Power Grid Corporation of India (PowerGrid), India’s principal transmission utility, posted a net profit of ₹1,042 crore, down 7.7 per cent, for the quarter ended December 2013.

This was despite income being higher by about a tenth from the year-ago period.

PowerGrid commissioned new transmission lines during the quarter, which has resulted in higher fixed costs. But, revenues from the new lines are yet to catch up. A 14.4 per cent increase in depreciation expense and 15 per cent rise in finance cost brought down profits.

With projects worth ₹3,000 crore getting completed during the quarter, costs that were earlier being capitalised in the balance sheet have now been accounted for as expenses.

PowerGrid operates under an assured return model that allows it a pass-through of costs and a 15.5 per cent return on equity on completed projects. Revenue is dependent on the expansion of its network.

The transmission utility appears well on track to achieve its FY14 expansion target, having already spent ₹18,500 crore or 80 per cent of its capital investment this far.

Completed projects showed a sharp expansion between December and January. This is likely to translate into even higher revenues for the company in the March quarter.

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