Capex momentum likely to improve for Power Grid Corporation of India

Power Grid Corporation of India (PGCIL) closed FY2025 with a flat profit of ₹15,500 crore. It was adversely impacted by the weak capitalisation of ₹9,000 crore in the year. The capex at ₹26,200 crore was up 110 per cent year-on-year (Y-o-Y) with the guidance of further improvement to ₹28,000 crore in FY26 and ₹35,000 crore in FY27.

 

Record project wins were also reported with ₹92,000 crore, and works-on-hand is ₹1.55 trillion. The management hopes capex improvement will translate to asset capitalisation of ₹28,000 crore in FY26.

 

The Q4FY25 results reported consolidated a net profit of ₹4,140 crore (down 0.6 per cent Y-o-Y), despite higher consultancy and telecom revenues of ₹520 crore (up 120 per cent Y-o-Y) and ₹300 crore (up 21 per cent Y-o-Y), respectively. There were losses in joint ventures (including EESL) of ₹29.6 crore, in comparison to ₹61.7 crore profit in Q4FY24. 

 

Transmission revenues of ₹11,500 crore rose 1.7 per cent Y-o-Y, owing to weak capitalisation, and were also impacted by lower prior-period income of ₹63.2 crore in Q4FY25 (₹140 crore in Q4FY24).

 

For FY25, PGCIL reported revenues of ₹46,000 crore (up 1.8 per cent Y-o-Y), operating profit of ₹39,300 crore (flat Y-o-Y) and net profit of ₹15,500 crore (down 0.3 per cent Y-o-Y). PGCIL incurred a capex of ₹8,600 crore (up 79 per cent Y-o-Y) in Q4FY25, taking FY2025 capex to ₹26,250 crore (up 110 per cent Y-o-Y). 

 

The capitalisation was weak at ₹1,590 crore (down 13 per cent Y-o-Y, down 53 per cent Q-o-Q in Q4FY25, with FY2025 capitalisation at ₹9,000 crore (up 18 per cent Y-o-Y), much lower than guidance of ₹18,000 crore. The weakness was due to challenges in land acquisition (owing to changes in government’s compensation policy) as well as poor manpower availability. 

 

PGCIL guidance for capitalisation of ₹25,000 crore in FY26 and ₹35,000 crore in FY27 is unchanged. Project wins are excellent at ₹92,000 crore in FY2025. Gross block stood at ₹2.9 trillion (up 5 per cent Y-o-Y), while projects-in-hand stood at ₹1.55 trillion.

 

The miss in capitalisation guidance by 50 per cent is a concern. While right-of-way and land acquisition issues have been key obstacles, management believes some of these challenges should recede as states adopt revised right-of-way compensation guidelines.

 

The medium-to-long-term pipeline is impressive including international projects. Of the current order book of ₹1.54 trillion, 30 per cent is attributable to regulated tariff management projects, where PGCIL earns a 15 per cent return on equity.

 

The transmission segment remained the primary revenue driver, contributing 96.95 per cent of consolidated segment profit while telecom segment contributed 1.96 per cent. In Q4FY25, the joint ventures reported a loss of ₹29 crore, taking the total loss to ₹110 crore for FY25. 

 

The company added 645 cable kilometres of transmission lines and 12,000 MVA of transformation capacity in Q4FY25. The transmission system had an availability rate of 99.8 per cent in FY25. The telecom division successfully added 75 new customers and reported income of ₹1,100 crore for the year.

 

PGCIL secured a record 24 TBCB projects in FY25. In Q4FY25, on a consolidated basis, capex was ₹8,600 crore and in FY25, capex of ₹26,300 crore was incurred. By FY28, capex could rise to ₹45,000 crore. While ₹9 per share was the dividend in FY25, management highlighted there could be dividend cuts going forward, given the capex plans.