Equity Research Report on

POWER SECTOR

Presented By
Team: Fukats

Members
Mahesh Hase
Abhisek Salecha

NMIMS University

0
 INDEX

SR.
TOPIC PAGES
NO

1 INTRODUCTION 2

2 INDUSTRY STRUCTURE 4

3 DEMAND SUPPLY ANALYSIS 8

4 INDUSTRY PROFITABILITY ANALYSIS 11

5 OUTLOOK: KEY GROWTH AND VALUE DRIVERS 13

6 COMPANY ANALYSIS 17

6.1 NTPC 18

6.2 TATA POWER 20

6.3 RELIANCE INFRASTRUCTURE 22

6.4 POWER GRID CORPORATION OF INDIA 24

7 OUTPERFORMING SENSEX 26

8 REFERENCES 27

INTRODUCTION

Power is a critical infrastructure in today’s time and over the past few years; the Government of India has
strived hard to meet the demand for this basic requirement of its people. Post the Electricity Act, 2003, which

1
provided an enabling framework for accelerated and more efficient development of the sector significant
reforms have been witnessed till date.
The power sector in India has seen a flurry of activity in the recent times, with many power projects announced
by both the private and public sector. The government’s push on infrastructure has been through higher focus
on the power sector, in generation, transmission and distribution segments. In the 11 th five year plan, the
government has envisaged creation of fresh generation capacity of 78,700 MW.
The Common Minimum Program of the government of India has envisaged 100% household electrification
‘Power for All’ by 2012.
Installed generation capacity (as on 30-06-09)

All India Annual Per capita Consumption of Electricity

750
700
Per Capita 650
Consumption 600
(KWh) 550
500
450
400
2002- 2003- 2004- 2005- 2006- 2000
03 04 05 06 07 7-08
Year Series1

 India has the fifth largest electricity generation capacity in the world with Low per capita consumption at
606 units; less than half of China

 Transmission & Distribution network of 5.7 million circuit km – the 3rd largest in the world

 Thermal plants at present account for 64% (96044 MW) of the total power generation, hydro-electricity
plants contribute 25% (36916 MW) and the rest comes from nuclear and wind 
 100% FDI permitted in Generation, Transmission & Distribution - the Government is keen to draw private
investment into the sector.

 Policy framework in place: Electricity Act 2003 and National Electricity Policy 2005.

2
 Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital
goods import duties on mega power projects (above 1,000 MW generation capacity).

 With the coming of Electricity Act 2003, the licensing requirements have been reduced, as the generation
company will be free to enter distribution business and vice-a-versa
 Currently central institutions like National Thermal Power Corporation (NTPC) and the State Electricity
Boards (SEBs) dominate the power scene in India.
 Average transmission and distribution losses (T&D) exceed 25% of total power generation compared to
less than 15% for developing economiesAccording to Central Electricity Authority (CEA), by 2012, the
energy requirement is expected to increase by 31.9% to reach 975,222 MU and peak demand is expected
to increase by 44.3% to reach 157,107 MU
 Speedy environmental clearance: The Ministry of Environment and Forests has agreed to delegate the
powers to States for environmental clearance of:
- all co-generation plants and captive plants up to 250 MW
- Coal based plants up to 500 MW using fluidized technology subject to sensitive areas restrictions
- Power stations up to 250 MW on conventional technology.

 Regulatory bodies: The Government of India has promulgated Electricity Regulatory Commission Act, 1998
for setting up of Independent regulatory bodies as Central Electricity Regulatory Commission (CERC) and
the State Electricity Regulatory Commissions (SERC) at the Central and the State Levels respectively.
These regulatory bodies would primarily look into all aspects of tariff fixation and matters incidental thereto.
Company TTM EPS P/E 2009 P/E 2008
NTPC 9.01 19.7 21.2
Power Grid Corporation 3.99 24.1 23.6
Neyveli Lignite 6.46 1.8 16.1
Jaiprakash Hydro-Power 5.06 5.4 9.4
Torrent Power 7.13 9.8 13.2
Tata Power 32.11 20.6 23.0
Reliance Infrastructure 48.47 10.0 23.7
BHEL 59.27 23.8 31.6

(Note: P/E values are TTM)

INDUSTRY STRUCTURE

The power sector can be largely segregated into four different categories on the basis of type of players in the
industry. These include:

3
 Central Government Corporations: Corporations like the National Thermal Power Corporation (NTPC),
Nuclear Power Corporation, National Hydro Electric Power Corporation (NHPC), and some other smaller
players. 
 State Government Corporations: Various state electricity boards and other corporations that have been
promoted by the respective governments.
 Private Sector Licensees: In the private sector, companies had been given licences to carry on
generation and distribution activities
 Independent Power Producers: The Independent Power Producers (IPPs) are the companies that have
been given a nod to set up generation capacities.

