@Shrish_Vaze @Mayank_Shekhar_Dwive
I tried calculating dividend per share from cash flow of SPVs published in their report. Next 10 year yield without dipping into reserves is on average 5.62% (SPV giving 90% CF) - 7.02% (SPV giving 100% CF).
Where as 10 year bond yield is around 7.2%, but we can expect some acquisition to happen in next 10 years.
Let me know if I am making any mistake.
Thank you for sharing with us.
Your analysis is superb wrt to the dividend. However , considering the long span of 10 years and the recent concall , Following are my few points to ponder:
I believe the management has spoken during the concall , that they are not looking for further acquisitions apart from the current , wherein they will acquire till 100% of all current assets.
Mangement has clarified that dividend per share per year will gradually fall.
IMO , with no futuristic growth plan and lower divided per share , manegement need to express clearly their growth plan for next 5 years.
Do correct me if i have a wrong understanding of the company.
I think , holding just for dividend is a waste of capital .
Disc : Sold , due to lack of growth vision. Although earned good dividend from listing.
Hi. Thanks for sharing this detailed analysis. I see that you have used H1FY22 valuation report for this, I think the FY22-23 one would provide a better estimate as the NAV declined according to this report as a result of the increase in WACC.
POWERGRID gets an important project worth almost 21000 crore on cost plus basis.
Hi all, I’ve just done an updated valuation on Powergrid, and it seems to be a compelling long term investment at current prices.
Powergrid (NSE: POWERGRID) owns and operates 45% of India’s electricity transmission network. It meets all the criteria for a good long term investment:
Please let me know your thoughts / feedback
Valuation model (base case): 20230917_PowerGrid_analysis_ to share - Google Sheets
To get a sense of each project’s unit economics, I also looked at the ROEs on their InvIT projects based on FCF and equity value:
disc - invested, this is not a buy / sell recommendation
Nice Analysis!
Even though its doing 45% of the total power transmission in India, and with 85% of inter-regional capacity - why is the “Tariff based competitive bidding” still less than 10% of its revenue?
I understand profitability might be lower in this revenue model but would it not also indicate that its able to beat competition and gain market share. Correct me if wrong, but this is the only way i see it can break from the dependance on the CERC tariff regulations every 5 years…
Hi Mayank, thanks for the feedback! The main reason that RTM is a large part of revenue is that TBCB was introduced only in 2011, while many of the current transmission projects run by Powergrid were commissioned earlier. Also , even now, the government uses RTM route for many large or sensitive projects and also when they was to speed up the commissioning.
From the annual report, they state 7k ckm of transmission lines and 30k MVA transformers are the aggregate TBCB assets. Overall transmission lines are 174k ckm and transformers are 500k MVA. So, 94%~96% of assets are under RTM at the moment.
The TBCB route would have reduced dependency on CERC tariffs, but faces different kinds of risks, such as very high maintenance or cost inflation. In the RTM model, it is “cost-plus”, so this risk is not material. Powergrid is pursuing both types of projects. The company’s MD mentioned during the last concall that Powergrid is targeting to win 50% or more of all TBCB projects until 2032. However, he also mentioned stiff private competition, with 5~8 other bidders competing for the contracts.
Going forward, TBCB share would probably increase, but not sure by how much. In the current “work-in-hand” projects, 74% of them are RTM and 26% are TBCB.
This may be a rerating candidate -
