The stock of Power Grid Corporation of India (PowerGrid) which has gained 11 per cent since last Monday is up 6 per cent in this trading session. The stock has in fact gained 36 per cent so far this calendar. Prospects remain bright for PowerGrid, India’s central power transmission utility, which has been growing its revenue at a healthy 20 per cent over the last few years.
PowerGrid enjoys tariffs fixed by the Central Electricity Regulatory Commission which provide it an assured return on commissioned projects. Expansion in transmission capacity (and volumes), therefore, holds the key to the company’s growth. Over the past few years, PowerGrid has seen its transmission assets grow at over 20 per cent, which is reflected in the growth in its transmission revenues too.
Reforms in the power sector figures among the top priorities of the new Narendra Modi-led government and that bodes well for power sector players such as PowerGrid. Faster clearances for stranded power projects will boost power generation and accordingly PowerGrid’s transmission volumes. The company has near-monopoly over India’s transmission network and is therefore well placed to benefit from any expansion in power generation.
It has laid out a capital expenditure of ₹22,450 crore and plans to expands its inter-regional transmission capacity of 38.6 GW by an additional 7.3 GW in 2014-15. The company’s foray into intra-state transmission is also on track. It has received the licence for power transmission in Bihar under its joint venture with Bihar Grid Co. and contracts for projects worth Rs 1,700 crore are under finalisation.