Power Grid Corporation Eyes Stronger Earnings with Rs 1.52 Lakh Crore Project Pipeline and Aggressive Capex

Power Grid Corporation of India Limited (PGCIL) reported a modest 2 percent year-on-year revenue growth to Rs 11,476 crore in Q2 FY26. However, profitability was pressured by elevated other expenses, causing EBITDA margins to contract by 661 basis points to 79.4 percent. Adjusted net profits declined by 6 percent year-on-year to Rs 3,566 crore, missing consensus estimates by 10 percent, largely due to a significant drop in other income.

Execution challenges, primarily delays from Right-of-Way (RoW) disputes, impacted asset capitalization, with only Rs 4,587 crore capitalized in the first half. The earnings outlook, however, is set to improve as execution accelerates. New government norms for RoW compensation, issued in March 2025, are resolving critical bottlenecks, particularly in urban areas, which should boost commissioning momentum from the second half of the year.

PGCIL has outlined an aggressive multi-year capital expenditure (Capex) plan, guiding for Rs 28,000–30,000 crore in FY26, Rs 35,000 crore in FY27, and Rs 45,000 crore in FY28, to support India's transmission expansion and renewable energy integration. The current project pipeline stands at Rs 1.52 lakh crore. The company is also diversifying into new segments like data centers, cross-border transmission, and smart metering.

Valuations are considered reasonable, with the stock trading at approximately 15 times its FY27 estimated earnings and 2.4 times its book value, especially after a recent correction from its peak. The second half of the fiscal year is expected to be capitalisation-heavy, driving revenue and profit recognition.

Impact This news indicates a positive future outlook for Power Grid Corporation of India, driven by strong project execution, significant expansion plans, and regulatory support. These factors are expected to lead to improved financial performance, potentially boosting investor confidence and the company's stock valuation. Rating: 8/10.

Key Terms Explained * **RoW (Right-of-Way)**: The legal right to use land for specific purposes, such as laying power transmission lines. Delays in obtaining RoW from landowners or authorities can halt project construction. * **Capex (Capital Expenditure)**: Funds invested by a company to acquire or upgrade physical assets like infrastructure, property, and equipment. PGCIL's capex is for expanding its transmission network. * **EBITDA**: Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's operating profitability. * **Adjusted Net Profits**: Profit after all expenses, including taxes and interest, with certain adjustments for non-recurring items. * **Capitalisation**: The process of recording expenditures as assets on a company's balance sheet, typically when a project is completed and ready for use. * **Regulated RoE (Return on Equity)**: A stable rate of return on the capital invested by shareholders, determined by regulatory bodies for utility companies, ensuring predictable earnings. * **Basis Points**: A unit equal to 1/100th of 1%. 661 basis points means a 6.61% decrease.