Power Grid Corp. of India's 2QFY15 profit edged down by 3% to INR12b

Even total revenues were a bit disappointing.

India-based Power Grid Corp of India's (PWGR) total revenues at INR41.8bn were a tad below the projected forecast.

According to a research note from Nomura, this was primarily due to lower consultancy income (INR0.6bn, flat q-q and half Nomura's forecast of INR1.2bn) partially offset by an unexpected spike in “other operating income”, which is typically lumpy in nature.

Further, at INR40.3bn (+19% y-y, +6% q-q), transmission revenues came in line with our forecast.

Meanwhile, at INR35.9bn, PWGR’s 2QFY15 normalized EBITDA came in 2% below Nomura's/consensus forecasts whereas normalized PAT (NR12.1bn, +10% y-y) missed Nomura's/consensus forecasts by 3%/5%.

Also, reported PAT at INR12bn (-3% y-y) was 4%/5% below Nomura's/consensus forecasts.

Here's more from Nomura:

By our calculations, return on regulated equity (RoRE) on its transmission business (after treating deferred tax as ‘recoverable from the customers’ under the new tariff regulations) was ~15.5% vs. ~16% in 1QFY15.

After our brief interaction with management, we understand that GFA stood at ~INR1060bn as of Sep 2014, implying asset capitalization – ie, commercial start-up of transmission capacity in 1HFY15 was INR96bn (vs. INR65bn in 1HFY14, which included an exchange rate variation linked component of INR16bn).

For 2QFY15, implied transmission capacity startup is INR47bn (up 33% y-y on reported 2QFY14 figure) vs. INR49bn capitalization in 1QFY15.

Considering that in its analysts’ meet on 5 August, management had indicated YTD transmission capacity start-up in FY15 (ie, 1 April to 5 August) at ~INR86bn, incremental capacity start-up after early August through to September 2014 seems to be merely INR9bn.

On the balance sheet, there is a spike in short-term borrowings and receivable days have posted a reasonable uptick.