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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, I'm Mrinal Shrivastava, Company Secretary of Power Grid Corporation of India Limited. I have the privilege of introducing our Board of Directors, they are present here. We welcome Chairman and Managing Director Shri K. Sreekant. Right to him is G. Ravisankar, he is the Director of Finance and Chief Financial Officer. Beside him, we have with us Shri V.K. Singh, he is Director of Personnel. Our Chairman and Managing Director is joined with Director of Operations R.K. Tyagi, he is left to him. And then extreme left, we have with us [ Shri B. Anantha Sarma ], he is Executive Director of Corporate Planning, Materials Management and Contracts. Ladies and gentlemen, please, I request you all to give a few minutes our corporate movie. Please.
[Presentation]
Thank you so much. Now I humbly request our Chairman and Managing Director to address the gathering, which is speech please.
Hello, good morning. I think that was more on the context-setting video than a corporate presentation. Thank you for your time. So I'll just briefly talk about power grid, the major highlights of this last quarter, performance overview for 22-'23, outlook. I think now we have grown to be 37 subsidiaries. [Technical Difficulty] So 37 subsidiaries showing the growth of TBCBs in our fold. 174,000 circuit kilometers; 272 substations; 97,290 of interregional transmission capacity; system availability, we will talk a little later. About 45% of the power transmitted goes through our network in the country. This year, we acquired 12 plus one, 12 ISTS and 1 intrastate transmission companies under the TBCB bidding, about INR 1,200 crores of tariff. One of the highlights in our operational performance for the year '21-'22, there is the benchmarking by ITOMS, International Transmission Operators, I think. And there, we got to be the best utility in terms of transformer maintenance and third best in terms of vegetation management. I have a slide on this going forward. One of the major achievements is that we transmitted 6.6 gigawatts from Chhattisgarh to Southern region through our Raigarh-Pugalur link. This is, I think, the highest through a single line in the country, and we are very proud of this because this line was commissioned during the pandemic in very difficult times. And it is serving its purpose well.
Coming to the performance highlights of 22'-23'. First, on CapEx. We have done capital expenditure of INR 9,200 crores against our target of INR 8,800 crores for '22-'23. And we have capitalized INR 7,413 crores of assets, both the numbers on a consolidated basis. Power GRid Medinipur unit, this is in West Bengal, Bihar Jharkhand. This system has been completed. Both transmission has been completed. This was critical for our evacuation from Gujarat. Rampur Sambhal intrastate transmission project in UP and Bhind Guna, this is an intrastate transmission in Madhya Pradesh, both these have been completed in this year. So we added 29,000 MV of transformation capacity, 9 new substations and 2,972 circuit kilometers of lines.
Operational performance, we maintained consistently 99.8%-plus availability. 99.75% is the threshold for incentive, as you are aware, and we have been consistently above that. In terms of reliability, trippings per line per year have come down from 0.34 to 0.27 in '22-'23.
Yes, this is the ITOMS ranking, International Transmission Operation and Maintenance Study. This is an independent study of participating transmission utilities all across the world. I think about 26 such utilities have participated. And this measure just performance on 2 parameters, cost and efficiency. So Power Grid is in the top quadrant, best performance quadrant of high efficiency and low cost, both for transmission lines as well as substation maintenance. So we are one of the 6 utilities globally who participated in this study and are in top quadrant. And we are very -- it shows the best internationally comparable performance parameters of Power Grid in terms of asset management and operation. Some of the technologies we have adopted, we have adopted this [ methanol market test kit ] for assessment of the insulation of our transformers and reactors. We have introduced resonate [indiscernible] bushings 765kV. These have been introduced in the land reactor at Satna. And then we started with a model for detection of line defects through AI and ML. So we created in-house model, which will identify, based on image processing, the defects. So we expect this -- right now, it is in demo version, or what is the -- before we go for -- it is in the proto kind of a thing, it is having an accuracy of more than 70% in this, and we are expecting it to come full-fledged in the current financial year.
