Power carrier for investors (Review by Premium Investments)
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Power Grid Corporation of India is entering the capital market on 10th September 07, with a public issue of 57.39 crore equity shares of Rs.10 each in the band of Rs.44 to Rs.52 per share. Of this, 38.26 crores shares are fresh issue while 19.13 crores shares are offer for sale, being sold by Government of India. The present holding of the promoters viz. Government, which is at 100% would fall to 86.36%.
The company is country’s principal electric power transmission company, owning country’s inter-state and inter-regional electric power transmission system. As at 30-06-07, company owns and operates 61,875 circuit kilometers of electrical transmission lines and 106 electrical sub-stations. In FY 07, the company transmitted about 29,800 crores units of electricity, which represents 45% of power generated in the country. The company also diversified into telecommunication by creating its network principally using its overhead transmission infrastructure. The company own and operate fibre-optic cable network of 19,000 km. long and connected to 60 cities, including all major metropolitan areas. The company has been leasing bandwidth on this network to 60 customers including major telecom operators like VSNL, BSNL, Tata Tele, R-Com and Bharati.
For FY 07, the total income of the company was placed at Rs.4,082.37 crores with PBT of Rs.1,482 crores and PAT of Rs.1,229.37 crores which was reduced to Rs.1,087.66 crores, due to certain accounting adjustments. This has resulted in an EPS of Rs.2.84 on equity base of Rs.3,826.22 crores. Net worth of the company on 31-03-07 was at Rs.10,702.24 crores while total debt of the company, on that date, was at Rs.19,325.50 crores.
For three months ended June 07, total income was placed at Rs.1,050.93 crores with PAT of Rs.453.92 crores giving an EPS of Rs.1.19 for the quarter.
The company is implementing certain identified transmission projects with 13,022 circuit km. with total estimated cost of Rs.12,708 crores which is being financed by debt equity of 70 : 30 in accordance with CERC norms. An amount of Rs.5,863 crores has already been spent upto 31-03-07.
The company is likely to post an EPS of Rs.5 for FY 08, and even if the book is discovered at the upper band of Rs.52 per share, PE ratio works out close to 10. The power sector has tremendous untapped potential and transmission companies would largely get benefited from capacity addition. The company being one of the largest players, controlling almost 50% market, has bright future ahead. Hence, investment is advised at the upper band of Rs.52.
Zerodha (Trading & Demat Account)
RHP
