See revenues growing 25-30% over next 2 yrs: Power Grid

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Follow-on public offering' shares of the country's largest electricity transmission utility Power Grid Corporation of India listed on the exchanges on Thursday.

The company plans to add 40,000 megawatts in the next two years, its chairman and managing director SK Chaturvedi told CNBC-TV18 in an exclusive interview.

"This would boost our transmission business, which contributes almost 94% to our revenues. With this we expect a 30% jump in profit on a quarterly basis going forward," he added.

Below is a verbatim transcript of his interview with CNBC-TV18's Sonia Shenoy. Also watch the accompanying video for more.

Q: The funds that Power Grid would be raising and where they would be ploughed in could you tell us exactly what the capacity expansion plans are for Power Grid going into FY11 and FY12?

A: Through this FPO, we have collected around Rs 7,442 crore. Half of it will go to the government the remaining half will remain as an equity share of Power Grid. These proceeds will basically be used for completing the 11th plan project which is scheduled to be completed in 2010-11 and 2011-12.

The rest will be kept for our 12th plan project which will be taken up right now and these projects will have to be completed by 2013-14 so we will be putting some money for the provisioning of the projects for the 11th plan and rest would be used to start the 12th plan projects.

Q: In FY10 particularly could you tell us the amount divided between FY11-12? In FY10, you saw commissioning of projects worth about Rs 3,000 crore, what kind commissioning are you expecting to see in FY11 particularly?

A: In FY10-11 we are sure to capitalize around Rs 10,000 crore worth of projects and in FY11-12 Rs 11,000 crore worth of projects. The project cycle of the completion of the generation projects matches with the last two years of the planned period.

A lot of capacity additions say around 40,000 megawatt will be added in the next two years and we have to complete the transmission projects for execution of power from these projects. Not less than Rs 10,000 crore each will be the capitalization plan for FY10-11 and FY11-12.

Q: In terms of total capacity you had said you planned to add roughly 8,000 circuit kilometers in FY11. Do you still stand by that or are there any new capacity addition plans that you have?

A: We are doing much more than this because a lot of projects are under final stages of completion. We will be doing much more to ensure that the transmission system is available before the commissioning of the project.

Q: What would that translate into in terms of a quarterly run rate? In the second quarter of FY11, you reported revenues of around Rs 2,100 crore that was up about 20% on a YoY basis. Could you give us what kind of run-rate are you looking at? Do you hope to see a 20% jump on the revenue front?

A: On an average, Power Grid has always jumped about 20% to 25%. The next two years we will be a bit more, say at about 25% to 30%. There will be an increase of 5% to 6% because the completion schedules are much more during these two years.

Q: If you are sitting on a base of Rs 650 crore of profit for Q2 in FY11, how much do you think the profits could jump at post your commissioning coming on-stream and post the capacities of 8000 circuit kilometers coming on-stream. How much do you think you could see a jump in your profitability from this quarterly base of Rs 650 crore?

A: We will be taking it to around 30% jump on a QoQ basis because capitalization has been lined up in such a fashion that we have to complete the total schedule of FY10-11 before March and also next year it will be a 30% increase every quarter.

Q: From FY11-15, I have an estimate that you would be spending almost about USD 26 billion which would be an amount in terms of capacity expansions. Is that a figure that you are working with as well?

A: Yes, it is evident that we will be spending Rs 12,900 crore this year. Next year it will be around Rs 17,000 crore. FY12-13 onwards, it will never be less than Rs 20,000 crore capex every year.

Q: On the split up between consultancy revenues and transmission revenues, what kind of jump are you expecting in individual revenue streams?

A: 94% of our revenue comes from the transmission side and rest 5-6% comes from consultancy and telecom business. Consultancy will have a definite jump because in the last quarter we saw a 58% increase was there in consultancy jobs and more and more international consultancy jobs are coming to us. Most states are also now our clients for the sub-transmission works. So this segment will definitely grow by more than 50% to 60% YoY basis.