DCF Studio

    POWERGRID.NS · NSI · Utilities

    Power Grid Corporation of India Limited

    Also onConsensus Drift

    Implied value per share

    INR 124.69

    Market price

    INR 270.30

    Implied upside

    -53.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 45.6% of revenue against depreciation of 29.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 124.69-53.9%
    Exit multiple
    INR 221.53-18.0%
    Market price
    INR 270.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn78bn157bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 450.2bnINR 452.8bnINR 455.4bnINR 458.0bnINR 460.6bn+0.6%
    EBITINR 263.5bnINR 265.0bnINR 266.6bnINR 268.1bnINR 269.6bn+0.6%
    NOPATINR 222.9bnINR 224.2bnINR 225.5bnINR 226.8bnINR 228.1bn+0.6%
    Add depreciation & amortisationINR 133.2bnINR 134.0bnINR 134.7bnINR 135.5bnINR 136.3bn+0.6%
    Less capital expenditureINR -205.5bnINR -206.7bnINR -207.9bnINR -209.1bnINR -210.2bn+0.6%
    Less increase in working capitalINR 2.6bnINR 2.6bnINR 2.6bnINR 2.6bnINR 2.6bn-0.6%
    Free cashflow to firmINR 153.2bnINR 154.1bnINR 155.0bnINR 155.9bnINR 156.7bn+0.6%
    Discount factor0.95970.88390.81410.74980.6906-
    Present valueINR 147.0bnINR 136.2bnINR 126.2bnINR 116.9bnINR 108.2bn-7.4%
    Present Value Of The ForecastINR 634.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.435Reported 0.156, pulled toward 1.0 (Blume)
    Cost of equity10.28%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 2514.0bn62.4% of capital
    Total debtINR 1515.6bn37.6% of capital, book value as a proxy
    Tax rate15.4%Effective, capped at statutory
    WACC8.57%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 124.69

    76% of EV

    Forecast FCFF, final year
    INR 156.7bn
    Capex at depreciation, working capital in reinvestment
    INR 228.6bn
    Less reinvestment at g/ROIC (25.3% of NOPAT)
    INR -57.7bn
    Capitalised
    INR 170.9bn
    ROIC (reported)
    9.9%
    Terminal value, undiscounted
    INR 2883.6bn
    Terminal value, discounted
    INR 1991.4bn
    Enterprise value
    INR 2625.9bn
    Less net debt
    INR 1466.2bn
    Equity value
    INR 1159.7bn

    Exit at 10.3x EBITDA

    Value per shareINR 221.53

    82% of EV

    Terminal value, undiscounted
    INR 4187.9bn
    Terminal value, discounted
    INR 2892.2bn
    Enterprise value
    INR 3526.7bn
    Less net debt
    INR 1466.2bn
    Equity value
    INR 2060.4bn

    Spread between methods: 56%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.57%226.89242.05260.71284.33315.32
    7.57%162.99170.48179.28189.81202.70
    8.57%117.23120.74124.69129.19134.41
    9.57%82.8784.1785.5487.0088.56
    10.57%57.8358.5759.3160.0560.79

    Outlined: this model. Green text: above today's price of 270.30. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year0.6%9.1%+8.5pp
    EBIT margin58.5%85.8%+27.2pp
    Discount rate8.6%6.5%-2.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.