Regulatory structure: Various Acts govern the power sector which provide for the tariff determination
procedure for companies. It also defines the various terms such as reasonable returns and capital base.
However, approvals of tariffs rest with the respective governments.

Captive Addition Target during 11th Plan

 Recognizing that electricity is one of the key drivers for rapid economic growth and poverty alleviation. As
per Census 2001, about 44% of the households do not have access to electricity.
 Shortage was expected as projects have not come on schedule. Against target of 11,000MW of capacity
addition in 2008-09, India has achieved only 3,500MW. Also Scenario of 2009-10 can be explained by
following table

4
 Country’s total installed capacity of 150323 MW, only around 85,000MW is operational at any
given point of time. India plans to add 78,577MW by 2012, but as per mint report on 28 August
2007 that it could miss this target by up to 60% because of shortage of equipment and contractors

 India’s track record in adding power generating capacity is poor: in the five years to 2007, the
country added 20,950MW of capacity, against a target of 41,110MW. Scenario of 2009-10 can be
explained by following table

Electricity Generation Target/Achievement (2009-10)

 The power generation capacity has consistently fallen short of the requirement. Further, capacity additions
have seldom managed to keep up with plan targets. Adding to the inadequate generation capacity is the
problem of poor capacity utilization. This has led to a massive shortage situation. The track record of the
companies in project implementation has been quite dismal.
 The financial health of most of the State Electricity Boards is very bad. This has led to their inability in
adhering to payment schedules. This is a major cause of delay as most promoters are looking for
guarantees or assurances before embarking on the projects.

All India Thermal PLF (%)

 Transmission and distribution (T&D) losses is another area, which has posed a lot of problems to the
power sector in the country. Massive pilferage is one reason for it. Aiding in this process is the fact that
majority of transmission in the country is low voltage transmission, which helps pilferage. Inadequate
metering facility and poor collection rates too contribute to the problem.

All India Transformation, T&D and AT&C losses

5
 For companies generating power, fuel is the single largest component of the cost structure. It accounts
for as much as 50% of the cost of electricity produced. Operating expenses too are very high for these
companies.
 Being a capital-intensive industry, interest and depreciation costs are understandably high. Net margins for
companies have typically been around 10% for the larger companies.
 Typically, all the license holders have been relying on other external sources such as the state electricity
boards or other companies for additional requirements. Thus, the cost at which this additional requirement
is sourced is an important factor.

Average cost of Power Supply and Average realization (paise/KWh)

 According to data from CEA, the western region is the worst affected in the country with around 19% power
shortage, with states such as Maharashtra and Gujarat reeling under a shortage of 23.7% and 23.4%,
respectively in 2008-09.The northern region has a shortage of 15.7% with Uttar Pradesh having a 22%
shortage in 2008-09.

6
7
 DEMAND SUPPLY ANALYSIS

Huge Power Shortage Across India

The Indian power sector has historically been characterized by energy shortages which have been
increasing over the years. In the period from April 2008 to February 2009, peak energy deficit was estimated to
be at 13.8% and normative energy deficit was estimated to be 11.0%.The problem of sparse generation
capacity has been aggravated by the insufficient T&D infrastructure, regulations in the power sector and
inefficient state electricity boards (SEBs).
Demand Supply Mismatch:
Year ENERGY(MU) PEAK(MW)
Requirement Availability % Shortage Demand Met %Shortage
2002-03 5,45,674 4,97,589 8.8 81,492 71,547 12.2
2003-04 5,59,264 5,19,398 7.1 84,574 75,066 11.2
2004-05 5,91,373 5,48,115 7.3 87,906 77,652 11.7
2005-06 6,31,554 5,78,819 8.4 93,255 81,792 12.3
2006-07 6,90,587 6,24,495 9.6 1,00,715 86,818 13.8
2007-08 7,39,345 6,66,007 9.9 1,08,866 90,793 16.6
2008-09 774324 689021 11 109809 96685 12
Source: Ministry of Power

