Power Grid Corporation of India Ltd. makes a corporate announcement

Verdict: The TBCB project is more growth-oriented but less explicitly protected on returns than POWERGRID’s legacy regulated portfolio. Its tariff is a competitively discovered annual charge for 35 years, whereas existing RTM assets earn a CERC-determined annual fixed cost with a specified RoE component. On the disclosed return indications, the growing TBCB mix should create some downward pressure on the consolidated RoE profile over time, although the impact cannot be quantified for the individual project from tariff data alone.

For a project such as the recently awarded Gujarat scheme, the quoted Rs 822.91 crore per annum is the annual transmission charge, not the project’s RoE. Without the project capex, debt-equity mix, financing cost, tax profile, operating cost and commissioning schedule, that tariff cannot be converted into a project-level RoE. ^[14]

Consolidated RoE implication

The mix is shifting materially toward TBCB. At Q1 FY27, operational TBCB equity had risen to Rs 9,965 Crores from Rs 4,671 Crores a year earlier, while under-construction TBCB equity stood at Rs 3,408 Crores. ^[15] TBCB also represented Rs 1,46,315 Crores, or 83%, of total works in hand, versus Rs 25,168 Crores for RTM projects. ^[16]

Management had previously discussed 11–13% equity IRRs for TBCB projects, while stating that higher equipment, land and interest costs were factored into bids. This is an equity IRR, not directly comparable with CERC’s post-tax RoE, but it points to a potentially lower return profile than the protected 15.5% RoE on much of the legacy regulated base. ^[17]

Accordingly:

• Near term: Consolidated RoE may be volatile as projects move from construction to operation and earnings ramp up. TBCB project profitability is not separately disclosed, which limits precise attribution. ^[18]
• Medium term: As TBCB assets become a larger share of the consolidated capital base, the portfolio should deliver faster asset and earnings growth but with a lower blended RoE than a pure legacy-RTM portfolio, assuming the disclosed 11–13% equity IRR range is representative.
• Current benchmark: Consolidated TTM RoE was 16.5% in Q1 FY27. This is the company-wide outcome and should not be interpreted as the RoE of either the RTM or TBCB portfolio individually. ^[19]
• Funding effect: The TBCB equity investment has been funded through internal accruals rather than parent-level debt, reducing incremental holding-company leverage but increasing the amount of capital deployed into the competitively priced portfolio. ^[20]

The key analytical issue is therefore not whether TBCB creates revenue—it clearly expands the asset base—but whether execution costs and financing remain sufficiently below the discovered tariff to preserve project returns. That will determine how far consolidated RoE moves below the legacy regulated-asset benchmark.