Financials, you have already seen. We have released the numbers on Friday. So I'll not dwell much into this. This quarter, we had a consolidated income INR 12,557 crores, 13% growth, PAT has gone to INR 4,320 crores. Annually, the revenues were INR 45,968 crores on a stand-alone basis and INR 46,605 crores on a consolidated basis. And consolidated profit has been INR 15,417 crores. Last year, we had an InvIT monetization program, due to which the profits were higher by about INR 3,700 crores. This year, you won't see that. So if you adjust for that, still, we have a good 10% growth in the profits. These numbers are more for record. In terms of our capital work in progress, as of March 31, it is about INR 14,752 crores. Our debt equity has improved from 63-37 to 60-40. Return on net worth is 18.57% compared to 18.89% last year. And EPS has been 22.10.
Some of the other key data which you seek, we have put it here, that will be available on the net shortly. I think major is the surcharge income, it has come down this year, INR 182 crores compared to INR 375 crores. Incentive has gone up INR 544 crores. And then, yes, average cost of borrowing remains at 7.5%, marginal increase, maybe 40 basis points to 50 basis points compared to last year.
Dividend, we have increased the payout from 60% to 67% just to maintain the INR 14.75 which we gave last year. And we are balancing the requirements for our CapEx, the equity infusion and also the payout. As we mentioned several times in the past as well, we don't want to keep adding cash. So to the extent we need, we will retain the equity and then we'll continue to distribute.
Telecom, 1 of the major segments we have other than Transmission this year, the income has been INR 729 crores. One major development, CERC has approved the formation of subsidiary and transfer of Telecom business to the subsidiary. So we hope that by next quarter, we should be seeing the Telecom business hived off into a separate subsidiary. ILD connectivity also, we have got the licenses, we have got the equipment, and we are going to start this business as well. So we expect to give more focus to the Telecom business in our quest to cross 4-digit turnover through the separate subsidiary. Consultancy, we have again formed a subsidiary, Power Grid Energy Services Limited, we will transfer these consultancy businesses and also the various other businesses such as metering and operation maintenance, solar into this new subsidiary.
Coming to commercial performance, INR 44,000 crores of billing, INR 43,688 crores of realization, about 99% realization. We improved in terms of better days significantly. The onetime settlement of the late payment surcharge rules, whatever has been settled through that scheme, we have been receiving very regularly.
In terms of the works in hand today, it's about INR 50,000 crores, ongoing RTM, about INR 11,500 crores, new [indiscernible] where we are yet to give the investment approvals, 25,000 allotted but yet to be taken off. TBCB projects under execution about INR 13,000 crores. Again, we have targeted this year about INR 8,800 crores of CapEx, but I think there is a potential to push this up.
Overall, if we look at the sectoral growth opportunities, as you are aware, there is a significant push for the renewable generation installed capacities and transmission plan for 500 gigawatts up to 2030 has been drawn and released by the government. So adjusted for the projects which have already been bid out, we see today by 2030, an opportunity of INR 1,90,000 crores in the inter-state transmission system; about 1,96,000 crores in the intrastate; cross-border transmission, about INR 20,000 crores. And then there is on top of it, whatever green hydrogen requirement is there. So for that, there will again be transmission. So by and large, we see sectoral investment in excess of 4 lakh crores in the transmission sector in the next 7, 8 years kind of a framework. So that shows definitely a significant opportunity set for the company, even after we factor for TBCB and the competition. Of course, there are other areas which are pursuing, I hope, the solar generation, we will be able to start something this year. We have invited bids in '22-'23, but then we got a higher price. But now with the change in the rules for sourcing, we expect better prices. We have already invited the revised bids, they are under consideration. Smart metering, we have given the offer for 67 lakh meters to Gujarat, it is under consideration. We hope that it will be soon settled so that we can start this work. International transmission projects in developer mode, we got the approval from the Kenyan government for a PPP mode project in Kenya, about $250 million investment in association with the Africa50. So we are now entering into the project development phase with the [indiscernible]. Few of the awards Platts Global Energy under corporate impact, it will response category, ATD for talent development. That's one of the best companies to work for in India. Then CSR World Lead reward, Best Organization For Women 2023 by Economic Times. So I conclude here with my presentation. Thank you for your patient hearing.
Thank you so much for CMD Power Grid. Now the floor is open for interactive session. I request the participant to please introduce themselves with the name of the organization they are associated with before asking the questions. Thank you so much. Please.