The government has undertaken an ambitious initiative under which it strives to provide “power for all by 2012”.
Accordingly, the Xth 5-Year Plan (FY03-07) witnessed an increase of 23,250MW (57% of the targeted) in
capacity. Going forward, the XIth Plan (FY08-12) envisages a capacity addition of 66,463MW and the XIIth
Plan (FY13-17) a capacity addition of 86,500MW.
Investment Argument:

8
The huge power shortage in India is driving power utilities to aggressively add power capacity. Moreover,
efficient manufacturers of power are moving towards merchant power plants as these plants offer unregulated
returns. Also, the government is pushing for UMPPs for huge capacity additions at lower tariffs to consumers.
Similarly, PGCIL is driving expansion of inter-regional transmission capacity to improve regional connectivity of
power through own and private participation. However, progress of reforms on distribution remains slow with
only one circle in Maharashtra being privatized so far. We believe power utilities will witness explosive growth
with their huge generation as also transmission capacity addition plans

Many projects have been planned but due to slow regulatory processes, especially in the
distribution segment, the supply is far lesser than demand. Currently, India needs to double
Supply
its generation capacity in the next 7 to 10 years to meet the potential demand.

The long-term average demand growth rate is 6% to 7% per annum and is expected to
Demand grow at faster rate in the future.

Barriers to entry are high, especially in the transmission and distribution segments, which
are largely state monopolies. Also, entering the power generation business requires heavy
Barriers to entry investment initially. The other barriers are fuel linkages, payment guarantees from state

governments that buy power and retail distribution license.

Bargaining Not very high as government controls tariff structure.

power of
suppliers
Bargaining power of retail customers is low, as power is in short supply. However
Bargaining
government is a big buyer and payment by government can be erratic, as has been seen in
power of
the past.
customers

Not high currently. The Electricity Act 2003 aims to encourage investments, thereby
Competition
increasing competition.

In FY08, the total power generation figure for the

country stood at 704 bn units as compared to 663 bn
units in FY07, thus representing a growth of 6.3% YoY.
This was largely on the back of higher capacity addition

9
and improved plant load factor. However, owing to sustenance in strong demand for electricity, the shortages
are remaining on higher side. 

In order to bridge this gap and keep up with the increasing demand, an estimated capacity addition of 14507
MW units is required by 2010. This translates into an investment opportunity including investment on
transmission and distribution; more than 30% of this investment is expected to come from the private sector.

Reasons for Increase in Gap of Demand-Supply

 The power sector at this juncture is plagued by a number of problems. Some of these being inadequate
generation capacities, poor capacity utilization, very high transmission losses and poor project
implementation.
 Plant load factor (PLF) in most of the plants has been very low compared to the power plants in other parts
of the world.
 The sector fortunes have also been bogged down by resource constraints.
 In India electricity tariffs are a politically sensitive issue and often create turmoil. This is the reason for poor
performance of most SEBs and has also resulted in serious financial problems.

10
 INDUSTRY PROFITABILITY ANALYSIS

Investment Opportunities

Some of the significant programs of the government which translates into investment opportunities both for the
public as well as the private sector are as follows:
 10 Ultra Mega Power Projects (UMPPs) each with a capacity of 4,000 MW and investment of over
Rs16,000 crore. Of these four has already been awarded and six are in the pipeline.

 In Hydro projects, 77 schemes have been identified with a total of 33,000 MW capacity additions.

 The National Grid Program envisages adding 60,000 km of transmission network by 2012 with a total
investment of $15.18bn. Of these 28.5% of the investment has to come from private sector.

Government Initiatives
 Captive power plants have been freely permitted.

 Open access to transmission encouraging competition amongst generators and distributors and trading in
power from surplus to deficit regions.

 Generating companies permitted to distribute electricity in rural areas

 Automatic approval for 100% foreign equity is permitted in generation, transmission, distribution and
trading in power sector without any upper ceiling on the quantum of investment.

 Government's increased focus on private public partnership (PPP) for power projects provides tremendous
opportunities for the private companies.

Investment Plans of Corporates

The corporate sector has been gearing to grab the opportunities in the power sector. According to an
Assocham study, of the total $132.13bn corporate investment announced during the first half of 2008,
maximum were from the power sector with 33.9% share. Few significant examples are:
 Reliance Power plans to invest $12.5bn in the next five years to add 15,000 MW of capacity.
 Videocon plans to invest $5.21bn in setting up 5,000MW thermal power projects.

