India’s Power Grid Profit Up By 21 Percent

India has had a very good run in its economy last year and it is likewise forecasted that the country will continue to do well this year. India is on top of the countries in Asia that has tremendously improved to date. Its stock market has been reaching record highs and is growing more steadfastly than China. The different industries in the country are outperforming each other, ushering in more job opportunities for locals and foreigners alike.

The electrical sector of India has been performing well also. The nation which is also a top notch producer of professionals like electricians is not shy of hitting the target profit in the electrical sector. India’s Power Grid Corporation’s profit surged 21 percent year on year. For the third quarter of fiscal year 2015, the EBITDA is reported to be at INR 37.7 billion. These earnings were in line with experts’ forecasts and sector consensus.

The total revenue for the power grid is reported to be at INR 43.5 billion. This amount is below the forecast of some expert. What accounted for the lowered revenue is the transmission revenue which contributed INR 41.8 billion. This figure is -2 percent below consensus. The transmission revenue was offset by the higher income in consultancy which is lumpy in nature. The consultancy income was accounted at INR 1 billion. This amount is up by 67 percent on a quarterly basis but is down by 32 percent on a yearly basis.

How do we interpret the results? The result would mean that the return on regulated equity (RORE) on India’s transmission business is approximately between 14.5-15 percent. It can be recalled that during the second quarter, the return was at 12-15.55 percent.

The return on regulated equity amount is produced after treating the deferred tax as an amount that is recoverable from the customers. This new regulation is in accordance with the new tariff rules.

For the third quarter of fiscal year 2015, the capitalization for transmission was calculated to be in the amount of INR 70 billion. This is up by 130 percent on a yearly basis. The amount also is considerably higher than the capitalization in the second quarter in fiscal year 2015 which was only at INR 47 billion.