So good afternoon. I am Mohit Kumar from ICIC Securities. So my first question is on the transmission CapEx. As you said, 4 billion number, which includes the interstate, intrastate and the cross-border. My question is, the government has lined up 2.4 trillion, which is for renewables. So how do you marry all this number with 2.4 trillion? Secondly, do you see the intrastate transmission activity picking up? You're still talking about 88 billion CapEx in FY '24, while the requirement is, as per your projection, roughly 500 billion. So when do you expect this number to go up for us and the industry?
Well, the -- now when will this intrastate transmission come into play? There are -- right now, UP, for example, is coming out with 3, 4 bids for intrastate transmission. But some of them are doing it on their own, and it is a bit delayed. Intrastate is quickly coming, [ vary with the pace ]. But intrastate, I'm not able to put a finger and say it will come so quickly or not. But overall see INR 8,800 crores which we targeted was kind of based on last year's estimate, so to say, when all these projects have not yet been fully decided. So that's why I'm saying I'm optimistic that when the revised estimates are made, we may increase this CapEx.
So the related question is that are we seeing transmission bidding acuity picking up massively in FY '24?
Definitely.
So what kind of number, your ballpark number you can talk about?
It is very difficult to put a ballpark number because it is a function of the projects which come and how much we will win in TBCB mostly. So -- but I'm very sure that there is a secular increasing trend in the transmission investments.
So second question is on the monetization, right? We have been talking about for these last few years. But are you hopeful of doing any monetization? Or is yourself, are you looking for alternate opportunities to monetize?
We have. Then the issue is monetization of cash flow. So in the first tranche which we did, the NMP was not then released. So we transferred the shareholding to the [ invIT ] of 5 operating assets. After the NMP has been released, there has been a very subtle shift in the stance that ownership will not be transferred. There will be a transfer of rights to the cash flows and then the whole set should come back to the original owner and so on and so forth. So in that metrics, we found rather than in InvIT model, securitization of cash flows to be a better opportunity. More cost-effective, easy to do transactions. So that is what we have done this year. We have raised more than INR 3,400 crores, INR 3,400-plus crores in this year through securitization. So monetization, securitization. I mean, it's fundraising ultimately at the end of the day. Whether we use the InVIT model or not, going forward, we are not very sure about it. In the sense that we have to evaluate at any given time what is the cost of funding, what is the government policy framework for that, and then take that call. So at the current moment, securitization is a better option, which we have done.
So lastly, on the consultancy income. Revenue is negative for the fourth quarter. What is the reason?
So there was a certain change in the terms of one contract with the government with retrospective effect so we had to make adjustment for that revenue.
Had this an impact on profitability?
Definitely.
How much, can you quantify that?
About INR 150 crores. INR 150 crores this year, yes. That is last -- past amounts.
Ramesh Bhojwani from [indiscernible]. First and foremost, your presentation is all encompassing. It has covered each and every detail and every aspect of the company. And very heartening to see that you have registered a growth of 12% in the top line and a 10% in the bottom line. I would like to know will this be improved upon in the coming year, or will it be maintained at the same levels?
It is a function of our asset tradition and also I don't think -- I mean, double-digit growth, 10% continuously is difficult to maintain. Let me put it very clearly.
But But top line of 12% is...
No. No.
Okay. Second thing you mentioned, that you are in the process...
We should be seeing around 7%, 8%, kind of growth.[indiscernible]
Second thing is, sir, you mentioned you're actively executing or pursuing the 67 lakh smart meter order from Gujarat. Because smart meters, I believe, are a need of the hour, looking at the T&D losses or putting it plain and simple, power trips happening all around the country. So why only Gujarat? Why not on an all-India basis, let tender be floating or putting these meters reinstalled.
We have a joint venture called EESL. It has another -- [indiscernible] has a joint venture called IntelliSmart. So this IntelliSmart and EESL, both are into smart metering business. We have been mandated by the government to put up INR 1 crore meters under nomination rule, so that is how we have gone to Gujarat. So we have a demand for about 67 lakh meters there, we are pursuing that.
Okay. And lastly, are you -- as you have isolated and separated, created a telecom subsidiary and a consultings company subsidiary, are you intending to take both these subsidiaries public going forward in the coming year?
That is premature at this stage. Let us see how they go, how they do this. It is -- Telecom definitely has a certain potential.
