Propane competition intensifying
Industrial consumers are switching to cheaper propane/LPG, pressuring PNG volumes. Management responded by offering competitive pricing.
POWERGRID / bear-case history
Track the concerns that keep returning.
Powergrid · risk themes across the available quarters.
Research layer active
Bear-case history
Risks carried through the record.
medium
APM gas allocation deficit may persist
APM allocation deficit was 14% in Q1, trending down but could remain a margin headwind if domestic gas supply doesn't keep pace with demand.
Regulatory risk on CNG/PNG pricing
Analyst raised concern about potential price regulation; management dismissed it, citing natural competition, but risk remains if government intervenes.
Equipment supply constraints for transformers and GIS
Management acknowledged that transformers, reactors, and GIS are in tight supply, with costs rising 70-80% since 2017-18, potentially delaying projects.
Cost overruns on first-of-its-kind offshore wind projects
The offshore wind evacuation projects (INR 13,100 crore total) are India's first, and management noted costs may be higher than routine projects, posing execution risk.
Dividend dependency on SPVs impacting standalone profits
Analyst noted flattish standalone PAT due to lower dividends from SPVs; management confirmed this but said consolidated view is more relevant going forward.
Green hydrogen transmission capacity not yet in NEP
Management could not confirm if the 125 GW RE requirement for green hydrogen is included in the National Electricity Plan, indicating potential policy uncertainty.
Right-of-way challenges persist
ROW issues remain a significant bottleneck for transmission line commissioning, especially in Delhi and Haryana, despite new compensation guidelines.
Supply chain inflation for key equipment
Transformer costs have doubled in seven years, and GIS bay costs have risen from INR 6 crore to INR 14-15 crore, impacting project costs.
Leh HVDC project technology risk
The Leh HVDC project faces delays due to technology challenges at high altitude; an alternative AC solution may be costlier and unproven in India.
Consolidated PAT decline due to JV losses
Consolidated PAT fell ~2% YoY partly due to INR 70 crore loss from joint venture ESL, which management did not elaborate on further.
Supply chain constraints for STATCOM and HVDC equipment
Management acknowledged challenges in transformer and HVDC equipment availability due to global demand, though insulated by firm-price contracts.
Regulatory uncertainty on new tariff control period
CERC draft regulations expected by Nov-Dec 2023; any adverse changes could impact regulated equity returns.
Execution risk in Leh-Ladakh project
High-altitude terrain and extreme weather limit working months to 5-6 per year, posing timeline risks.
Slowdown in TBCB bidding activity
H1 FY24 saw fewer bids; management expects pick-up in H2, but any delay could impact order book.
EESL associate losses continue
EESL contributed a loss of INR 100 crore in H1 FY25 due to mounting receivables and interest costs, with no clear timeline for reversal.
O&M cost reduction under new CERC regulation
New CERC tariff regulation (2024-29) reduced O&M charges by INR 600 crore annually, impacting profitability by ~INR 300 crore in H1.
Declining RTM revenue offsets TBCB gains
Revenue from legacy RTM projects is declining due to lower depreciation and interest, partially offsetting growth from new TBCB projects.
Competitive pressure in TBCB bidding
Analyst raised concern about potential ROE compression in TBCB projects due to competitive bidding, though management downplayed the risk.
Right-of-Way (ROW) Delays Impacting Capitalization
ROW challenges from landowners have delayed project execution, though new government guidelines are expected to ease the process.
Slowdown in TBCB Tendering
TBCB tendering has slowed down due to approval processes, which could impact future order inflows.
Equipment Supply Constraints
Shortage of transformers, GIS, and HVDC equipment with long lead times could affect project timelines.
Revenue Impact from Aging Assets
As assets complete 12 years, depreciation and interest costs decline, reducing revenue by ~9% of project cost, which may pressure reported growth.
CERC draft regulations on O&M and ROE
Draft regulations propose changes to O&M norms and reduce ROE to 15% for new assets. Management expects minimal impact but discussions ongoing.
Supply chain constraints for transformers and GIS
Management acknowledged potential challenges in transformer and GIS supply, but noted government actions to develop more vendors.
Aggressive ISTS CAPEX target may face execution delays
Analyst flagged that the INR 310,000 crore ISTS target over FY22-27 appears aggressive given the need for rapid awarding and execution.
Leh-Ladakh HVDC project timeline risk
The project has a long gestation of ~5 years from order placement, with commissioning expected only by FY2030, posing execution risk.
Execution delays due to land acquisition and equipment supply
Management acknowledged challenges in land acquisition (ROW issues) and supply of high-voltage transformers and GIS equipment, which could delay project commissioning beyond the typical two-year timeline.
Impact of CERC tariff true-up on profitability
The CERC tariff true-up impacted Q3 PAT by INR 140 crore, and the nine-month impact is ~INR 440 crore. This regulatory adjustment could continue to weigh on earnings.
Loss from JV EESL dragging consolidated profits
PowerGrid's 39% stake in EESL resulted in a loss of INR 140 crore in 9M FY25, contributing to the decline in consolidated PAT. Management has stopped further equity infusion.
Dividend reduction due to rising CapEx requirements
Management reduced the interim dividend per share (from INR 4.5 to INR 3.25) to conserve equity for the growing CapEx pipeline. Further reductions are possible if CapEx continues to rise.
Transformer supply chain constraints
Domestic transformer capacity (228,000 MVA) is insufficient vs demand (421,000 MVA in FY27), potentially delaying projects unless Chinese component imports are allowed.
Right-of-way issues persist despite improvements
While new guidelines have helped, ROW remains a challenge in some states; execution depends on timely adoption by local authorities.
HVDC project award delays
Two major HVDC projects (Barmer II-Srikakulam, Bikaner V-Begunia) may slip beyond FY27, impacting CapEx phasing.
Intrastate project risks
Intrastate projects (e.g., Maharashtra, Karnataka) involve higher execution risks; management will bid selectively based on risk assessment.
TBCB annuity rate compression
Analyst noted a deteriorating trend in CapEx-to-annuity ratios for TBCB projects, which could pressure IRRs. Management acknowledged but maintained 10-12% IRR target.
Smart metering execution delays
Management admitted smart metering progress is slow due to teething problems in software, with only 30,000 of 69,000 meters installed.
Subsidiary profit decline due to one-offs
Consolidated subsidiary profits fell YoY partly due to a one-time INR 200 crore tariff order in Q4 FY23, which may not recur.
ROW-related project delays
ROW compensation policy changes and state-level adoption delays caused commissioning slippages in FY25; may persist.
Lower TBCB pipeline in FY26
Current TBCB pipeline is only INR 45,000-46,000 crore, significantly lower than INR 92,000 crore won in FY25, which could slow order book growth.
ROE compression from higher equity base
ROE dipped ~100bps YoY as net worth grew faster than profits; further dilution possible if CapEx ramp-up requires equity.
RE demand slowdown impacting transmission needs
Weak power demand and delayed PPAs for RE projects could reduce urgency for new transmission lines, affecting long-term pipeline.