Company Name:

POWER GRID CORPORATION OF

INDIA LTD

A. Industry Analysis and Competitive Advantage Analysis

Question 1. A clear description of the business model of the company. Use diagrams in
addition to narration.

Key Partners Key Activities Value Proposition Customer Customer S

 Powerli  Power Grid Relationships
nk’s Corporation of  Strong base
Trans
 Power  State El
System India Ltd. takes
mission  Value driven Board
Manag continuous
Limited
ement action regarding  Custom  BPOs a
(Transmission
system  Transmission operation and er need MNCs
associated with  Domestic maintenance to identifi IBM an
Tala HEP in Consultancy seek to ensure cation Ericsso
Bhutan – under compliance with
successful
 Telecom
prescribed
 Analyses and  Media l
operation since standards as prioritization of  Major T
Aug’ 06.) inputs.
 Torrent
well as to Service
POWERGRID Key Resources achieve high Channels & ISPs
 Inter-State and other availability of
Limited
the system for
Relian
(Transmission transmission links
may be owned by uninterrupted  Upgradatio Commu
System associated
with 1100 MW other independent power supply to n of idea an
Sugen generating entity (Ex: PGCIL). customers. distributio
project at Surat --  State Electricity Boards n network
 Power
progressively Can Import or Export a
pre decided amount of Grid’s  Rural
commissioned in
Mar’11.) power from neighboring multiple electrification
 Jaypee states or generators supply lines  Developmen
POWERGRID owned by other entities improve the t of Anti-
Limited like National Thermal quality of
Power Corporation. Theft
(Transmission power.
system associated Increasingly, measure and
with 1000 MW the role of grievance
Power Project at transmission addressing
Karcham-Wangtoo mechanism
is changing
in HP -
progressively from mere  Automation
commissioned in evacuation of billing
Apr’12.) of power to  Reduction
 Parbati-Koldam developing
of technical
Transmission the
Company Limited electricity distribution
(Transmission market. losses
Lines associated Better
with Parbati-II (800
availability
MW) and Koldam
(800 MW) HEPs. of power and
- Progressively choices of
commissioned in purchase
Nov’15.) will attract
 Teesta valley more
Power consumers.
Transmission  The smart grid is
Limited expected to
(Transmission
provide benefits
System
 associated with to Utilities,
1200 MW Consumers &
Teesta – III HEP society in terms
in Sikkim.) of economy,
efficiency and
environmental
safety
 POWERGRID
with its
brand name
‘POWERTEL’
in Telecom
business is the
only utility in
the Country
having
overhead optic
fibre network
using Optical
Ground Wire
on power
transmission
lines.

Cost Structure Revenue Streams

 Equipment cost of lightning arresters,  POWERGRID's telecom company,

power transformers, circuit breakers, POWERTEL, operates a network of 29,279
insulators and potential transformers etc. Kilometers and points of presence in 210
 Design layout cost and Transmission cost locations across India.
 Joint Venture Costs  Consultancy
 Economies of scale  Telecom
 Interest on debt
 Distribution cost

Question 2. A brief industry analysis (not more than 1500 words) touching upon the
domestic and global scenarios in terms of growth prospects and emerging technological
trends.
Power Grid Corporation of India (PGCIL) is a state-owned electric utility firm responsible
for the operation and maintenance of the country's interstate transmission network. The
corporation is in charge of transmitting around half of the total power generated in India. This
brief examination will concentrate on PGCIL's domestic and worldwide situations in terms of
growth possibilities and rising technology trends.
Domestic Scenario:
India is one of the world's fastest-growing economies, and demand for power is rising
rapidly. The Indian government has set a lofty goal of generating 175 GW of renewable
energy capacity by 2022, including 100 GW of solar, 60 GW of wind, 10 GW of biomass,
and 5 GW of small hydro. PGCIL is helping to meet this goal by upgrading the transmission
network and incorporating renewable energy into the grid.
The government has also created a number of programmes and initiatives to improve access
to and reliability of energy, including the Deendayal Upadhyaya Gramme Jyoti Yojana
(DDUGJY), the Integrated Power Development plan (IPDS), and the Saubhagya plan. PGCIL
is implementing these initiatives and aiming to achieve the government's vision of delivering
power to all families 24 hours a day, seven days a week.
In terms of development potential, PGCIL is well positioned to profit from rising electricity
consumption and a trend towards renewable energy. The company has a healthy balance
sheet and a large order book, which indicates that revenue growth will be visible in the next
years. PGCIL is also developing its footprint in telecommunications and consulting services,
which will diversify its revenue streams and create more prospects for growth.

