FPO Analysis

PF / IPON / 08112010 / 639

8 November 2010
About the Issuer
Recommendation: Subscribe Brief Introduction:
Issue Highlights Power grid owns and operates 95% of India’s interstate and
interregional Electric power transmission systems. It was ranked as
Issue Open: 09/11/2010 the third largest transmission utility by World Bank in 2009. It was
Issue Close: 12/11/2010 conferred the status of Navratna in 2008 by Government of India. As
Issue Size (Shares): 84, 17, 68, 246 shares a Navratna company Power grid has more autonomy to take up new
Issue Size (Rs.): 7155.03 crs to 7575.92crs projects without Government approval. It has received the highest
Price Band: Rs.85 to Rs.90 annual performance rating of “Excellence” from Government of India
Face Value: Rs.10 in each year since fiscal year 1994.In addition to Power transmission
Bid Size:65 business, Power Grid has got diversified into consultancy business and
telecommunication sector also. In spite of having presence in
Issue Allocation consultancy business and telecommunication sector power
Employee Reservation: 33, 89, 600 transmission is the chief contributor to the revenues of Power grid.
Net Issue To public: 83, 83, 78, 646
QIB: 41, 91, 89, 323 In Fiscal 2010 transmission and transmission related activities
constituted 92.3% of Power grid total revenue and the balance came
Non Institutional: 12, 57, 56, 797
from consultancy and telecommunication related activities.
Retail: 29, 34, 32, 526
Investment Rationale:
Share Holding Pattern
Power grid’s near monopoly in India’s interstate and interregional
Pre Issue Post Issue Electric power transmission, its operational efficiency, capex plans,
Equity 4,208,841,230 4,629,725,353 visibility of earnings and its past performance make it a good choice
Shares for inclusion in the portfolio of investors. However as it operates in a
outstanding regulated sector it is more suitable for conservative investors.

BRLMs: Near Monopoly in power transmission:

SBI CAPITAL MARKETS LIMITED Power grid is India’s principal power transmission company, owning
GOLDMAN SACHS (INDIA) SECURITIES and operating more than 95% of India’s Inter state and Inter regional
PRIVATE LIMITED power transmission system. As at September 30, 2010, it operated a
ICICI SECURITIES LIMITED network of about 79,556 circuit kilometers of interstate transmission
JP MORGAN INDIA PRIVATE LIMITED lines, 132 EHV AC and HVDC substations with transformation capacity
of about 89,170 MVA and during the six month period ended
Registrar: September 30, 2010 it transmitted approximately 202.59 billion units
of electricity, representing approximately 51% of all the power
KARVY COMPUTERSHARE PRIVATE LIMITED Generated in India.

Bankers to the Issue: Operational Efficiency:

ICICI BANK LIMITED Power grid has maintained an average availability of over 99% for our
UNION BANK OF INDIA transmission system since Fiscal 2002 and it has not had a major grid
IDBI BANK LIMITED disturbance, meaning an interruption affecting an entire region or an
YES BANK LIMITED inter-regional transmission system, since January 2003. Since Fiscal
HDFC BANK LIMITED 1994, it has been rated “Excellent” by the GoI on an annual basis as a
AXIS BANK LIMITED result of it’s achievement of performance targets, which include
INDUSIND BANK LIMITED demonstration of high operational efficiencies, set for it in memoranda
KOTAK BANK LIMITED of understanding that it agrees to annually with the GoI.
SBI
Capacity Expansion:
During the Eleventh Five Year Plan, up to March 31,2010, It invested
254,405.2 million to further develop the national grid, including
Listing: expanding interregional transmission systems and developing system
NSE & BSE. strengthening schemes and transmission systems for the evacuation
of power from central sector generation projects and UMPPs. Based on
generation capacity targeted under the Eleventh Five Year Plan, It
plans on capital expenditure of an aggregate amount up to 295,594.8
million for expansion in Fiscal 2011 and Fiscal 2012.

Call us at 1800 425 8282 Power Grid Corporation of India Ltd 1

 FPO Analysis
PF / IPON / 08112010 / 639

8 November 2010 Key Strategies:

Expand and strengthen our transmission network
including the adoption of a higher voltage level
system

Maintain efficient operating performance by

modernising our infrastructure and services and by
Sales(in crores) maintaining industry best practices.
6579.81 7127.45
8000
4614.82 Continue to expand telecommunications infrastructure
6000 3145.34 3589.85
operations
4000
2000
0 Continue to expand consultancy business

Expand corporate social responsibility initiatives

Financial Analysis

EBITDA Sales:
Powergrid sales increased from 3145.34 crs in 2006 march to
8000 6101.58 5871.17
4250 7127.45 cr in 2010 march at a CAGR of 17.7751%.
6000
4000 2690.3 2988.07
2000 EBITDA:
0 Power grid’s EBITDA increased from 2690.3 crs in 2006 to
5871.17 crs in 2010 at a CAGR of 16.892

Net Profit:
Power grid’s Net profit increased from 1008.93 crs in 2006 to
2040.94 crs in 2010 at a CAGR of 15.13%.

Objects of the Issue

The objects of the Fresh Issue are to:

Netprofit (a) To meet the capital requirements for the

implementation of certain identified transmission
2500 2040.94 projects
2000 1448.47 1690.61
1500 1008.93 1229.37 (b) General corporate purposes.
1000
500
0

Call us at 1800 425 8282 Power Grid Corporation of India Ltd 2

 FPO Analysis
PF / IPON / 08112010 / 639

8 November 2010

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 Written
-- -- -- --
Back/ 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

Call us at 1800 425 8282 Power Grid Corporation of India Ltd 3

 FPO Analysis
PF / IPON / 08112010 / 639

8 November 2010

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 52,771.14
Contingent 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 by Pradeep Kumar S – pradeep.s@karvy.com, Phone No. 040 – 4467-7542

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Call us at 1800 425 8282 Power Grid Corporation of India Ltd 4