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Transmission & Distribution Update




Kisan Ratilal Choksey Shares and Securities Private Limited


17 Apr 2014





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Transmission & Distribution Update “Subdued ordering in FY14; However competitive intensity much lower as compared to FY12” PGCIL Contracts awarded PGCIL awarded contracts worth Rs. 10,765 cr in FY14 vs Rs. 16,124 cr in FY13 (FY13 includes single order worth Rs 2,495 cr 800 Kv HVDC package awarded to Alstom Grid UK). Award of contracts has been weak from PGCIL on account of increased focus on execution of projects. Lag in orders in transmission tower space lead to overall decline. For the month of March 14 ordering stood at Rs. 1,012 cr vs Rs. 729 cr in Mar 13. Breakup of disbursement On an YTD basis transmission orders constituted major portion i.e. 40% of the total contract awarded, while substation orders constituted 24% of the order outflow followed by conductors’ order constituting 11%. Transmission Tower Orders Transmission tower ordering activity was muted post Nov 13. Dec 13 and Jan 14 saw two small contracts been awarded. In the month of March it picked up marginally with PGCIL giving out contracts worth Rs. 422 cr. For FY14 PGCIL awarded Rs. 4,322 cr worth of contracts vs Rs. 6,934 cr in FY13. Companies under our universe secured orders worth Rs. 1501 cr of the total orders (KEC: Rs. 866 cr, Kalpataru: Rs. 636 cr, Jyoti: Nil) vs Rs. 3,481 cr in FY13. Competition Analysis in Transmission tower orders • In FY14, 25 participants participated in 23 tenders which were opened during the period. Number of participants have remained on lower sides; which is a trend continuing from FY13 (In FY13 number of participant were 25 players in tenders opened v/s 50 players approximately participated in FY12). • In FY14 range of participant per tender remain on lower side. After rejection by PGCIL 52% of the tenders in FY14 had less than 5 participants per tender; which is similar to FY13 statistics ( in FY12 84% of the tenders had 6 or more participants). • Rejection rate by PGCIL had increased in last couple of tenders opened in FY13, this continued in initial part of FY14. PGCIL Rejected bids from Gammon India, Jyoti Structures, Tata projects, Emco, Hythro power corporation, among other. However, PGCIL stop rejecting bids from Tata projects from August 13. Post acceptance Tata Projects has won 3 projects of 6 tenders in which its bid was accepted (Single stage two envelope - SSTE). Post acceptance of bid EMCO also won all 3 projects (Oct) it participated. This suggest aggressive pricing by such players who bids were earlier rejected. Whether other players (whose bids are still being not accepted) follow such strategy would be a key thing to watch out for. • In FY14 KEC secured maximum share of orders – Rs. 866 cr (20%); followed by Tata Projects – Rs 771 cr (18%), Kalpataru power – Rs. 636 (15%) and EMCO - Rs. 619 cr (14%) , L&T – Rs. 558 cr (13%). • Bid success for KEC, Kalpataru & L&T was 25%, 10% and 15% respectively; which suggest these players have not priced bids aggressively. • In our previous report we mentioned Jyoti Structure bids got accepted for Contract id 1491 and 1492 (both under single stage two envelope). However, we noticed that Jyoti structure name was absent in the list of Responsive and qualified bidders for the same tender on opening of first envelope. In respect of SSTE the price envelope of such bidders whose capacity gets exhausted in the intervening period are not opened. • In FY14, We believe competition has picked up as compared to later half of FY13 and initial half of FY14. However; we believe compe...

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