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4QFY25: Present tense, future bright; Maintain BUY

Power Grid (PGCIL) revenue for 4QFY25 was largely flat at INR 123bn, 2%/1% YoY/ JMFe due to subdued CapEx during earlier years (INR 91bn/92bn/125bn in FY22/FY23/FY24) and capitalization of just INR 90bn in FY25. EBITDA came in at INR 102bn, 1%/-1% YoY/ JMFe with margin of 83.3% in 4QFY25 vs. 84.3%/85.1% in 4QFY24/3QFY25 due to increase in 19%YoY employee expense. Adj. PAT came in at INR 41bn, -6%/-6% YoY/ JMFe due to increase in finance cost by INR 3.7bn (19% YoY). Execution of large transmission projects is inherently challenging but perpetually rewarding. During FY25, capacity augmentation for transmission lines and transformation capacity in India lagged behind targets by 42% and 23% due to issues in getting RoW and short supplies in transformers. Currently, Power Grid’s 9 TBCB projects are more than 90% complete, which we expect to commission in FY26, giving a fillip to capitalisation. Capex momentum is likely to gain pace and exceed INR 250bn in FY26 and beyond with pick up in execution of HVDC projects. We maintain our BUY rating with a revised SOTP-based TP of INR 353.

* Business Outlook: A total of 1,91,474 ckm of transmission lines and 13,07,435 MVA of transformation capacity (including HVDC bi-pole/BTB) is planned for addition in ISTS and InSTS from 2022 to 2032 as per National Electricity Plan 2032. This will require a CapEx of INR 4.3 tn (62% ISTS) during FY22-27 and INR 4.9 tn (80% ISTS) during FY27-32. The management guided a cum CapEx of INR 3 tn by FY32 for the upcoming opportunities.

* CapEx & capitalisation: The company incurred a CapEx of INR 86bn in 4QFY25 vs INR 48bn in 4QFY24 and capitalisation of INR 16bn in 4QFY25 vs. INR 18bn in 4QFY24. The Management during the call has guided for CapEx of INR 280bn/ INR 350bn/ INR 450bn in FY26/FY27/FY28 vs. INR 92bn/ INR 125bn/ INR 262bn in FY23/FY24/FY25. It expects capitalisation of INR 260bn for FY26 vs. INR 76bn/ 90bn in FY24/FY25. As of Mar’25, it has INR 1,547bn of works in hand, including INR 468bn of RTM projects and INR 1079bn of other projects including TBCB.

* Project wins: PGCIL has won 24 TBCB projects in FY25, commanding the market share of 57.3% in terms of NCT cost and 54.6% in terms of projects wins. In 4QFY25/FY25 company has won projects worth INR 290bn/ INR 920bn respectively.

* Project execution: The company has added 12,000MVA/ 37,515MVA of transformation capacity and 645ckm/ 2,540ckm of transmission lines during 4QFY25/FY25.

* Receivables: Total receivables continue to decrease- INR 34bn/ INR 44bn/ INR 48bn in 4QFY25/ 3QFY25/ 4QFY24. The company has done billing of INR 369bn in FY25 with realization of INR 383bn (103.8%).

* Land and RoW: Currently, 14 ISTS projects are facing delays due to prolonged RightofWay (RoW) issues, primarily due to the demand for higher compensation compared to state government-determined rates. Eight of the 14 affected projects belong to Power Grid (Exhibit-5). Recently, the Ministry of Power has issued supplementary guidelines significantly increasing the compensation for ISTS lines. (Execution more arduous than anticipated)

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