India's Powergrid banks on asset monetisation to weather order drought

The utility is eyeing to execute its $1.39b plan by March 2020.

India’s largest transmission utility, Powergrid Corp, is expected to get a boost in earnings for H2 2020, thanks to its $1.39b (INR100b) asset-monetisation plan through Infrastructure Investment Trust InvIT by March 2020, according to a Maybank Kim-Eng note. It could provide an avenue for Powergrid to fund incremental capex.

The said plan will utilise InvIT’s cash flows for future growth and higher DPS. The report also noted that the asset-monetisation plan, which form 5% of its gross block, will be used to bump up dividend payouts from 44% and provide capital for new projects.

Furthermore, Powergrid Corp is also expected to get a boost from its Raigarh Pugalur line, which is awaiting right-of-way approval. Maybank Kim-Eng said that it may contribute 40% to FY2020E transmission line commissioning forecast of $3.06b (INR220b).

Powergrid also posted an order book of $9.18b (INR660b) which is expected to provide double-digit earnings-growth visibility for the next three years.

“Yet, the market is worried about Powergrid’s growth rates as it has not received major orders in the last 1-1.5 years. We highlight that the Ministry of Power is working on tenders for the laying of transmission lines for 66.5GW or INR430b worth of renewable power in the next 18-24 months. Tender awards will allay investor concerns,” said Vishal Periwal, an analyst at Maybank Kim-Eng.