So this is Rohit from Antique Stock Broking. So you said something about the data center business and international transmission projects in developer mode. Could you show some color on it, what exactly the opportunity size, the quantum, the numbers, that would be really helpful.
In the international transmission, we are pursuing 2 opportunities, 1 in Kenya and 1 in Tanzania, okay? Tanzania is still behind. We are engaging with the authorities. But in Kenya, it is much more advanced. We have covered a lot of ground, and we got the in-principle approval to start with the discussions for contractual documents and all for the transmission system in Kenya. And the investment there is about $250 million. So we will be having, I think, a 40% stake. And Africa50 will have 60% in SPV equity. So this is the opportunity set. What we are now required to do is -- we have given a definitive proposal to them. So we have to now negotiate the transmission service agreement, payment security and things like that and execute it once we get the final approvals. Tanzania, I think is about -- investment about $400 million. So that is about $400 million, but then it is still at an early stage. Besides these, there are no concrete proposals which we have. I mean this is -- we are eager to do in Africa, but then we want to go with Africa50 or some where the risk of that investment is mitigated either implicitly or through some agreements. So that is one. As far as data center business is concerned we got approval of CERC to set up 1 at our Manesar complex. So that is -- we are in tendering stage. Once we have a certain grip on it, then we would like to pursue it further. So -- but relative to our transmission, this is not going to be a very significant business. But within the Telecom, it will be significant. So that idea is that because it is remaining within the larger balance sheet, it is not getting the due attention. So once it goes into a separate company and their own revenue targets, so they should be able to push this further.
Just to add on this, if you could touch upon even that solar generation part, how big is that number that you're strategically pursuing?
We have a bid right now for 85 megawatts in Nagda, Madhya Pradesh. As I mentioned, we did one round of tendering, but the prices were a bit high. So with the change in procurement, we have again gone for tender. In addition, another 100 megawatts at 3, 4 sites together is there. So overall, we have about 260-odd gigawatts -- sorry, megawatts, which is available and which we want to pursue. So our target is to get 50% of our total energy consumption through renewable sources, either in-house or through contracting, by 2025. So this is also part of our [indiscernible] initiatives to take it. We have today -- how many? 6 megawatt.
Around 8.5 megawatt.
8.5 megawatt of solar -- rooftop solar in different locations, but those are all smaller installations.
This is Subhadip here from Nuvama. I have 2 questions. Firstly, on the HVDC projects, would you be able to give us an update as to how do you see those 4 large HVDC projects coming up in terms of tendering and ordering activity?
I think they will come for tendering sooner. I think one of them is under reconsideration whether it should be HVDC or not. At the Fatehpur-Bhadla system, that one is more likely to come sooner for tendering. Globally, HVDC demand is very high right now. So it will be quite a challenge to -- with the time lines also. Because in Europe and all, because of RE integration, offshore, there is a lot of HVDC demand. And suppliers are only 2, 3. So it is a challenge.
So do you see the domestic suppliers of HVDC technology not really having the ability of facing some kind of technology shortfall in case these do come?
No, no. There is no technology shortfall. No, no, no. Don't mistake me. There is no technology shortfall here. It is the capacity constraint. It is the manpower constraint, which can come in the way of meeting these tight time lines, because global demand is very high.
Understood. So we understand that the Leh-Ladakh project might take some time to come in terms of ordering. Is there any other project that you mentioned which is now being reconsidered as...
Leh-Ladakh is right now studies are going on. We have to do field -- what is called front-end engineering and design study, field study, okay? Typically, we used to in the past, award the contract and then this design used to take place, okay? But because of the harsh weather conditions, geographical conditions of that place, it is not possible to give a good bid without doing much of these design aspects first. So we have engaged Hitachi as well as Siemens to do the study. So they are doing this study in 2 parts. First part, they will do the system. That is the network studies. Then they will do -- because in that location, there is a lot of inverter-based generation. It will be wind, solar and then there will be battery. So all these 3 inverter-based will interact with the HVDC system and the network. So there is no other source of power there. So because of that, they need to do detailed network studies first to determine the parameters of their system. And it is each unique to each service provider. So that is one. Then they will do studies to design the IGBT, the controllers and the other equipment, the hardware. Because it has to operate in those temperature conditions, there is issue of cosmic rays and so on and so forth. So they have to decide. So these 2 studies will take place, then they will be in a position to freeze their technical parameters to make a good bid. So the work is on. It is not that work is not on, work is on. But the only thing is, we don't have a proper bid and price and ordering and all in the conventional sense of it. Otherwise, we have placed 2 orders, 1 order on Siemens and 1 order on Hitachi to do the studies. And we are paying them a good amount of money for it.
