Power Grid — The Year the Spending Exploded and the P&L Stood Still

The State of Play

Power Grid is the company that owns India’s electricity highways — the high-voltage lines that move power across the country — and earns a government-regulated toll for the privilege. For three years its revenue barely moved, stuck around ₹46,000–48,000 crore, because the network it built in the 2010s had matured and it had nearly stopped building new lines. FY26 is the year that turned: capital spending roughly tripled off its low, the order book swelled to ₹1.7 lakh crore, and management laid out a runway stretching to the 2030s. And yet the reported numbers — revenue, profit — hardly budged. This is the story of a spending boom that hasn’t reached the income statement yet, and management’s quarter-by-quarter case for why it soon will.

The Company

Power Grid moves bulk electricity from where it’s generated to where it’s consumed, across states and regions, over roughly 1.84 lakh circuit-kilometres of extra-high-voltage line and nearly 300 substations. It is a Maharatna — the top tier of Indian public-sector companies — majority-owned by the Government of India, which holds a flat 51.34%.

The way it earns is the key to everything that follows. This is a regulated business, not a competitive one. A transmission asset earns a fixed, allowed return — historically a regulated return on equity of around 15.5% — largely regardless of how much power actually flows through it. Revenue is therefore annuity-like and remarkably stable, which is why operating margins sat around 85% for a decade. There are two flavours of project, and the distinction matters all year: older “regulated tariff” (RTM) lines, awarded on a cost-plus basis, and newer lines won through tariff-based competitive bidding (TBCB) — auctions where Power Grid bids a tariff and, if it wins, locks that tariff for 35 years. The order book is now ~81% TBCB. Two smaller businesses — telecom (leasing fibre on the transmission towers) and consultancy — round out the model.

The financial character is that of a capital-hungry utility. At ~₹2.65 lakh crore of market value the stock trades at about 16.8× earnings and 2.66× book. Returns are modest for the risk taken — return on capital around 10% — and the balance sheet carries more debt than equity (borrowings of ₹1.48 lakh crore against reserves of ₹0.91 lakh crore), because lines are built largely with borrowed money. It pays out roughly two-thirds to four-fifths of profit as dividend, for a ~3.1% yield. Underneath a locked promoter stake, ownership has been quietly changing hands: foreign institutions have trimmed from ~33% (mid-2023) to ~25%, and domestic institutions have absorbed almost exactly that, rising from ~12.5% to ~20%.

The Story So Far

The backdrop: from a build-out to a lull, and a war chest

The annual reports trace a company coasting after a long construction binge. FY23 was still expansionary — consolidated income of about ₹46,605 crore (up ~9%), profit of ~₹15,417 crore, eleven inter-state projects won, and a steady de-leveraging as the debt-to-equity ratio fell from 1.77 to 1.52. FY24 was the trough: a new chairman, R.K. Tyagi, took over in January 2024, the telecom arm was hived into a separate subsidiary, leverage kept improving — and core transmission capital spending actually fell year on year, to roughly ₹12,500 crore. The toll collector had largely stopped paving new road.

The FY25 annual filing available publicly was only the AGM notice rather than the full report, so the strategic narrative for that year is thin here. But the notice carried one tell: shareholders were asked to authorise an extra ₹25,000 crore of bond borrowing plus a fresh ₹30,000 crore programme, both explicitly earmarked for capital expenditure. The war chest was being filled. What it would fund is the subject of the four calls that follow.

November 2025 (Q2 / H1 FY26) — spending hard, but the meter wasn’t moving

The half-year results showed the new posture and its problem at once. Capital spending in the first half jumped ~54%, to ₹15,385 crore from ₹10,002 crore a year earlier. But capitalisation — the moment a finished line is switched on and actually begins earning its regulated return — limped in at just ₹4,587 crore against a full-year target of ₹22,000 crore. You can pour money into a toll road for two years and collect nothing until the day it opens; Power Grid was paving furiously and opening very little.

The culprit was land. A March 2025 government reform had shifted the compensation paid to landowners under a line’s path — its “right of way” — from old circle rates to market rates, set by a three-valuer process. Good policy for getting future lines built, but mid-transition it gummed up project completion while states adopted the new rules. Management cut the year’s capitalisation goal to about ₹20,000 crore.

“By March 2026, we should be in position to commission up to ₹20,000 crores projects.” — R.K. Tyagi, CMD

Crucially, profit was flat — H1 income ₹23,115 crore, profit ₹7,197 crore — and the finance chief, G. Ravisankar, pushed back on reading too much into it, arguing that for a regulated business “EBITDA is not the right parameter to monitor,” since the allowed return on equity is held constant across an asset’s life regardless of the margin in any one year. A J.P. Morgan analyst pressed on a quieter worry: prior calls had pointed to ₹35,000–40,000 crore of annual capitalisation in the out-years, and the new figures were lower. The chairman reframed it around a two-year lag from spending to switch-on rather than concede a slowdown. The forward promise to remember: capex of ₹28,000 crore-plus in FY26, ₹35,000 crore in FY27, ₹45,000 crore in FY28.

