Power Grid Corp. of India capex in 1QFY15 surges 17% y-y at INR58.4bn

Asset capitalization, meanwhile, also soared.

During the Power Grid Corp. of India's 1QFY15 analysts' meeting, management noted that the company's capex and transmission capacity start-up (asset capitalization) in 1QFY15 stood at INR58.4bn (up 17% y-y) and INR48.8bn (up 65% y-y).

According to a research note from Nomura, meanwhile, YTD asset capitalization is at a robust INR85bn, which is 45% of Nomura's FY15F target).

Notably, April-July 2014 asset capitalization at INR76.5bn nudged ahead of capex (INR75.3bn) indicating that CWIP remains virtually unchanged since March 2014.

The report said that over 60% of overall CWIP as of 1QFY15 was in the ‘installed state’, which bodes well for capacity start-up timelines. Capex target for FY15 is unchanged at INR224.5bn.

Here's more from Nomura:

Management indicated that the tightened operating norms and stiffer incentive thresholds in the 2014-19 tariff regulations led to a ~INR700mn dent to the top line (income), which partially explains the muted QoQ uptick in core transmission revenues.

Further, management and the company’s auditors concur that the new regulations deem deferred tax relating to the transmission business as ‘recoverable from beneficiaries’ as the same would be recovered upon realization (in the form of current tax) in the future.

Accordingly, the effective tax rate for PWGR in the books of accounts goes down to the current tax level, thus boosting the bottom line.

Management categorically stated that there was no under-recovery of O&M costs.

Up to 1QFY15, PWGR had utilized INR27.8bn of the INR53.2bn net proceeds from its equity offering in December 2013 towards the funding of 27 identified projects.

PWGR commissioned ~34 elements of 14 identified projects during Dec-13 to Jul-14.

As of 1QFY15, debt (excluding working capital loans) stood at INR847bn whereas cash in hand stood at ~INR41bn.

Accordingly, leverage (D/E) stood at 70:30 as of June 2014 (70:30 as of March 2014).

Receivables positions remains comfortable – debtors outstanding for >60days stood at ~INR3bn, implying ~3 days’ billing.

PWGR’s consultancy division received eleven orders in 1QFY15 (nine domestic and two international); over 135 assignments are under execution.

As the Leh-Srinagar and Lalitpur-Agra projects get underway, management expects a healthy uptick in consultancy revenues later this year.

Telecom division’s EBIT was dragged lower in 1QFY15 on account of higher depreciation (change in norms based on new Companies’ Act) and a one-off payment linked provision of ~INR180mn.