11
 Lanco plans to invest $3.75bn in setting up 3000MW hydro-power project by 2015.

 Essar plans to invest $1bn in setting up a 1200MW of power project.

 Bharat Heavy Electricals (BHEL) in collaboration with Bharat Electronics plans to invest $1.23bn in setting
up an integrated photovoltaic facility.

Mr Bharatsinh Solanki minister of state for power in his inaugural address at the India Electricity 2009 in
New Delhi said that the power Sector in India offers immense opportunities for business to all the stakeholders.
Mr Solanki said that to fulfill its power requirement of 315 to 335 GW by 2017, India will require a generating
capacity of 415 to 440 GW, after adjusting for plant availability and a modest 5% spinning reserve. This implies
a tripling of installed capacity from the current level of about 140 GW which in turn translates into annual
addition of 20 to 40 GW. This is 5 fold to 10 fold the GW which was achieved in the last 10 years.
He said that best efforts are being made to plan well in advance for power projects targeted in the 11th and
12th plan periods. Government is also extending active support to project developers to ensure streamlined
implementation of projects. Capacity addition in the area of Project Management has also been identified as an
area of utmost importance. We look forward to an immediate action from the industry on this front.

Key Indicators Of Profitability:

 Large demand-supply gap: All India average energy shortfall of 7% and peak demand shortfall of 12%
 The implementation of key reforms is likely to foster growth in all segments:
o Unbundling of vertically integrated SEBs
o “Open Access” to transmission and distribution network
o Distribution circles to be privatised
o Tariff reforms by regulatory authorities
 Opportunities in Generation for:
o Coal based plants at pithead or coastal locations (imported coal)
o Natural Gas/CNG based turbines at load centres or near gas terminals
o Hydel power potential of 150,000 MW is untapped as assessed by the Government of India
o Renovation, modernisation, up-rating and life extension of old thermal and hydro power plants 
 Opportunities in Transmission network ventures - additional 60,000 circuit km of transmission network
expected by 2012 
 Opportunities in Distribution through bidding for the privatisation of distribution in thirteen states that
have unbundled/corporatised their State Electricity Boards – expected to take place over the next 2-3

12
 years
 
Total investment opportunity of about US$ 200 billion over a seven year horizon

13
 OUTLOOK: KEY GROWTH AND VALUE DRIVERS

The track record of the country in tapping other energy sources such as nuclear power, hydel power, wind
energy, etc. has been quite dismal. The country's power sector thus continues to be largely driven by thermal
power, although private players are looking at alternative fuels like LNG. Therefore, need of the day is to seek
other power generating renewable sources. In view of this worsening shortage, the government decided to go
for massive increase in capacity through projects, which would be opened out both to the private sector and
foreign investors.

Technology upgradation
Clean coal technologies
Clean coal technologies offer the potential for significant reduction in the environmental emissions when used
for power generation. These technologies may be utilised in new as well as existing plants and are therefore,
an effective way of reducing emissions in the coal fired generating units. Blending of various grades of raw coal
along with beneficiation shall ensure consistancy in quality of coal to the utility boilers. This approach assumes
greater relevance in case of multiple grades of coals available in different parts of the country.
Refurbishment of existing thermal power stations
Renovation and Modernisation Schemes(R&M Schemes) were drawn and executed for improving the
performance of existing thermal power stations. During phase-I, 163 units of 34 thermal power stations were
covered. As a result of R&M schemes these achieved 10,000 million units of additional generation per annum
against the target of 7000 million units. Encouraged by the results achieved, R&M phase-II programme is
presently under progress. Total estimated cost of these works is Rs. 24 Billion.

Major weakness of present system of power planning

 Planning based on traditional approach of meeting demand through new capacity additions.
 Bureaucratic delays in obtaining various clearances including environmental clearances.
 Inadequate preliminary investigation of project
 Lack of coordinated planning of generation and transmission.
 Generation priority over transmission. Inadequate investments in transmission system main cause for
increase in transmission and distribution losses and poor quality of power supply.
 Distribution plans formulation lacks optimization and systematic planning lines extended in haphazard
manner to cover maximum villages areas disregarding capacity of system to sustain load
Solution - Power Planning

14
  CEA/ministries to streamline procedures and develop a time bound program for clearances.
 Generation and transmission planning be done simultaneously not sequentially - no bias in allocation of
resources between generation and transmission projects
 improve performance of distribution systems through
 efficient operation and management of existing systems and
 scientific system planning for future load growth.
 Increasing shortage of resources, need to limit environmental impacts of power generation, distribution
and utilization calls for
 Integration of both supply and demand management (increasing energy efficiency and conservation)
options

