8/8/2019 Power Grid FPO Analysis

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PF / IPON / 08112010 / 639

8 November 2010

1Power Grid Corporation of India LtdCall us at 1800 425 8282

FPO Analysis

Recommendation: SubscribeAbout the Issuer

Issue Highlights

Issue Open: 09/11/2010Issue Close: 12/11/2010Issue Size (Shares): 84, 17, 68, 246 shares

Issue Size (Rs.): 7155.03 crs to 7575.92crsPrice Band: Rs.85 to Rs.90Face Value: Rs.10Bid Size:65

Issue Allocation

Employee Reservation: 33, 89, 600

Net Issue To public: 83, 83, 78, 646

QIB: 41, 91, 89, 323

Non Institutional: 12, 57, 56, 797

Retail: 29, 34, 32, 526

Share Holding Pattern

Pre Issue Post Issue

EquitySharesoutstanding

4,208,841,230 4,629,725,353

BRLMs:

SBI CAPITAL MARKETS LIMITEDGOLDMAN SACHS (INDIA) SECURITIESPRIVATE LIMITED

ICICI SECURITIES LIMITEDJP MORGAN INDIA PRIVATE LIMITED

Registrar:

KARVY COMPUTERSHARE PRIVATE LIMITED

Bankers to the Issue:

ICICI BANK LIMITEDUNION BANK OF INDIAIDBI BANK LIMITEDYES BANK LIMITED

HDFC BANK LIMITED

AXIS BANK LIMITEDINDUSIND BANK LIMITEDKOTAK BANK LIMITEDSBI

Listing:

NSE & BSE.

Brief Introduction:

Power grid owns and operates 95% of Indias interstate andinterregional Electric power transmission systems. It was ranked as

the third largest transmission utility by World Bank in 2009. It wasconferred the status of Navratna in 2008 by Government of India. Asa Navratna company Power grid has more autonomy to take up newprojects without Government approval. It has received the highest

annual performance rating of Excellence from Government of Indiain each year since fiscal year 1994.In addition to Power transmissionbusiness, Power Grid has got diversified into consultancy business andtelecommunication sector also. In spite of having presence inconsultancy business and telecommunication sector powertransmission is the chief contributor to the revenues of Power grid.

In Fiscal 2010 transmission and transmission related activitiesconstituted 92.3% of Power grid total revenue and the balance came

from consultancy and telecommunication related activities.

Investment Rationale:

Power grids near monopoly in Indias interstate and interregionalElectric power transmission, its operational efficiency, capex plans,visibility of earnings and its past performance make it a good choicefor inclusion in the portfolio of investors. However as it operates in aregulated sector it is more suitable for conservative investors.

Near Monopoly in power transmission:

Power grid is Indias principal power transmission company, owningand operating more than 95% of Indias Inter state and Inter regionalpower transmission system. As at September 30, 2010, it operated a

network of about 79,556 circuit kilometers of interstate transmissionlines, 132 EHV AC and HVDC substations with transformation capacityof about 89,170 MVA and during the six month period endedSeptember 30, 2010 it transmitted approximately 202.59 billion unitsof electricity, representing approximately 51% of all the powerGenerated in India.

Operational Efficiency:

Power grid has maintained an average availability of over 99% for ourtransmission system since Fiscal 2002 and it has not had a major griddisturbance, meaning an interruption affecting an entire region or aninter-regional transmission system, since January 2003. Since Fiscal1994, it has been rated Excellent by the GoI on an annual basis as aresult of its achievement of performance targets, which include

demonstration of high operational efficiencies, set for it in memorandaof understanding that it agrees to annually with the GoI.

Capacity Expansion:

During the Eleventh Five Year Plan, up to March 31,2010, It invested254,405.2 million to further develop the national grid, including

expanding interregional transmission systems and developing systemstrengthening schemes and transmission systems for the evacuationof power from central sector generation projects and UMPPs. Based ongeneration capacity targeted under the Eleventh Five Year Plan, Itplans on capital expenditure of an aggregate amount up to 295,594.8million for expansion in Fiscal 2011 and Fiscal 2012.

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PF / IPON / 08112010 / 639

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2Power Grid Corporation of India LtdCall us at 1800 425 8282

FPO Analysis

Financial Analysis

Objects of the Issue

3145.343589.854614.82

6579.817127.45

0

2000

4000

6000

8000

Sales(in crores)

2690.3 2988.074250

6101.58 5871.17

0

20004000

6000

8000

EBITDA

1008.931229.37

1448.471690.61

2040.94

0

500

1000

1500

2000

2500

Netprofit

Sales:

Powergrid sales increased from 3145.34 crs in 2006 march to7127.45 cr in 2010 march at a CAGR of 17.7751%.

EBITDA:

Power grids EBITDA increased from 2690.3 crs in 2006 to5871.17 crs in 2010 at a CAGR of 16.892

Net Profit:

Power grids Net profit increased from 1008.93 crs in 2006 to2040.94 crs in 2010 at a CAGR of 15.13%.

The objects of the Fresh Issue are to:

(a) To meet the capital requirements for theimplementation of certain identified transmissionprojects

(b) General corporate purposes.

Key Strategies:

Expand and strengthen our transmission networkincluding the adoption of a higher voltage levelsystem

Maintain efficient operating performance bymodernising our infrastructure and services and bymaintaining industry best practices.