Understood. Which is the project that you mentioned is now being reconsidered, is it the Khavda project?
I think the Khavda project. I have to check that.
Okay. Understood.
I remember that -- 1 HVDC?
Right, yes. It's from Khavda to Akola.
Understood.
Khavda-2. KPS-2.
Understood. Last question from my side, you also had some plans of partnering with DISCOM, and partnering on the CapEx side of DISCOM, so the intrastate CapEx. And I think there were some discussions on.
They have not taken off.
Yes. I stand corrected, the Tanzanian investment is about $300 million.
[ Savariya ] from [indiscernible]. I have a couple of questions. The first one is from the stage like the smart meter project that you took based on the last call's data, you shared that the project CapEx would be something around INR 5,500 crores to INR 6,000 crores. And we would be generating an income of something around INR 700 crores on an annual basis. So don't you think it's a bit of ROE-dilutive? And I just wanted to ask, based on this, like whatever projects or CapEx that you are doing, what is the IRR that you are targeting or the payback period that you have in mind before you take any project on an average? What is the rule that you follow? And the second question would be on the debt schedule, like the current debt that we have, are we comfortable on it? What are we looking in the next couple of years? And what could be our peak debt in the CapEx or the cap line? That will be all.
As far as smart meters is concerned, relative to our size and all, it is not a very big opportunity, but it is not ROE-dilutive. It is certainly not ROE-dilutive. It doesn't require so much of investment also. That is what we realized. Because the moment you install the meter, it will start earning and so on. So there is a lot of cash flows, which it throws up. So it is not ROE-dilutive. As far as the current -- I mean payback period is quite long for a transmission asset. I don't think payback is the right measure. But as far as returns are concerned, because of competition, we have to go with the market. We cannot have a targeted benchmark like ROE 15.5%, we will do the project, otherwise, we will not do the project. No, that will not work. We have to see what is the current market condition and fight accordingly because it is all compatibility. And peak debt, I think, peak debt we have already crossed in a way because today, we have 125,000 and 60-40 and 30-50 ratio. I remember, we used to be around close to 69 kind of numbers also debt-equity. So we have pared down quite a bit. And not only repayments, but also internal accruals and then the declining capital investment, all this have contributed to this improvement in debt-equity ratio. So absolute number may go up a bit down. That's not the key measure. But in terms of the ratio, we have crossed the peak.
Okay. So you said that we do competitive bidding. So there's no ballpark number that we can give on returns. But something like -- so if you could just give me an average, so what was the average returns on whatever CapEx you took in the last 3 to 4 years? And what could be the assumption in the CapEx...
The last 3 year results are before you, so you can make an assessment what we are making or what we are not making. I'm not going to give any number on that. And I'm not going to even disclose what is the kind of rate of return for which we are targeting or bidding. It is a competitive market out there. We have to get the market share, we can't leave the market totally out and wait for the best returns we have in mind. So whatever market is offering, we have to take it and then wait for opportunities.
Sir, I'm Atul from Citi Research. Just a couple of questions. Could you elaborate on capitalization plans for FY '24 and '25?
Okay. I'll just mute -- any other -- next question?
And sir, my second question is on your comment regarding the asset monetization strategy. So of course, securitization is an easier way. But after all, it remains a debt on the balance sheet, while injection into InvIT, the money comes as equity to the company. So what are your thoughts regarding that difference between debt and equity?
Yes. '23, '24, we are likely to do about INR 11,000 crores of capitalization, okay? INR 10,000 crores to INR 11,000 crores of capitalization. Between -- if you do transfer to InvIT and all, then there is a counter to it in terms of it hampers the growth, there is no growth and continuous cash flows will not be there. So -- and that is not all that bad. We have only 60-40. We have the capacity to take that debt. And it doesn't matter in TBCB how much you do inject or you don't. So why we should be -- I mean, it's not that, that is to be avoided. We are not highly levered that we need equity, okay? We are generating enough internal resources. So as on debt from purely cost of funding point of view, securitization is more beneficial, okay? The margin or the delta between raising through InvIT and raising through securitization is a bit steep today compared to what it was when we did the first transaction, okay? So we believe today, this suits us better. It is good for the company. So we are adopting this.