FINANCES
 Financial planning by Annual Plans and budgets. Inclusion of a project in Plan, guarantee to cover
costs despite time/cost overruns. However, uncertainty about funds that would actually flow during
different years of Plan.
 Capital structure of boards not sustainable
o Primarily debt based - heavy interest burden. High interest costs offset by conversion of State
loans into equity
o Declining financial health of States adversely affects fund availability.
o Actual disbursement adjusted for interest and electricity duty due to State by board.
o Poor liquidity position of boards - capital resources diverted for working capital.
 Results
o Sbstantial delays in completion and
o Cost overruns.
Solutions
 At least 20% of capital expenditure be financed by board's internal resource generation.
 Rationalized tariffs, cost control and complete financial discipline in operations of boards.

TARIFFS
 Single most reason for deteriorating financial health of SEBs - average revenue realized less than
average cost of generation and supply

15
  Excessive political interference by state governments in setting tariffs - guided by social and political
considerations than economic and efficiency objectives against advisory role under Electricity Supply
Act.
 Tariffs for agriculture sector most subsidized - average cost of supply and revenue differ by 80- 100% in
states
 Section 78(A) of E(S) Act empowers state governments to give policy directions - what is policy left
open for interpretation - state directions on policy and also on operations - courts held that states can
direct boards to charge flat rate for agricultural pumping
Solution
 Transparency in tariff revision exercises.
 Tariffs in short run be based on normative efficient cost and marginal costs in long run.
 All electricity sales metered - flat rate abolished
 Cross-subsidization limit within consumer categories. Establishment of National Power Tariff Board at
center with five Regional Tariff Boards.

MANAGEMENT AND OPERATION OF SEBs

 Excessive interference by states in day-to-day management of boards.
 Board members appointed by State Government.
 State Electricity Consultative Council to advise SEBs on policies, planning, and review progress -
ineffective.
Solution
 Improving generation efficiencies of existing facilities
 Reducing transmission and distribution losses through
 Rational utilization of excess staff to improve manpower utilization - enhance skills of personnel,
redeployment.
 Introducing innovative options to ensure accurate metering, timely billing and regular collections.
 Reducing revenue outstanding through greater control and autonomy to take actions against defaulters.
 Incentives be linked to overall performance score instead to PLF or losses
o Identify key performance parameters
o Give each a weightage and
o Arrive at net performance score.

16
17
Targets for the 12th Five year plans are far more aggressive
According to a document released by the Central Electricity Authority titled ”Key Inputs for the Accelerated
Development of Indian Power Sector for 12th Plan and Beyond”, the targets for the 12th five year plan has
been quite aggressively raised, suggesting the strong push by the authority to improve the power
infrastructure in the country. The key highlights for the same are:

 The generation capacity target for the 12th plan has been raised to
100000 MW, up 27% compared to 78700 MW planned in the 11th plan.
 The Transmission lines expansion program over the 12th plan is
pegged higher by 26% to 120000 ckm with substantial jump of 67% at 295000 MVA in terms of
transformation and substation.
 The total outlay for the 12th plan towards generation, transmission
and distribution of power is estimated at Rs. 11110 bn, 49% higher than Rs. 7470 bn estimated for the
11th plan.
 The report suggests that high end technology is the way forward and
Super critical technology in generation and 765 KV lines in transmission will account for major share of
the overall projects
 Continued thrust on distribution revamping, rural electrification
through R-APDRP and RGGVY schemes.
 Adoption of Public-Private-Partnership model in electricity
transmission and distribution
 Greater push towards development of Renewable Energy sources.
 National Action Plan for Climate Change envisages renewable energy
to constitute ~ 15% of the energy mix of India by 2020

18
 Oct 2009

BSE Sensex: 16810.81

COMPANY ANALYSIS

Stock Data

Reuters :NTPC.BO
Bloomberg :NTPC IN
52Wk range(INR) : 233/113
Share in Issue(mn) :8,245.5
Avg. Daily Vol. BSE(‘000):8,861.4

Soure: Money Control

Share Holding Pattern(%)

Promoters* : 89.5
MFs, FIs & Banks : 4.1 NTPC Rs. 214.65
FIIs : 3.0
Others : 3.4 Mkt Cap: Rs.
* Promoters pledged : NIL 176998.89 cr
(%of shares in issue)
Company Description:
Source: Rediff Money