Continue to expand telecommunications infrastructureoperations

Continue to expand consultancy business

Expand corporate social responsibility initiatives

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PF / IPON / 08112010 / 639

8 November 2010

3Power Grid Corporation of India LtdCall us at 1800 425 8282

FPO Analysis

SUMMARY STATEMENT OF CONSOLIDATED PROFIT AND LOSS-RESTATED (in crs.)

Mar '06 Mar '07 Mar '08 Mar '09

Sales Turnover 3,145.34 3,589.85 4,614.82 6,675.85

Other Income 408.97 492.46 466.71 352.69

Total Income 3,554.31 4,082.31 5,081.53 7,028.54

Total Expenses 620.80 641.59 869.74 1,103.85

Operating Profit 2,524.54 2,948.26 3,745.08 5,572.00

Profit on Sale of Assets -- -- -- --

Profit on Sale of Investments -- -- -- --

Gain/Loss on Foreign Exchange -- -- -- --

VRS Adjustment -- -- -- --

Other Extraordinary Income/Expenses -- -- -- --

Total Extraordinary Income/Expenses -- -- -- -70.36

Tax On Extraordinary Items -- -- -- --

Net Extra Ordinary Income/Expenses -- -- -- --

Gross Profit 2,933.51 3,440.72 4,211.79 5,924.69

Interest 947.45 1,140.42 1,339.55 2,532.09

PBDT 1,986.06 2,300.30 2,872.24 3,322.24

Depreciation 744.33 827.58 959.65 1,093.97

Depreciation On Revaluation Of Assets -- -- -- --

PBT 1,241.73 1,472.72 1,912.59 2,228.27

Tax 160.06 252.63 282.06 537.66

Net Profit 1,081.67 1,220.09 1,630.53 1,690.61

Prior Years Income/Expenses -72.74 9.28 -182.06 --

Depreciation for Previous Years WrittenBack/ Provided

-- -- -- --

Dividend -- -- -- --

Dividend Tax -- -- -- --

Dividend (%) -- -- -- --

Earnings Per Share 2.99 3.19 3.87 4.02

Book Value -- -- -- --

Equity 3,623.44 3,826.22 4,208.84 4,208.84

Reserves 6,378.55 7,138.66 9,298.53 10,414.75

Face Value 10.00 10.00 10.00 10.00

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PF / IPON / 08112010 / 639

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4Power Grid Corporation of India LtdCall us at 1800 425 8282

FPO Analysis

SUMMARY STATEMENT OF CONSOLIDATED ASSETS AND LIABILITIES-RESTATED (in crs.)

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Sources of Funds

Total Share Capital 3,584.63 3,787.41 4,208.84 4,208.84 4,208.84

Equity Share Capital 3,584.63 3,787.41 4,208.84 4,208.84 4,208.84

Share Application Money 38.81 38.81 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 6,378.55 7,138.66 9,545.33 9,325.14 11,733.06

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 10,001.99 10,964.88 13,754.17 13,533.98 15,941.90

Secured Loans 10,406.62 13,053.30 17,552.13 25,288.25 31,345.78

Unsecured Loans 4,619.51 6,272.20 4,711.35 3,177.18 5,483.46

Total Debt 15,026.13 19,325.50 22,263.48 28,465.43 36,829.24

Total Liabilities 25,028.12 30,290.38 36,017.65 41,999.41 52,771.14

Application of Funds

Gross Block 24,879.22 29,004.09 35,417.14 40,319.33 43,202.28

Less: Accum. Depreciation 6,372.01 7,198.56 8,061.94 9,190.89 11,141.02

Net Block 18,507.21 21,805.53 27,355.20 31,128.44 32,061.26

Capital Work in Progress 6,409.89 9,450.93 8,758.09 13,286.00 20,422.18

Investments 2,139.41 1,967.00 1,736.22 1,592.83 1,453.22

Inventories 180.24 184.13 248.22 297.57 344.90

Sundry Debtors 325.60 490.48 1,100.50 1,373.56 2,214.86

Cash and Bank Balance 0.63 167.21 12.50 53.06 3,277.64

Total Current Assets 506.47 841.82 1,361.22 1,724.19 5,837.40

Loans and Advances 1,647.42 1,651.64 2,185.21 2,928.01 3,789.92

Fixed Deposits 588.42 1,029.61 1,853.09 2,375.82 0.00

Total CA, Loans & Advances 2,742.31 3,523.07 5,399.52 7,028.02 9,627.32

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 4,113.03 5,635.64 5,885.98 8,851.56 8,338.11

Provisions 678.40 833.37 1,352.59 2,189.82 2,458.29

Total CL & Provisions 4,791.43 6,469.01 7,238.57 11,041.38 10,796.40

Net Current Assets -2,049.12 -2,945.94 -1,839.05 -4,013.36 -1,169.08

Miscellaneous Expenses 20.73 12.86 7.19 5.50 3.56

Total Assets 25,028.12 30,290.38 36,017.65 41,999.41 52,771.14Contingent Liabilities 6,207.85 6,909.61 5,754.66 22,265.47 21,146.82

Book Value (Rs) 2,779.42 28.85 32.68 32.16 37.88

IMPORTANT: Please read the Red Herring Prospectus of this issue carefully before investing in the same.

Report prepared byPradeep Kumar S pradeep.s@karvy.com, Phone No. 040 4467-7542

Disclaimer

The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our

analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is forpersonal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not

be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position andusing such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please

note that neither Karvy nor Karvy Stock Broking nor any person connected with any associate companies of Karvy accepts any liability arising from theuse of this information and views mentioned in this document.