And sir, one more. For financial year FY '25, I know obviously, CapEx and capitalization numbers would not have been frozen as of now, but could you qualitatively comment, could we see, say, a substantial increase from this INR 9,000 crores, INR 11,000 crores number? Or will it likely be in the ballpark of, say, 5%, 10% only?
No. It should be higher than that. It should be higher than that. That is what the first question was about. So we believe that '24-'25, '25-'26 should see a substantial pickup in the CapEx. Because that will be required to support the kind of RE expansion that is planned. So definitely, it will be there.
Sir, Girish from Morgan Stanley. Just on your international business that you just spoke about, a few clarification. Is this a dollar tariff? And the $250 million, is that 100% of your stake? And the third one was...
$250 million is the project size. You will not get so big a stake. Dollar tariffs. So dollar tariffs...
Okay. And what kind of returns should be normalized? Will it be in line with your regulated returns or it will be lower than that number?
See, in Kenya, there is no concept of regulated returns. So we have to engage with them. We have been engaging with their regulator about the availability-based tariff for transmission. Otherwise, there is a system of payment on a per-unit basis. So we said that won't work, you need to adopt the Indian system of payment on availability. So that in principle, they have agreed. But those contours have to be drawn and also -- but let me put it this way, that our partnership with Africa50 has been on the fundamental that the returns are much attractive.
And how soon do you close this -- like, I mean, the form approvals come...
This year, we are targeting to do the financial closure for the Kenyan project.
So it will be executed over next 2 years, FY '25 and '26?
2 years, 2.5 years, it should be executed.
Last 1 or 2 questions, please. Otherwise -- yes, over there.
Sir, this is Deepika Mundra from JPMorgan. Regarding the bidding pipeline. I think last time you had mentioned that you're looking at close to INR 60,000 crores of new project bids coming up. And of course, last few months, you've seen Power Grid win a substantial number of projects. Can you give us some color as to how does the big pipeline look for the next couple of years? And in terms of the competitive intensity and number of players that you see participating now, is there any difference?
In terms of competitive intensity, there is not much change. There's not much change. Though there were 2 projects recently, I won't take them as indicators, there were only 2 bids. But those are very small projects. So I don't -- I won't draw much meaning from them. There were only 2 bidders in those 2 projects. The projects are very difficult and very small, so I don't think -- in terms of our bidding pipeline -- just a minute. About INR 30,000, INR 35,000 crores is -- INR 31,000 is under bidding. INR 31,000 is right now under bidding. So it is continuously coming.
And sir, any update on when are we likely to see the CERC tariff for the next 5-year block in terms of when are you expecting the first draft paper to come?
Can you comment -- they will first issue an approach paper, then a draft regulation and also -- they are working on it. Maybe -- typically, they issue the regulation January. So...
Okay. Thank you.
I'm very happy this year, or this block, we have not started the discussion on ROE yet.
That's good to know.
Last block, even after -- soon after 2 years, I had to start answering it for 3 years.
Sir, this is Sudhanshu Bansal from JM Financial. Sir, in Telecom business particularly, how do we see monetization of this opportunity? And next 5 years, what is the horizon for that?
No, Telecom, we are not looking to do any monetization.
No, no, monetization in the sense -- I mean the opportunity -- like do you see an opportunity.
Opportunity is good. Telecom opportunity is good. See, we have about 80-plus thousand kilometers out for [ PGW ]. Our network is on top of the towers. So it is rodent-free and it is very reliable, near-100% backbone availability we are giving. So we have good set of customers and we are increasing it. Our target is this year to get INR 1,000 crores income.
And like, I'm just interested in knowing the long-term reason, like how we are going to capitalize on this so much of assets we have? And the time? Like today, it's INR 1,000 crores, like I said after 5 years, how much it will be?
