About Transrail Lighting Limited

Transrail Lighting is an Indian engineering, procurement and construction (“EPC”) company. The Company primarily focuses on power transmission and distribution business and integrated manufacturing facilities for lattice structures, conductors, and monopoles. They have a track record of four decades in providing comprehensive solutions in the power transmission and distribution sector, on a turnkey basis globally and have been a trusted and longstanding partner. They have completed more than 200 projects in power transmission and distribution vertical since their inception, along with comprehensive and extensive project execution capabilities in terms of manpower, supply of materials (including self-manufactured products) and availability of world class machinery, both in India and internationally (majorly across Asia and Africa).

Their position in the power transmission and distribution sector is owing to the following factors:
Having a footprint in 58 countries like Bangladesh, Kenya, Tanzania, Niger, Nigeria, Mali, Cameroon, Finland, Poland, Nicaragua etc. including turnkey EPCs or supply projects. As of June 30, 2024, they have undertaken EPC of 34,654 circuit kilometers (“CKM”) transmission lines and 30,000 CKM distribution lines, domestically and internationally. They provide EPC services in relation to substations up to 765 kilovolts (“kV”). The Company has presence in all the power transmission and distribution segments and majorly in high voltage (“HV”) and extra high voltage (“EHV”) segments. Other than the power transmission and distribution business, they have other business verticals, such as, civil construction, poles and lighting, and railways.

As of June 30, 2024, Transrail Lighting had a total of 1,761 permanent employees and 8,340 contractual employees (including international locations). The Bankers of the Company are Export-Import Bank of India, IDFC First Bank, Bank of Maharashtra, Canara Bank, IndusInd Bank Limited, Bandhan Bank Limited, Union Bank of India, Punjab National Bank, IDBI Bank Limited, Indian Bank, ICICI Bank Limited and ICFS Mumbai, Bank of Baroda.

Review of power demand-supply scenario in India
The total installed generation capacity as of March 2024 was ~442 GW, of which ~98 GW of capacity was added over fiscals 2018-24. The overall installed generation capacity has grown at a CAGR of 4.3% over the same period. Coal and lignite-based installed power generation capacity has maintained its dominant position over the years and accounts for ~49% as of March 2024. However, RE installations (including large hydroelectric projects), have reached ~191 GW capacity as of March 2024, compared with 114 GW as of March 2018, constituting about 43% of total installed generation capacity. This growth has been led by solar power, which rapidly rose to ~82 GW from 22 GW over the same period.

The Electricity Act, 2003 and competitive bidding for power procurement, implemented in 2006, encouraged the participation of private market participants that have announced large capacity additions. As a result of competitive bidding, capacities of ~37 GW (fiscals 2014-24) were added by the private sector, which accounted for 73.0% of the total additions. Moreover, a strong government thrust on RE and decreasing tariffs (with falling capital costs and improving efficiency) also supported RE capacity additions. Investments from marquee foreign funds have also accelerated growth into the sector. e.g. US investment firm Augment Infrastructure acquired a majority stake in CleanMax Enviro Energy Solutions Pvt. Ltd. Copenhagen Infrastructure Fund has signed agreement with Amp Energy India Private Ltd for joint equity investment of over USD 200 million (around Rs 1,500 crore) in renewables. PTT group bought stake in Avaada Energy. The Norwegian Climate Investment fund, managed by Norfund, and KLP, Norway’s largest pension company, together committed equity and guarantees for a 168 MW wind power plant developed by Enel Green Power in India, Tata Power has signed up for MUFG's Sustainable Trade Finance Facility to expand its clean and green energy portfolio.

In 2014, the GoI set a target to achieve 175 GW of renewable energy in India by fiscal 2022, with a focus on solar energy (100 GW) and wind energy (60 GW), in addition to other renewable energy sources such as small hydro projects, biomass projects and other renewable technologies (~15 GW).

Between fiscal 2015 and 2024, ~79 GW of conventional power and ~115 GW of renewable power generation capacities were added. However, beyond fiscal 2018, only 22 GW of conventional power capacity were added (~3.6 GW of annual capacity addition) as against an average of ~15 GW of annual capacity addition witnessed over the past five years (fiscal 2014-2018). Over the same period, ~76 GW of RE capacity was added with an annual average capacity addition of 12.7 GW.

Additions in both wind and solar power were driven by strong government focus, which is evident from fiscal and regulatory incentives, VGF, and execution support in terms of land and evacuation infrastructure. Improved availability of low-cost finance through various instruments/sources would also support RE capacity additions. In solar power, in particular, further decreases in capital costs and consequently, tariffs, have driven the capacity additions.

India's electricity requirement has risen at a CAGR of ~5.0% between fiscals 2018 and 2024, while power availability rose at ~5.1% CAGR on the back of strong capacity additions, both in the generation and transmission segments. As a result, the energy deficit declined to 0.5% in fiscal 2023 and further reduced to 0.3% in fiscal 2024 from 0.7% in fiscal 2018. Also, strengthening of inter-regional power transmission capacity over the past five years has further supported the fall in deficit levels as it reduced supply constraints on account of congestion and lower transmission corridor availability.

