The net profit of Adani Transmission, India’s largest private sector power transmission company , fell by 38% year-on-year to Rs 99.5 crore in the September quarter on account of higher interest outgo. The management expects to cut interest expense in the next two quarters following debt refinancing. This along with expansion of its transmission network is likely to retain investor interest.
Interest cost as a percentage of operating profit (EBITDA) increased to 53% in the September quarter compared with 40% in the previous quarter. The total debt in the September quarter was Rs 8,803 crore.
The average interest rate is likely to come down after the debt refinancing at an attractive rate by using instruments such as masala bonds and US bonds of 10-year maturity. The company said in a conference call after the September quarter earnings announcement that the average interest rate is expected to fall by around 150 basis points to 9.66% from nearly 12% in the first half of the current fiscal, thereby improving net profit in the coming quarters even though the outstanding debt will rise by nearly Rs 800 crore.
The company is on track to double its transmission line in the next three years from 5,050 circuit kilometers (km). Recently, the company has acquired 384 circuit km line from GMR and 3,521 circuit km from Reliance Infrastructure. This will help the company to reach the 10,800 circuit km target by FY19. The company aims at a market share of 1820% of transmission capacity as compared with 7%, currently.
A power transmission company earns revenues based on the fixed 15.5% return on equity(RoE) deployed for a project and can add expenses such as depreciation, interest charges on normative loans, interest on working capital and operating and maintenance (O&M) cost. Given that most of these projects have a life of 35 years, increasing transmission lines provide revenue visibility and stable cash flows for the long term. Wesley Johnson Womens JerseyShare This