19
NTPC, setup in 1975, is India’s largest power generation company with 30,644 MW capacity (including 2,294
MW from JV’s). The company plans to double its capacity over the next five years and treble it by 2017E. In
addition to generation, NTPC also provides consultancy services to entities in the power domain. A subsidiary,
NTPC Vidyut Vyapar Nigam, is engaged in power trading, while the company has also entered into JVs for
different businesses—with Singareni Collieries for coal mining, BHEL for equipment manufacturing, and
Transformers & Electricals Kerala (TELK) for repairs and maintenance
 NTPC reported revenues of INR 125.28 bn and PAT up by 27% in Q1FY10.due to higher generation
and balance due to higher RoE and efficiency gains based on new CERC norms.
 Targeting 3,300 MW of capacity addition in FY10
 Huge cash balance of INR 163 bn
 NTPC imported 2.5 mn tonnes of coal in Q1FY10., NTPC is running behind schedule to meet its
Eleventh Five Year Plan target of 22,400 MW.

NTPC v/s SENSEX – Outright Outperformer

Source: Money Control

20
KEY FINANCIALS:

21
 TATA POWER Rs:1473.05

Mkt Cap: Rs.

34,815.95 cr
Company Description:
Tata Power is a pioneer in India’s power sector, with a presence in all

Oct 2009 spheres of the power industry, encompassing generation, transmission,

trading, and distribution. It has demonstrated exceptional performance in
its transmission and distribution JVs. The company was also awarded the
BSE Sensex: 16810.81
first UMPP at Mundra (Gujarat) due to its lowest levelised tariff bid at INR
2.26 per unit.
The company is aggressively pursuing new growth opportunities across
the power value chain, especially generation (9,350MW under
Stock Data
implementation). Tata Power’s healthy balance sheet would enable it to
Reuters : TTPW.BO implement the huge generating capacity addition plan. The existing
Bloomberg : TPWR.IN distribution business continues to generate steady cash flows, which is
52Wk range(INR) :1487/531.50 expected to drive 8% CAGR in the company’s earnings over FY06-09.
Share in Issue(mn) : 236
 Tata Power reported PAT of INR 3.97 bn for Q1FY10.
Avg. Daily Vol. BSE(‘000) : 837.6  The company sold 220 MUs on merchant basis, which aided
~30% profit growth Y-o-Y.
Soure: Money Control  starting April 2010, the company will have surplus power of ~500
MW in its Mumbai business
 Finished 26% Mundra UMPP and 54% Maithon projects
completed
 Steady progress on pipeline projects
 Funding concerns being addressed through USD 335 mn GDR
Share Holding Pattern(%) issue

Promoters* : 33.2 TATA POWER v/s SENSEX – Consistent Outperformer

MFs, FIs & Banks : 29.3
FIIs : 19.0
Others : 18.5
* Promoters pledged : 14.6
(%of shares in issue)

Source: Rediff Money

Source: Money Control

22
KEY FINANCIALS:

23
 RELIANCE INFRASTRUCTURE Rs:1199.85

Mkt Cap: Rs.

26,987.38cr

Company Description:
Oct 2009
Reliance Infrastructure is involved in infrastructure
BSE Sensex: 16810.81 projects, power EPC projects, and generation,
transmission and distribution of electricity. In the
infrastructure space, it is developing five road
projects on build-operate-transfer (BOT) basis in
Stock Data Tamil Nadu. This division is involved in the
development of metro rail projects in Mumbai and
Reuters : RLIN.BO
Delhi. The company holds 45% in Reliance Power
Bloomberg : RELI.IN
that plans to have a portfolio of 32 GW of
52Wk range(INR) : 1404/354
generating asset.
Share in Issue(mn) : 225.3
 Reliance Infrastructure reported PAT of INR 3.2 bn in Q1FY10
Avg. Daily Vol. BSE(‘000):6,424.9
 Management does not expect Earnings unlikely to be affected by
Soure: Money Control customer migration
 The company reported 27% growth in EPC revenues, at INR 5.6
bn, with a 9.6%
 EBIT margins against 8.1%% in FY09.
Share Holding Pattern(%)  Traction likely to improve in road, non-power generation projects