February 2026 (Q3 / 9M FY26) — the logjam clears

Three months later the bottleneck broke. The right-of-way reform that had been a drag became a tailwind: as district authorities issued market-rate orders through September and October 2025, stalled projects could finish. Capitalisation in the December quarter alone was roughly ₹12,000 crore — nearly triple the entire first half — taking the nine-month figure to ₹12,915 crore. Gross fixed assets crossed ₹3 trillion for the first time. Asked directly whether the jump was a one-off or structural, the chairman was clear it was structural.

So the guidance went up, the opposite of November: FY26 capital spending raised to ₹32,000 crore and capitalisation to ₹22,000 crore. The order book stood at ₹1.45 lakh crore of work in hand, with another ₹50,000 crore in progress, inside a total opportunity management sized at ₹6.6 lakh crore by 2032. The multi-year targets firmed up:

“For FY27, CapEx will be ₹37,000 crores. In FY28, it will be ₹45,000 crores… Capitalization, FY27, will be ₹30,000 crores and FY28, it will be ₹35,000 crores.” — R.K. Tyagi, CMD

Reported profit, though, still barely grew — nine-month profit of ₹11,382 crore was essentially flat against ₹11,379 crore — because the spending was still in front of the earnings, and because a strong year-ago base flattered the comparison. The receivables, at least, were pristine: collection days hit a record-low 24.65. This was also, in passing, the chairman’s valedictory lap before retirement.

March 2026 (analyst webinar) — drawing the long runway

Between the December-quarter results and the year-end, management used an investor webinar (hosted by PL Capital, 23 March) to widen the lens. No profit-and-loss numbers — this was strategy. FY26 capital spending was nudged again toward ₹35,000 crore-plus and capitalisation past ₹25,000 crore, and the runway was extended well into the next decade: a transmission opportunity now framed at roughly ₹15 lakh crore stretching to the mid-2030s, built on India’s renewable-energy build-out, the Brahmaputra hydro corridors, and new demand from data centres and green hydrogen. Management also flagged housekeeping that matters for a sprawling PSU: more than eighty special-purpose vehicles, each holding a TBCB project, were being consolidated into a leaner structure.

May 2026 (Q4 / full-year FY26) — the spending beat, the P&L didn’t

The year-end results, on 18 May, closed the loop on every promise. Capital spending came in at roughly ₹40,000 crore — against an opening guide of ₹28,000 crore later raised to ₹35,000 crore, a clear beat. Capitalisation landed at ₹28,206 crore, ahead of the ₹22,000–25,000 crore the year’s calls had pointed to. Gross fixed assets reached ₹3.2 lakh crore and net worth crossed ₹1 lakh crore. On every operational measure, FY26 was the biggest building year in the company’s recent history — 4,765 circuit-kilometres of line and 72,055 MVA of transformation capacity added, roughly one large transformer every two and a half days.

And the income statement stood almost perfectly still. Full-year consolidated income was ₹47,684 crore, against ₹47,459 crore the year before — flat. Profit rose about 3%, to ~₹15,928 crore. Management’s bridge for the flatness is the heart of the whole chronicle, and it has two parts. First, the regulated lag: the bumper capitalisation landed late in the year, so its revenue shows up in FY27, not FY26. Second, a structural quirk — Power Grid’s older cost-plus assets step their tariff down after twelve years, as depreciation and debt run off, so a major project crossing that mark plus naturally ageing RTM lines knocked roughly ₹1,700 crore off revenue, on top of a ~₹700 crore one-off high base in FY25. New roads opening, old roads quietly cutting their tolls — and for one year, the two roughly cancelled.

The forward guidance kept climbing: FY27 capex around ₹37,000 crore, FY28 in the ₹40,000–45,000 crore range, with capitalisation rising to ₹30,000 then ₹35,000 crore. Asked whether annual spending could reach ₹50,000–70,000 crore within three years, the new chairman, Burra Vamsi Rama Mohan, called it “not far-fetched.” And asked the question that hangs over the flat year — whether earnings over the next three years would be meaningfully better than the last three — he gave the chronicle its closing line:

“You are not wrong.”

Where Things Stand

The reconciliation across the year is unusually clean for a utility. Every spending and execution promise was not just met but beaten: capex guidance walked from ₹28,000 crore to a ₹40,000 crore actual, capitalisation from a cut-down ₹20,000 crore back up to ₹28,206 crore, and the capitalisation logjam that looked worrying in November turned out — exactly as management claimed in February — to be a clearing land-acquisition transition rather than a structural ceiling. The order book, at ₹1.7 lakh crore with a multi-lakh-crore opportunity behind it, is the fullest it has been.