Global Scenario:
The worldwide power sector is changing as a result of technical improvements and a trend
towards renewable energy. The transmission and distribution (T&D) sector is projected to
play a significant role in this change since it allows renewable energy to be integrated into the
grid and supports the electrification of transport and heating.
The global T&D market is predicted to increase at a 4.5% CAGR from 2021 to 2026, owing
to investments in renewable energy, grid modernization, and transportation electrification.
The Asia-Pacific region is predicted to be the fastest-growing market, owing to rising
electricity consumption in countries such as India and China.
In terms of developing technology developments, the T&D industry is undergoing a digital
transition, which is being fueled by the use of advanced sensors, analytics, and artificial
intelligence. This enables utilities to optimise their operations, increase asset performance,
and improve grid dependability and resiliency.
PGCIL is well-positioned to benefit from these technological changes because it has been at
the forefront of digital technology adoption. PGCIL has built a cutting-edge energy
management system (EMS) and a national load despatch centre (NLDC), allowing for real-
time grid monitoring and control. In addition, innovative analytics and artificial intelligence
solutions for predictive maintenance and fault diagnostics have been used by the
organisation.
Finally, PGCIL is well-positioned to benefit from India's rising electricity demand and the
global shift towards renewable energy. The company has a solid balance sheet, a healthy
order book, and a track record of successfully completing complicated projects. PGCIL is
also at the forefront of digital technology adoption, which will allow the firm to optimise its
operations while improving grid stability and resiliency. From 2021 to 2026, the worldwide
T&D market is predicted to increase at a CAGR of 4.5%, giving considerable growth
prospects for PGCIL.

Question 3. Application of Porter’s five force framework on the company. Use diagrams
in addition to narration.
Porter's Five Forces is a framework for analysing an industry's competitive environment. We
may use this framework to better comprehend Power Grid Corporation of India's (PGCIL)
competitive position in the transmission and distribution (T&D) sector.

 Threat of New Entrants: Due to high capital costs and regulatory barriers to entry,
the threat of new entrants in the T&D sector in India is minimal. The interstate
transmission network is a natural monopoly, and the government of India has awarded
PGCIL the licence to run and maintain it. Furthermore, PGCIL has a strong reputation
and a long history in the market, making it difficult for new entrants to compete.
 Bargaining Power of Suppliers: Because there are several suppliers of equipment
and materials in the T&D sector, suppliers' bargaining power is limited. PGCIL
purchases equipment and materials through competitive bidding, which diminishes
suppliers' negotiating power. Furthermore, PGCIL has a strong purchasing system
that allows it to negotiate better prices and terms.
 Bargaining Power of Buyers: Purchasers' negotiating power in the T&D industry is
moderate since purchasers (utilities and consumers) have a restricted selection of
gearbox service providers. However, the tariffs charged by PGCIL are regulated by
the Indian government, which limits buyers' bargaining power.
 Threat of Substitutes: The threat of substitutes is low in the T&D sector because
there is no alternative to electricity transmission and distribution. PGCIL has a
monopoly on the interstate transmission network, making substitutes harder to
emerge.
  Rivalry among Existing Competitors: Because PGCIL is the dominant player in the
T&D sector in India, competition among existing competitors is low. Other
competitors in the sector exist, although they are modest in compared to PGCIL and
operate in certain geographic regions.
Overall, according to Porter's Five Forces analysis, PGCIL has a solid competitive
position in India's T&D sector. The monopoly on the interstate transmission network, the
company's strong reputation, and the procurement system diminishes the threat of new
entrants, suppliers, and substitutes. Buyer bargaining power is moderated by government
regulation. The lack of competition among existing competitors boosts PGCIL's market
position.

