venturing into bonds now. “Of our total requirement, one third we take from outside loans, and two-third from the Indian market,” informs I. S. Jha, chairman and managing director of the public sector undertaking.

“We have large share of assets which are giving us revenue,” says Jha, on being asked how good the proposal of infrastructure investment trust or the InvIT model (to monetise assets) is, as suggested by the power minister. “ The InvIT model is an excellent route available to the infrastructure sector as it gives a way out to monetise existing assets and to reinvest the free capital in additional business opportunities. The company has already started exploring the feasibility and shall ready itself in this direction,” he says. Presently, as told, the company has capex worth Rs 1 lakh crore to be invested in the next three to four years, which is sufficient but more opportunities may come and would be explored, he adds.

In developing a strong culture of performance, it becomes all the more imperative to keep strict financial control. “The concerted efforts towards reducing capital works in progress (CWIP), through faster capitalisation and prudent addition to CWIP, resulted in better margins for Power Grid. Overall, we redistributed our capex (capital efficiency), decreased CWIP, increased capitalisation and received tariff on time. The result is our improved profitability,” he adds.

Power Grid’s revenue and earnings growth, to a great extent, depend on the expansion of its transmission network capacity. Today, it owns and operates more than 85 per cent of India’s inter-state power transmission capacity and plans to invest Rs 1 trillion ($6.8 billion) in the next four years to build new projects. Another task in hand is to integrate supply of renewable energy coming in to the grid.

While Jha may have helped in bringing the company on a strong footing, it cannot rest on its laurels and has the responsibility to maintain the performance, “We are focusing on new business opportunities coming up in power transmission and distribution sector. Smart Grid is basic building block of Smart Cities. The government of India initiative for development of 100 smart cities would open doors for investment in distribution system,” concludes Jha.