Friday, September 14, 2007

India Sparkling!

A government-owned power transmission company launches an IPO for around Rs 3000 crore. It gets bids worth Rs 190,000 crore. And these are said to be troubled times for financial markets! This is not India Shining, it is India Sparkling.

PowerGrid Corporation has nearly 45% of the share of power transmision in the country. But that in itself is not what is attracting institutional investors (this segment is said to have been oversubcribed 115 times). Investors are attracted by earnings growth. Investors see earnings growth potential in PowerGrid. That clearly means they expect to see more transmission, which means more power generation.

This perception is signification because the power sector has long been one of the areas of failure in the reforms era. Now, with mega-power projects going ahead, this sector is also poised for a sea-change. That would complete the overhaul we are seeing in every other segment of infrastructure- airports, ports, telecom, railways, roads. Investment in infrastructure and broader investment demand driven by infrastructure investment and improvements in infrastructure will be the key element in the India growth story in the next few years.


Raj said...

"Now, with mega-power projects going ahead, this sector is also poised for a sea-change".

I am afraid that this is being too optimistic. A couple of mega thermal projects have been awarded, but the others are in trouble. Such projects take a minimum of 5 years to come up and even the zero date is quite far away.

The 11th plan has targeted 78000 MW and there are serious issues already. Shortage of material, manpower, contractors, critical BOP equipment. Meanwhile, peaking shortages have gone up significantly and frequencies are at unacceptable level in all regions.

There are no clear signs of a turnaround yet, or even a willingness to bring about a change. Sorry for being a doom-monger, but I feel that the power sector is going to drag the country down.

Even if God commands,"Let there be light", the EB can say, "No, there shall be load-shedding".

T T Ram Mohan said...

Point taken, Raj, but let me just say this: power shortages, it was widely believed through the nineties, would constrain India's growth rate. Yet India's growth rate has accelerated to 8-9%. I don't believe that the outlook for power today is worse than it was in the nineties.


Raj said...

ram, true, but the growth has happened because a)industry has invested heavily in captive power plants. Every single kg of cement in the country is produced using captive power. this, by itself, is not wrong, but many other sectors can't do the same thing b) load shedding on a massive scale has taken place, especially in the rural sector,condemning the latter to remain in the dark ages.

The feeling that 'we are no worse off now' than in the nineties should not give us satisfaction.