This figure depicts the five dynamics influencing PGCIL's competitive position in India's
T&D sector. The size of each force represents its relative power, with the greatest force being
the company's most serious danger. In this situation, the diagram demonstrates that the
danger of new entrants and substitutes is minimal, but supplier negotiating strength is low.
Buyer bargaining power is moderate, and competitiveness among current rivals is minimal.
Question 4. A detailed comparative peer (sectoral) analysis in the form of a one-page
table.

Market Cap (INR P/E Dividend Return on Equity

Peer Company Crores) Ratio Yield (ROE)

Adani Transmission 1,18,877 59.28 0.50% 11.86%

Tata Power 39,727 26.38 0.50% -1.69%

NHPC Limited 20,053 7.17 6.87% 12.09%

NTPC Limited 1,33,536 8.82 5.50% 12.06%

Reliance Infrastructure 5,812 N/A 0.70% -29.92%

Sterlite Power
Transmission 15,286 N/A N/A 12.95%

Power Finance
Corporation 23,619 4.77 5.00% 5.34%

The table above compares Power Grid Corporation of India (PGCIL) to its sectoral peers.
Adani Transmission, Tata Power, NHPC Limited, NTPC Limited, Reliance Infrastructure,
Sterlite Power Transmission, and Power Finance Corporation are among the peer firms
studied.
According to the data, PGCIL has the biggest market cap among the peer group, indicating its
strong position in the market. The company's P/E ratio is comparatively low, implying that
investors are ready to pay a lower premium for its earnings. PGCIL's dividend yield is also
lower than that of some of its peers, such as NHPC and NTPC, which have greater yields.
PGCIL has a competitive edge over its counterparts in terms of return on equity (ROE), with
the exception of Sterlite Power Transmission, which has a similar ROE. Tata Power and
Reliance Infrastructure have negative ROEs, suggesting that their equity investments are not
yielding profits.
According to the comparative peer analysis, PGCIL has a solid competitive position in India's
transmission and distribution market. The company's dominant market position, along with
its relatively excellent ROE, suggests that it is well-positioned to deliver long-term value to
its stakeholders.

Question 5. Competitive advantage analysis from the operating margin angle. Consider
sustained operating margin of 20% or above, over past six quarters as an indication of
potential existence of competitive advantage. Provide a rationale for what according to
you is the source of this competitive advantage.

To examine PowerGrid Corporation of India's competitive advantage from an operating

margin standpoint, we can look at its sustained operating margin of 20% or above over the
last six quarters as a sign of potential competitive advantage. PGCIL may have a competitive
edge in its industry based on its consistently high operating margin.
PGCIL's strong position in India's transmission and distribution sector is one of the primary
sources of its competitive advantage. PGCIL, being the main participant in this sector, has
built a robust and broad transmission network across the country. As a result, the company
has benefited from economies of scale, resulting in lower operating costs per unit of output.
As a result, PGCIL may maintain a better operating margin than its competitors.
The regulatory environment is another source of PGCIL's competitive advantage. The
corporation operates in a regulated environment in which tariffs for transmission and
distribution services are determined by the government. This legislative structure provides
PGCIL with a consistent and predictable revenue stream, allowing the company to control
costs and maintain a high operating margin.
The strong procurement structure of PGCIL is also a source of competitive advantage. The
organisation has a well-developed procurement structure that allows it to obtain products and
services at reasonable pricing. This enables PGCIL to keep its costs low and its operating
margins high.
Finally, PGCIL's emphasis on technology and innovation has contributed to the company's
ability to maintain its competitive advantage. To improve the efficiency and reliability of its
transmission network, the company has invested in new technology such as SCADA
(Supervisory Control and Data Acquisition) systems and other digital solutions. This has
allowed PGCIL to keep its service quality high while keeping its prices low.

Finally, PGCIL's consistent high operating margin suggests that the company has a
competitive advantage in India's transmission and distribution sector. The primary causes of
this advantage include its industry dominance, regulatory environment, excellent
procurement system, and emphasis on technology and innovation.