It's very difficult. I mean I won't hazard such number. But the issue is there is an increasing demand for quantum. But the prices fall. Telecom is such a business that the prices continuously fall, 10% discount is like a norm. So it's very difficult to kind of project that will become 100%, 200% like that. And I won't hazard such guess. But the idea to separate it out is that, one, to insulate from any kind of some future shock like that AGR. And second, to give more focus and kind of see that growth and whether at some good time, we can take it out public or do something. So that's kind of opportunity is there.
Yes. Hi sir, it's [indiscernible] from JPMorgan. I just want to understand a bit on the capitalization front. FY '24 capitalization, you are still making it [ INR 110 billion ], despite a sort of mix in FY '23. And I understand it's a project business. Therefore, there could be some spillover effect. So should we understand that maybe applicable into full guidance is sort of conservative and there can be an upside over there?
Sorry, what, CapEx or capitalization?
On the capitalization front.
Capitalization? We gave INR 10,000, INR 11,000 kind of guidance.
I mean the reason I'm asking this question is because FY '23, there was a miss. So this is below where ideally it should have picked up in FY '24. So...
That is factored here.
That is sort of factored here. Understood. And sir, on the receivables front, I can see sort of improvement. Is it driven by the Pugalur project where there were some pending receivables? Or...
Pugalur project, there has been final tariff order. So we've got the money. The late payment, such as rules, the rules and the subsequent payment system, it is working well. So we are getting all the money. Whatever arrears for Pugalur, they also settled that.
Understood. Sir, lastly, if I may ask one more question. On the fair benchmarking that you -- based on the study. If I look on the substation front, I think there is still some scope for improvement compared with peers, correct me if I'm wrong. And given the substantial RE integration that needs to be done and with significant CapEx out there on the substation front, do you see some scope of improvement? Or if you can also throw some color on the competition within India or there, how we rank in that front.
No, substation front, you are very right in terms cost, we are closer here than that. Now we do -- so we are trying to make efforts in that direction. It's a continuous process. Actually, we are also reviewing -- and maybe you can supplement in terms of what we are doing to reduce cost. You have been very quick to catch this, I must say. And actually, it is comparative studies. If we do better, other utilities also do still better. So to maintain a very efficient at low cost is a challenge. However, with the technology, we are trying to optimize our cost. For operations, all stations are remotely operated, remotely controlled as of today. And now we are working in direction of patrolling by helicopter, patrolling by drone. And even for transformer and breakers. Asset health indexing, we have introduced. So we are hopeful that our performance and our efficiency will further improve. So by that way, we can still improve the efficiency and cost for substation equipments also. Substation, big cost in manpower cost, okay? So on manpower cost, you can -- you cannot reduce beyond a point. So we are trying to do through TBCB, how we are trying to -- that is the reason to shift it to PESL. Through PESL, we will adopt a model which can have more outsourcing, more -- different wage structure so that we can reduce the cost. So that is one idea.
Sir, just on that, I mean, how do we compare with the peers within the -- in terms of competition, essentially, in TBCB projects out here? If you can throw some color on that.
How do -- how do we compare? I will not compare, but we are fighting for the market share. And then we are trying to evolve our business model in terms of what manpower deployment, what kind of maintenance practices. We have identified a few elements of costs which are high in our case structurally because of the, say, for example, security. We have to follow certain security protocols, certain sourcing of security services, and that pushes up the cost. So we have to navigate through that and find ways. And if we cannot reduce it, then we have to sacrifice something else. So I mean, it is -- overall, of course, there is always a constant effort to identify, because O&M cost is a significant part of the tariff. It moves the tariff significantly.
If I may squeeze in one more question. Sir, just on the TBCB front. So how is the -- how do the lenders differentiate between your RTM projects and TBCB projects with respect to interest rate differential or terms?
Why do they have to differentiate?
Okay. So essentially, you mean to say the terms and rate of interest remain the same?
Yes. I mean, we are giving them the balance sheet. How does it matter whether we put it in the TBCB or on the RTM or where do we do?
Got it, sir. Thank you very much.
So we can conclude?
Thank you so much for so much of active interaction with our team of Board of Directors. We would like to convey that our lunch, you are all invited to the lunch. It will start -- there's a little bit of time in that we will start at 12:30. So stay with us, and if you want to further interact, you are most welcome. Thank you.