PowerGrid Corporation surges 5%, hits record high in a volatile market

Overall, transmission bidding is likely to gather pace from FY23, which bodes well for PowerGrid Corporation, said Edelweiss in its analyst note.

Shares of PowerGrid Corporation hit a record high of Rs 223.35, on rallied 5 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. The stock of the state-owned electric utilities company surpassed its previous high of Rs 220.85 touched on January 27, 2022.

At 10:16 am; the stock was up 1.3 per cent at Rs 215.90, as compared to 0.30 per cent gain on the S&P BSE Sensex. The trading volume at the counter jumped 1.3 times with a combined 9.3 million equity shares changing hands on the NSE and BSE.

PowerGrid Corporation is India’s principal power transmission company, is operating primarily in inter-state transmission sector and is one of the largest transmission companies in the world. The company’s robust & large power transmission network (alongwith its subsidiaries acquired through tariff based competitive bidding) alongwith other business segments, i.e. telecom, consultancy etc.

Government of India under National Infrastructure Pipeline (NIP) has envisioned per capita consumption at 1,616 kWh by 2025. Further, Draft National Energy Policy (NEP) published by the Government in June 2017 envisages country’s per capita annual electricity consumption to increase to 2,911 - 2,924 kWh by 2040.

The renewable energy (RE) sector in India is emerging as a significant player in the grid connected power generation capacity and it is gearing up to play a much bigger role in achieving energy security in the years ahead and is an integral part of the energy planning process.

Growing power demand as a result of Government’s focus on improving the distribution sector- the last mile in power; addition of RE capacity; addition of capacities in conventional generation sources; cross-border linkages and adoption of new technologies to address challenges linked to RE integration are likely to be the growth drivers for power transmission in India.

The management had indicated projects worth Rs 23,000 crore-plus (mostly tariff-based competitive bidding or TBCB) are likely to come up for bidding in FY23 as the RE projects picks up.

“Overall, transmission bidding is likely to gather pace from FY23, which bodes well for Power Grid Corporation. Furthermore, the company is likely to explore the buyback option as its leverage has come down (D/E now at 1.6x). This along with a 5 per cent dividend yield and 1.6x P/BV makes it an attractive play,” analysts at Edelweiss Securities said. The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 242 per share.