Power Grid gains as board approves Rs 803 crore-investment for electricity transmission projects

Shares of Power Grid Corporation of India rose a percent higher on February 27 following the board’s approval to invest over Rs 803 crore for various electricity transmission projects in the country.

With the weakness in overall market, the stock oscillated between losses and gains. At 9:34 am, shares of the company were trading 0.1 percent higher at Rs 215.25 on the BSE.

Additionally, one of the projects was the implementation of the Western Region Expansion Scheme-XXV (WRES-XXV) estimated at a cost of Rs 385.84 crore, which was scheduled to be commissioned by November 2023. This project aimed to expand the electricity transmission infrastructure in the western region of the country, which could potentially lead to increased demand for electricity.

The board had also approved the implementation of the North Eastern Region Expansion Scheme-XX (NERES-XX) at an estimated cost of Rs 109.38 crore. This project was scheduled to be commissioned by November 2024, and it aimed to strengthen the electricity transmission infrastructure in the northeastern region of the country.

The company had also approved a scheme to relieve high loading of WR-NR Inter Regional Corridor, which was estimated to cost Rs 200.58 crore and scheduled to be commissioned by May 2024. Another project was a transmission system for the augmentation of ISTS for the interconnection of HVPNL Transmission Schemes, which was estimated to cost Rs 107.77 crore and scheduled to be commissioned progressively from February 2024 to July 2024.

All these projects had the potential to improve the country’s electricity transmission infrastructure, which could lead to higher revenue for the Power Grid.

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JP Morgan has an overweight rating on the stock with a target price of Rs 255. It had said that electrification can result in growth multiple of greater than 0.9 times GDP of the past.

Plus, generation capacity target is to grow at 10 percent compounded annually to meet demand, which has warranted an upgrade to inter-state transmission capex plan to $30 billion till FY30, the foreign brokerage firm said.

Over the years, the present capex has tapered, on the back of huge investment in the transmission sector in India and Emkay Global Financial Services believes earnings growth for the company is expected to considerably moderate for FY24 and FY25, owing to commissioning of around Rs 10,000 crore each in FY23 and FY24 at consolidated level. Over the medium term, it sees Power Grid registering approximately 5 percent EPS on a compounded annual basis, with dividend yield of around 7 percent. “Power Grid remains as a low risk, moderate-return profile utility, in our view,” said Emkay Global Financial Services in a note.

Power Grid is India’s largest electric power transmission utility. It operates around 86 percent of India’s inter-regional transmission network. The power company has three business segments – Transmission, Telecom and Consultancy.

Recently, the company’s wholly owned subsidiary, Power Grid Teleservices, received Registration Certificate for Infrastructure Provider Category I from the Telecommunications Department to establish and maintain the assets such as dark fibres, fight of way, duct space and tower for the purpose to grant on lease/rent/sale basis to the licensees of telecom services.