What did not move is the part shareholders ultimately get paid on. Revenue was flat and profit up only a few percent, and the company is funding its build-out with rising debt against single-digit-ish returns on capital. Management’s entire case is that this is a timing artefact — that FY26’s late, large capitalisation, plus a far bigger FY27, converts into revenue growth from here, with the chairman explicitly endorsing the idea that the next three years look better than the last three. The bet a reader is left holding is whether the regulated lag resolves the way management says, against the headwinds the data flags: ageing assets stepping their tariffs down, a transformer-supply bottleneck management itself called binding (domestic capacity of ~300 GVA against ~400-plus GVA of annual demand), and a tax line currently flattered by old-regime benefits. The spending boom is real and visible. Whether it becomes an earnings boom is, by management’s own framing, an FY27-and-beyond question.

The Four Checks

1. Quality and moat. A genuinely durable business, because the moat is the asset itself: you cannot build a second national grid. Power Grid owns 1.84 lakh circuit-kilometres of inter-state line and 291 substations, runs them at 99.84% availability, and earns a government-set return on the lot — older assets on cost-plus tariffs, newer ones on 35-year locked tariffs won at auction. The existing network is close to irreplaceable monopoly infrastructure. The erosion risk sits at the margin, not the core: new projects are now won through competitive bidding (TBCB is ~81% of the order book), where Power Grid’s cumulative win rate is about 44% — dominant, but contested, and won at thinner returns than the old cost-plus regime. Old roads are unassailable; new roads must be bid for.

2. Returns on incremental capital and runway. This is where the regulated design caps the engine. ROCE has run 13% in FY23–25 and dipped to about 10% in FY26 as a wave of spending sat unproductively in construction (capital work-in-progress swelled from ₹13,772 crore in FY23 to ₹43,654 crore). ROE is 16.5%, but that is levered — borrowings of ₹1.48 lakh crore against ₹1 lakh crore of net worth. Management itself frames TBCB equity IRRs at 11–13%. So a rupee reinvested earns a moderate, rule-bound return — never spectacular, never terrible. What the business does have is runway in unusual abundance: ₹1.7 lakh crore of work in hand, a ₹1.1 lakh crore bidding pipeline, and a transmission opportunity management sizes at ~₹15 lakh crore into the mid-2030s. A mid-rate engine with decades of road ahead of it.

3. Capital allocation for the stage. Broadly rational, with the contradictions of a PSU. The big call — restarting capex hard into a real opportunity — has been executed unusually well: FY26 spending of ~₹40,000 crore against an opening guide of ₹28,000 crore, capitalisation of ₹28,206 crore against a ₹25,000 crore commitment, every promise beaten. Meanwhile shareholders still get paid: payout has run 54–79% of profit (79% in FY26) for a ~3.1% yield, with no dilution — promoter stake flat at 51.34%, the share-count increases being bonus issues. The quibble is that paying out four-fifths of profit while borrowing ₹17,000 crore more in a year to fund the build-out is a government dividend mandate, not a capital-allocation choice; a private owner would retain more during this phase. No buyback history is visible in the data. Side ventures (a Kenya transmission PPP, a pilot data centre) are small enough to ignore for now.

4. Price. Full but defensible. As of the June 2026 snapshot the stock trades at ₹288 — a ₹2.68 lakh crore market cap, 16.8× earnings, 2.66× book, with a 3.11% dividend yield. That is a premium-to-book price for a ~10% ROCE utility whose revenue has been flat near ₹46,000–47,000 crore for four years, so the multiple is already paying for the FY27 inflection management promises, not for what the P&L currently shows. Against that, the earnings it capitalises are annuity-grade, the FY26 capitalisation of ₹28,206 crore mechanically feeds FY27 revenue, and the yield pays you to wait. Not cheap, not reckless — a fair-to-full price that assumes the regulated lag resolves on schedule.

Sources

Built entirely from primary documents fetched from screener.in on 2026-06-05 (a logged-out session; the financial tables were current and the concall list reached the latest quarter):

• Earnings-call / investor-meet transcripts (BSE filings): Q2 / H1 FY26 (call 4 Nov 2025); Q3 / 9M FY26 investor meet (2 Feb 2026); analyst & investor webinar (23 Mar 2026, strategy update, no P&L); Q4 / full-year FY26 (18 May 2026).
• Annual reports (BSE): FY23 and FY24 (full reports — high-signal sections). The FY25 link on the exchange was the AGM-notice filing, not the full integrated annual report (which sits behind a link on powergrid.in), so FY25 strategy/MD&A is not part of this chronicle — only its governance and borrowing-authorisation details.
• Screener snapshot: company profile, key ratios, pros/cons, and the quarterly / 10-year P&L / shareholding tables (figures through the March 2026 quarter).

Full audit trail — the per-call and per-report research digests, raw transcripts, and the snapshot — lives in vault/Sources/Earnings/Power Grid Corporation of India Ltd/.