Promoters* : 37.7  Potential upside from Reliance Power’s project pipeline

MFs, FIs & Banks : 26.2
FIIs : 18.9
Others : 17.2 RELIANCE INFRA v/s SENSEX – Transition stage Performer to
* Promoters pledged : 16.4 Outperformer
(%of shares in issue)

Source: Rediff Money

24
Source: Money Control

25
KEY FINANCIALS:

26
 POWER GRID CORPORATION OF INDIA Rs: 108.70

Mkt Cap: Rs. 45,750.10 cr

Company Description :
PGCIL commenced operations in 1992 by consolidating transmission
assets of NTPC, NHPC, NEEPC, NPCIL, Tehri Hydro Development
Oct 2009
Corporation, and Neyveli Lignite. In 1994, the assets and communication
systems of regional load dispatch centre (RLDC) were also transferred to
BSE Sensex: 16810.81 the company with an objective to enhance grid management. Due to the
central transmission utility status, PGCIL is mandated to undertake and
operate inter-state transmission systems efficiently, provide for open
access, and undertake various functions of RLDC. Recently, under the
Stock Data Rajiv Gandhi Grameen Vidyutikaran Yojana, PGCIL is mandated to
Reuters : PGRD.BO implement the electrification of rural households in association with the
Bloomberg : PWGR.IN Rural Electrification Corporation, SEBs, and the respective state
52Wk range(INR) :128.35/51.75 governments.
Share in Issue(mn) : 4208.8  Power Grid Corporation of India (PGCIL) reported PAT of INR
Avg. Daily Vol. BSE(‘000) :5483.0 5.47 bn for Q1FY10
 Capex target at INR 115 bn for FY10 and INR 140 bn for FY11
Soure: Money Control
 Earnings from telecom and consultancy disappoint with loss of
26mn and falt revenues of 458mn respectively
 Fund raising on the cards

Share Holding Pattern(%) POWER GRID v/s SENSEX - Consistent Outperformer

Promoters* : 86.4
MFs, FIs & Banks : 4.3
FIIs : 2.5
Others : 6.8
* Promoters pledged : 10.1
(%of shares in issue)

Source: Rediff Money

Source: Money Control

27
KEY FINANCIALS:

28
 OUTPERFORMING SENSEX

If one is of the view that the power sector has grown to its limit, seeing the sector stocks grow and
outperformance Sensex more often than not then he is loosing on a great opportunity. This is just the
beginning of the ‘Power Sector Growth Story’.

The current power situation in the country and the government’s strong focus to improve the same has
meant strong opportunities for all the companies in the sector to have strong and sustained period of growth.
The growth is likely to come in all segments of the power sector like generation, transmission and distribution

With the huge demand and shortage of supply, the government and the companies are investing
heavily in installing capacity to meet the requirements. With the 10 UMPP’s, 77 hydro projects schemes and
the National Grid Program by the governments coupled with corporates pumping in more than $132bn; the
power sector is ready for a powerful boost.

And the good news is government is not only looking at investments but also on the regulatory side and
have passed policy changes like Deregulation, 100% FDI in Generation , Transmission & Distribution; reduced
licensing requirements, tax holidays.

With the planning commission targeting a GDP growth rate of 8-9% in the next 5 years with strong
focus on higher industrial growth, the power demand could grow in the country at a similar rate as the GDP
growth rate. Some reports have suggested that India’s power demand could grow at a CAGR of 7% till
FY2022.

The companies backed with strong fundamentals and high growth opportunities have consistently
outperformed the Index and will continue to do so in the coming years. The company stocks have become an
inherent part of most portfolios and have realized their true potential just like commodities.

29
 REFERENCES

1. http://www.indiapower.org/final.pdf
2. http://cea.nic.in/power_sec_reports/Executive_Summary/2009_08/1-2.pdf
3. http://www.teriin.org/opet/articles/art2.htm
4. http://www.livemint.com/2009/05/05005836/India-has-12-power-shortage.html
5. http://www.domain-b.com/industry/power/20001009power_study.html
6. http://www.rajenergy.com/indpowse.htm
7. http://www.equitymaster.com/research-it/sector-info/power/
8. http://www.valuenotes.com/vnteam/vn_Weeklypoll_24Mar09.asp?ArtCd=143233&Cat=I&Id=152
9. http://www.kseboa.org/news/ http://steelguru.com/news/index/2009/09/11/MTExMjM0/
10. http://www.livemint.com/indopower.htm
11. Moneycontrol
12. Rediffmoney

30