Power Grid Shares Drop 3% Amid Lower Dividend Outlook for FY26.

Market Performance

Power Grid shares dropped by nearly 3% on May 21, reacting to the company's latest financial disclosures and forward-looking statements.

The decline in Power Grid shares was triggered by the management's announcement regarding a potential lower dividend payout in FY26 to meet rising capital requirements for upcoming infrastructure projects.

Main Update

During its earnings call, Power Grid Corporation of India Ltd (PGCIL) highlighted a strategic shift in financial planning, emphasizing the need to retain more equity internally.

This shift comes in response to the company's expanding project portfolio and the anticipated capital expenditure of ₹28,000–₹30,000 crore in the upcoming year.

The management clarified:

"We have more projects now and will need more funds for execution. Hence, dividend payout could decrease further next year."

The company shared its plans for improved execution of delayed projects, citing the now-improving adoption of the government's Right of Way (RoW) guidelines across states. These delays had previously slowed down the pace of transmission infrastructure development.

Company Financials

Here's a breakdown of key financial takeaways regarding capital allocation and dividends:

Dividend Payout

• FY25 Dividend: ₹9 per share
• FY24 Dividend: ₹11.25 per share
• Outlook: Expected to decline further in FY26 due to capital funding needs

Capital Expenditure

• Projected Capex for FY26: ₹28,000–₹30,000 crore
• Capitalisation Aim for FY25: ₹16,000–₹17,000 crore
• Actual Capitalisation: Fell short due to supply chain issues and workforce shortages
• Capitalisation Target for FY26: ₹23,000–₹25,000 crore

Company Overview

Power Grid Corporation of India Ltd is one of India's largest power transmission companies, playing a extremely important role in strengthening the country's energy infrastructure.

The company is currently facing challenges in execution due to the supply chain disruptions and a shortage of skilled workforce, both of which impacted project timelines in the previous fiscal year.

However, with smoother implementation of Right of Way policies, Power Grid expects to accelerate its project delivery in the current financial year.

Summary

• Power Grid shares declined by 3% following news of reduced dividend expectations for FY26.
• The company plans to retain more earnings to support a capital expenditure of up to ₹30,000 crore.
• Dividend per share dropped from ₹11.25 in FY24 to ₹9 in FY25.
• Power Grid aims to capitalise ₹23,000–₹25,000 crore worth of projects in FY26 amid improved policy adoption and execution capabilities.