Government-owned Power Grid Corp. will consolidate 28 wholly owned subsidiaries into two to achieve operational and management efficiencies. The board has approved the revised merger and amalgamation schemes, in supersession to an earlier proposal of consolidating 11 units into two cleared in December, according to a stock exchange filing on Thursday.
The new plan is subject to approval of any statutory, regulatory and government authority as may be applicable or required.
"The proposed Merger/Amalgamation Schemes, envisages to consolidate the business for creation of larger unified entities and reduce the number of entities within the group to achieve operational and management efficiencies, and simplification of administrative tasks and have simplified organisational structure," the filing said.
The board also approved investment of Rs 705 crore for procurement of cold spare Transformers and Reactors approved by the 77th Northern Regional Power Committee (NRPC) and scheduled to be implemented within 30 months.
The company owns and operates approximately 84% of the inter-state transmission network, ranking among the largest transmission utilities globally. It has diversified into telecom business, through its wholly owned subsidiary PowerTel, by leveraging its Pan India transmission network through stringing of optical ground wire (OPGW).
On Thursday, multinational brokerge HSBC raised the share price target for Power Grid to account for increased pace of commissioning and new opportunities from intra-state transmission projects and BESS. Analysts revised their 12-month price target to Rs 290 from Rs 260 earlier and upgraded rating to 'hold' from 'sell'. The new target indicates a nearly 3% downside to the previous close.
The government's policy changes for faster commissioning of critical transmission lines in the country will increase the pace the PSU company's earnings growth, according to a note.
Moreover, analysts said since Power Grid was not able to participate in intra-state transmission systems, which the states themselves controlled, growth opportunities as limited. The smaller size of projects related to battery energy storage systems (BESS) meant PWGR was reluctant to participate.
"We believe with increased renewables penetration and recent curtailment issues, reliance on BESS is set to increase. PWGR has started participating in BESS projects, and project sizes are set to increase. As well, BESS will have a role in ancillary services too, which would allow for integration with PWGR's existing lines," the HSBC note said.
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