POWERGRIDOFINDIA Q2 FY26 earnings call.
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Power Grid reported H1 FY26 consolidated total income of Rs 23,115 crore with PAT of Rs 7,197 crore, reflecting steady performance driven by transmission charge growth. The company faces right-of-way (RoW) challenges impacting project execution timelines, though government guidelines issued in March 2025—increasing land compensation rates and introducing a three-valuer methodology—aim to accelerate approvals. Management maintained its Rs 20,000 crore capitalization target for FY26 despite H1 achieving only ~4,587 crore, with projects delayed to Q3/Q4. Equipment supply constraints persist for transformers and GIS, addressed through advance bulk procurement. Tendering activity has slowed due to approval cycles, but management expects pickup. FY27 capex guidance of Rs 28,000 crore and FY28 of Rs 35,000 crore reflects robust project pipeline including Brahmaputra basin opportunities worth Rs 6.4 lakh crore. Key risk: revenue pressure from aging RTM assets (depreciation and interest components declining post-12 years) partially offset by new TBCB project commissioning.
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Guidance to track
- Management reaffirmed Rs 20,000 crore project commissioning target for FY26 despite H1 achieving only Rs 4,587 crore. Projects delayed due to RoW approvals expected in Q3-Q4.
- Capex for FY27 guided at Rs 28,000 crore with TBCB projects worth Rs 19,062 crore and RTM Rs 3,554 crore.
- FY28 capex guidance of Rs 35,000 crore reflecting continued scale-up of execution capacity.
- Given ~2-year lag between capex and capitalization, FY27 capitalization expected at Rs 25,000-26,000 crore based on Rs 26,000 crore FY25 capex.
Risks flagged
- As explained by management, older RTM projects (commissioned 2010-13) are completing 12-year depreciation cycles, causing ~9% revenue reduction per old project due to lower depreciation (5.28% to ~1.2%) and declining interest on loan. TBCB projects yield lower returns (~10-15% vs 17% for RTM).
- Laday HVDC project tender failed due to cost escalation from Rs 20,000 crore to Rs 42,000 crore and manufacturer constraints. Now being replaced by 400 KV AC project (estimated Rs 30,000 crore) with timeline still targeted 2029. Order book impact uncertain until government direction received.
- Brahmaputra basin opportunity (~Rs 6.4 lakh crore through 2035+) may be bid out under TBCB rather than nominated to Power Grid, unlike initial expectations. Management indicated these are "normal HBDC projects in plain area" more suitable for competitive bidding.
- Power Grid's first data center project (1,000 racks) has faced clarifications and issues, pushing commissioning from Q3 to Q4 FY26. No revenue contribution expected this fiscal year.
Key quotes
- There will be net difference of about 4% revenue reduction only because of this. Second point will be that interest on loan because after 12 years we will be paying most of the loan. So interest on loan component will also become almost zero. So this 4.9 plus 4% so almost 9% reduction will be there in our revenue.
- We have got one guideline issued by government of India on 21st March 2025 for increasing land compensation rates as against 30% for RoW in urban areas from 30% to 60% and 45% in semi-urban area. For market rate there will be three valuers.
- There is a shortage of some equipments like transformer, GIS and HVDC equipment. Transformer especially which delivery time is more than one year because manufacturing and testing itself takes more than one year. So what we are doing we are procuring these transformer and reactors well in advance as bulk procurement.
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