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Shares of Power Grid Corporation of India are showing signs of a revival, after enduring a de-rating in recent years. They are leading gains in Nifty 50 stocks in afternoon trade on Tuesday, and the stock is up by about 21 percent over its level three months ago. The company's board is meeting on Wednesday to consider and approve a dividend for FY22, among other things. But dividends alone do not explain the recent optimism surrounding Power Grid.
As capital expenditure and project capitalisation moderated after FY17, the company stepped up dividends to reward shareholders. Even then, the stock languished in the three years to December 2020 as growth slowed. Renewable energy evacuation projects, which were expected to drive growth, did not take off in a big way due to procedural delays and other reasons.
But the scenario seems to be changing. As new renewable energy projects go on stream warranting fresh transmission capacities, the government is expediting clearances. Last week, the ministry of power approved 23 new inter-state transmission system projects with an estimated cost of Rs 15,893 crore. The projects are situated in Rajasthan, Gujarat and Madhya Pradesh. Earlier, the ministry of new and renewable energy reviewed the plan for a large renewable energy project with an evacuation system in Ladakh, seeking to expedite clearances, according to PTI reports.
These developments improve the project pipeline for Power Grid, a large developer of transmission projects in India. “We believe as renewable energy generation bids continue to pick up, given the shorter 1-year set-up time vs 4-year (execution) for thermal, the transmission pipeline should directionally move higher,” Jefferies India said in a note.
If the optimism is supported by progress on the ground, it should translate into order inflows for Power Grid. The central government is also seeking a modification of the Supreme Court’s order on laying underground power transmission cables in Rajasthan and Gujarat to protect the Great Indian Bustard, an endangered species. A favourable outcome is important to revive projects in the region.
Another notable stock on investor radar is ITC. The company is holding an investor and analyst meet on Tuesday. Dubbed to be the first ever, the analyst meet comes amid the stock’s underperformance and growing calls of value unlocking. While the outcome of the investor meet is awaited, ITC faces a unique challenge in separating its non-cigarette units, as we explained in this piece recently.
In primary markets, Anand Rathi Wealth made a decent debut on the stock exchanges, while the initial public offering (IPO) of Data Patterns (India) opened today. Read our research team’s analysis of the Data Patterns IPO here.
More investing insights from our research team:
Castrol & Gulf Oil: How to bet on these lubricant companies
What else are we reading today?
Economic Recovery Tracker | Consumer sentiment is up, but consumption is not November inflation print will not change RBI’s lower for longer stance Start-up Street: 2022 set to be another year of frenetic private equity National Infrastructure Pipeline: Timely resources needed to back ambitious plan
Algo trading rules: Is SEBI throwing the baby out with the bathwater? Crypto Conversations | Why stablecoins have seen phenomenal growth
How an unknown buyout firm pulled off a $4.5-bn deal with a novel structure (republished from the FT) Identity Politics | BJP plays to its advantage, opposition parties play into its hands
Technical picks: LT Foods, Tata Steel, Hero MotoCorp and PowerGrid (These are published every trading day before markets open)
R Sree Ram
Moneycontrol Pro
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