Power Grid Corporation of India

The Business Standard features an excellent article on Power Grid (here). The article talks about some businesses which Power Grid has, which can turn out to be hidden gems and a strong profit-centre 3-4 years from now. The report says -

1. The company owns and operates a fibre-optic cable network of 20,000 km, which connects over 100 Indian cities. This bandwidth is leased to more than 60 customers, including major telecom operators such as BSNL, Tata Teleservices, Reliance Communications and Bharti Airtel. The revenue from this segment has grown about ten-fold from Rs 7.4 crore in FY04 to Rs 77.3 crore in FY07 and stands at Rs 93.4 crore in the nine month ended FY08. These are estimated at about Rs 130 crore for FY08 and expected to grow at 25-30 per cent annually over the next few years. The net profit margin from this business is about 28-30%.

2. The company also plans to lease space on existing towers to mobile service providers. The company currently has about 200,000 transmission towers spread across the country. Even assuming that 15-20 per cent or 30,000-40,000 of these are available for leasing, the company is estimated to earn revenues in the range of Rs 600-700 crore annually by FY11 (considering prevailing tower rentals of Rs 35,000-40,000 per month). For FY09, leasing revenues are estimated at Rs 146 crore (7% of the total net profit) and at Rs 298 crore for FY10 (11.5% of the total net profit).

3. These apart, the company is also leveraging its vast experience in transmission related services, by providing consultancy services to various government funded projects such as implementation of projects under APDRP & RGGVY. Consultancy business, which is about 5.7 per cent of the total income, has grown from mere Rs 37 crore in FY04 to Rs 226.4 crore and is expected to grow fast on account of increasing allocation of funds for various projects.

The authors opine that Power Grid is available at a great valuation and it's buy time !