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Motilal Oswal Report
We analyzed details of Power Grid Corporation of India Ltd.'s tariff-based competitive bidding (TBCB) projects from their annual reports.
At an aggregate level, in our view, Power Grid should be able to generate approximately 14% equity internal rate of return (IRR) (assuming a debt-to-equity ratio of 80:20 for its 11 under-construction projects).
Equity IRR for its eight commissioned TBCB projects varies in the range of 2- 27%.
TBCB currently remains small in the overall context (3% FY20 profit after tax; 5% gross block).
However, with increased awarding at the interstate/intrastate level on a TBCB basis, its pie would eventually grow.
Over the past one year, the Company has won approximately seven projects on a TBCB basis.
We expect profits from TBCB projects to rise to Rs 7.8 billion in FY23 from Rs 3.7 billion as new projects get commissioned.
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