The COVID-19 backed mayhem has hardly spared few stocks on Dalal Street. However, one positive paradigm is that even the Blue Chip companies, which usually offer an utmost high level of safety, are thrashed in the recent bloodbath and now hovering around down 40 to 60 percent at historically low valuations.
Today we are making you aware of new stock which is relatively safe compared to its peers and also been trying to hold strong on their grounds. Power Grid (CMP: Rs 150, Market Cap: Rs 82,500 crore) is one of the safe stocks to invest in these turbulent times.
Power Grid Corporation of India Limited is a Govt. promoted company engaged in the power transmission business with responsibilities for planning, implementation, operation and maintenance of Inter-State Transmission System and operation of National and Regional Load Dispatch Centers. The Company’s
segments include Transmission, Telecom, and Consultancy. The Transmission segment includes extra-high voltage/high voltage (EHV/HV) networks and grid management. It also owns EHV alternating current (AC) and HV direct current (HVDC) sub-stations. The Consultancy segment includes planning, design,
engineering, load dispatch, procurement management, operation and maintenance, financing and project management. The Telecom segment includes transmission infrastructure, enterprise services, and topologies.
Indian Investors hoping to profit by India’s huge development with increment in per-capita power utilization can tap Power Grid Corporation of India. High-profit yield, a consistent income, a sound pipeline of activities and the experience to execute huge tasks make Power Grid a decent long-term safe bet.
It has approximately 210 sub-stations. Its Smart Grid enables real-time monitoring and control of power systems. The Power Grid Corporation of India (POWERGRID) is a 56% state-owned, listed company and India’s largest power transmission utility, owning and operating 38% of India’s total transmission assets in terms of ckm.
Power Grid Corporation of India Consistent Growth and Stable Development
Force Grid requires capital for development, for each rupee of steady income it needs to place in some measure of capital, which whenever deployed in mega projects earns a handsome stable returns that could be in the scope of 14-17 percent relying upon the efficiencies of the activities. A year ago, the organization did a capex of near Rs 21800 crore and it has guided lower capex this year to about Rs 15000 crore and about Rs 10000 crore in the following budgetary years. With regards to the size of its present monetary record of about Rs 2 lakh crore, this implies a peripheral development in development capital and accordingly a restricted degree for development.
In any case, one significant point here to note is that not normal for what the market fears, development could even now shock on the upside thinking about the capital work in progress. The enormous capex attempted in the last few years is very nearly culmination. More than the capex, what makes a difference is a pace of authorizing of such tasks, in light of the fact that the development in profit and income originates from the projects well executed and not from the capex. For example, regardless of whether the capex is quieted for the current year at about Rs 15000 crore, the organization is relied upon to commission ventures of worth Rs 20000 crore right now contrasted with about Rs 19000 crore a year ago.
Power Grid Corporation of India Future Opportunities in Indian Transmission Industry
The all India transmission capex in the thirteenth plan is pegged at around Rs 1.3 lakh crore as against Rs 1.1 lakh crore. This means an outright development of around 18 percent in the multi-year time frame or 3.4 percent on a yearly premise. This development is far lower than the noteworthy development in all India transmission capex. However, tariff led competitive bidding projects have evolved as a mega opportunity.
Up until now, in the present fiscal, the organization has gained projects worth about Rs 10000 crore with an all-India piece of the pie of around 50-55 percent. Activities worth about Rs 33000 crore are yet to be granted before the finish of the monetary year 2021. In addition these ventures could be increasingly profitable as a result of the serious offering where Power Grid has price and financing advantage.
In addition, there are acceptable open doors in the departure of intensity created through the sustainable power source. The administration’s own evaluations propose a venture of near Rs 2.85 lakh crore to accomplish the objective of 45000 MW power from the sustainable power resources before the finish of 2030.
Power Grid Corporation of India Fund Raising & Cost Cutting Plans
The organization is likewise searching for monetizing resources and has gotten a command to raise a huge amount of funds worth Rs 10000 crore through the InvIT. The organization will pool a portion of its operational resources and offer it to long term investors through the InvIT Trust. Through this, the organization will have the option to raise some value at exceptionally ease, which can be sent in TBCB (tariff-based competitive bidding) ventures at a higher pace of return and along these lines make more an added incentive for investors.
Besides, the ongoing decrease in the overall interest rate cycle is uplifting news for Power Grid, as the organization can raise assets at a moderately low rate for the forthcoming business projects and get the advantage for debt which is maturing. The lower financing cost will cut down intrigue cost and even a small amount of that on an asset report size of about Rs 2 lakh crore implies a great deal as far as to reserve funds.
To summarize, while the development in earnings could be moderate, but since of the consistency in development, positive cash flows, well-controlled business, and superior dividend yield, Power Grid could provide a great deal of safety and security to your portfolio in unstable economic situations. It is a moderately sure thing but then can convey better than average returns at whatever point the recovery and optimism happen.
Power Grid Corporation of India Major Risks & Threats
A Big slowdown in government CAPEX spending in the transmission segment and an adjustment in guidelines especially relating to managed return could antagonistically hit its future prospects and development. Any hazard to the convenient adaptation of transmission resources would have an orientation on its financials and a negative impact on investors.
POWERGRID should now seek tenders with private players under the bidding based system. Predictable with most significant infrastructure projects across India also Internationally, most transmission ventures face development delays. New rivalry from the private companies should expand cost productivity in the construction operations of POWERGRID while giving a truly necessary lift to the development of India’s Mega Power Sector.
The transmission line business appreciates a more drawn out resource life of 50 years when contrasted with other greenfield infrastructure projects, for example, Roads and Highways. They likewise have higher installment security and lower counter gathering hazard since installments get through the Power Grid Corporation of India, which goes about as the focal transmission utility. Additionally, transmission ventures get duties dependent on the accessibility of transmission lines and not the quantum of intensity transmitted through it, which makes the benefit and safest option to buy the stocks from an investor’s point of view.
The guarded idea of its business will be an aid in the midst of market unpredictability. In addition, the organization is generally protected from the stuns of the coronavirus scourge but then is currently trading at appealing valuations.
A couple of days back, the Power Grid stock was exchanging at around Rs 200 and it has gone through a major sell-off to about Rs 140 per share. Is intriguing this profoundly cautious business is accessible at multiple times its Financial Year 2021 forecasted earnings, which is at the most minimal levels seen in reality.
In addition, at the present market value, it is offering a dividend yield of around 7.5 percent which is acceptable considering the strength in the business and predictable incomes.
In the past few quarters, Dalal Street has not been very bullish from Power Grid, considering the topping Capex in transmission and power. While this implies earnings growth would not be exceptionally high, there are sufficient motivations to accept that the organization could report 8-10 percent yearly development in the following two years which is useful for a utility business whose profits are fixed and incomes are tied up for the following 20-30 years.