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Capacity additions in the transmission and transformer segments buoyed Power Grid Corporation (PGCIL)'s revenues for the year ended March 2011. Higher revenues from the transmission segment, sharp rise in other income (sustainable due to Rs 3,600 crore cash balances) and lower operating expense growth ensured a 32 per cent growth in profits for the year. PowerGrid's core business of transmission continued to contribute 91 per cent of the profits before tax and saw its margins jump from 35 per cent to 42 per cent in FY11 bolstering the overall profit growth.
PowerGrid's transmission lines network stood at 82,354 circuit kms (ckms) and transformation capacity at 93,265 MVA as of March 2011. Commissioning of these projects resulted in a 17 per cent growth in gross fixed assets. This has brought PowerGrid closer to achieving its 11th Plan targets, as the Plan period comes to a close this fiscal.
PowerGrid's peers in the power generation space are expected to miss their 11th Plan target by a mile.
PowerGrid's capacities are coming up in time with the increase in generation capacities such as the first unit of the Mundra Ultra Mega Power Projects. Around 26,000 MW of additional power capacity is expected to be commissioned in the next 11 months according to December 2010 appraisal by the Central Electricity Authority.
Outlook
Notwithstanding the capacity addition, PowerGrid's return on equity is not very high at 12.6 per cent, partly due to the recent follow-on offer. The company also has another 34 per cent of gross assets locked-into capital work in progress, not as yet earning any return. As these projects get commissioned, the return on equity may improve, given the company's extremely healthy margins.
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