In fiscals 2018 and 2019, power demand grew at 6% and 5% on-year, respectively, led by a low base and gradual pickup in consumption across categories, with impetus from electrification of un-electrified households, T&D network expansions, and healthy economic activity. However, in fiscal 2020, power demand grew at a slower 1.3% due to weakening economic activity and extended monsoon. By the end of the fiscal, economic activity and capacity additions (both generation and transmission) slowed further due to the pandemic.

After a minor (1.2%) decline in fiscal 2021, power demand saw a strong rebound in fiscal 2022, registering a ~8% on-year growth on the back of healthy revival in economic activity, and as demand picked up with the lifting of COVID-19 restrictions. Further, the same momentum continued in fiscal 2023 and 2024. Fiscal 2023 registered the highest y-o-y growth of 9.6% due to rising manufacturing activities, increase in domestic consumption, rising temperatures, delayed monsoons.

Peak electricity demand in India has grown from 164 GW in fiscal 2018 to 243 GW in fiscal 2024 clocking an average growth rate of 6.8% in the past six years. Prior to the pandemic, electricity demand in India usually peaked in August-September, mostly covering the monsoon season. This spike in peak demand was primarily due to an increase in domestic and commercial load, mainly space cooling load due to high humidity conditions.

However, during post pandemic years, annual peak demand occurred in the summer season (April-July), due to extreme heatwave conditions. Peak demand touched record high levels of 243 GW in fiscal 2024 during September, attributed to an increase in cooling demand as intense summers scorched several regions of the country. During fiscal 2023, the generation has struggled to keep up with the rise in demand, resulting in an increase in peak deficit to 4.2% as compared with 1.2% for the same period in fiscal 2022. However, during fiscal 2024, the peak deficit reduced to 1.4% with a deficit of only 3 GW with jump in supply.

Overview of power transmission segment
The transmission segment plays a key role in transmitting power continuously to various distribution entities across the country. The transmission sector needs concomitant capacity addition, in line with generation capacity addition, to enable seamless flow of power.

A transmission and distribution (T&D) system comprises transmission lines, substations, switching stations, transformers, and distribution lines. To ensure reliable supply of power and optimal utilisation of generating capacity, a T&D system is organised in a grid which interconnects various generating stations and load centres. This is done to ensure uninterrupted power supply to a load centre, even if there is a failure at the local generating station or a maintenance shutdown. In addition, power can be transmitted through an alternative route if a particular section of the transmission line is unavailable.

In India, the T&D system is a three-tier structure comprising distribution networks, state grids, and regional grids. The distribution networks and state grids are owned and operated by the respective state transmission utilities or state governments (through state electricity departments). Most inter-state and inter-regional transmission links are owned and operated by the PGCIL which facilitates the transfer of power from a surplus region to one with deficit.

The T&D system in India operates at several voltage levels:
• Extra high voltage (EHV): 765 kV, 400 kV and 220 kV
• High voltage: 132 kV and 66 kV
• Medium voltage: 33 kV, 11 kV, 6.6 kV and 3.3 kV
• Low voltage: 1.1 kV, 220 volts and below

Transmission and sub-transmission systems supply power to the distribution system, which, in turn, supply power to end consumers. To facilitate the transfer of power between neighbouring states, state grids are inter-connected through high-voltage transmission links to form a regional grid. There are five regional grids:
• Northern region: Delhi, Haryana, Himachal Pradesh, Jammu and Kashmir, Punjab, Rajasthan, Uttarakhand, and Uttar Pradesh
• Eastern region: Bihar, Jharkhand, Orissa, Sikkim, and West Bengal
• Western region: Dadra and Nagar Haveli, Daman and Diu, Chhattisgarh, Goa, Gujarat, Madhya Pradesh, and Maharashtra
• Southern region: Andhra Pradesh, Karnataka, Kerala, Puducherry, and Tamil Nadu
• North-eastern region: Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura

As peak demand for power does not take place at the same time in all states, it results in a surplus in one state and deficit in another. Regional or inter-state grids facilitate the transfer of power from a surplus region to the one facing a deficit. Additionally, they also facilitate the optimal scheduling of maintenance outages and better coordination between power plants.

Transmission Infrastructure Growth
Robust generation capacity addition over the years and government's focus on 100% rural electrification through last mile connectivity has led to extensive expansion of the T&D system across the country. The total length of domestic transmission lines rose from 413,407 circuit kilometres (ckm) in fiscal 2019 to 485,544 ckm in fiscal 2024.

There has been strong growth in the transmission system at higher voltage levels and substation capacities. This is a result of increased requirement of the transmission network to carry bulk power over longer distances and at the same time optimise the right of way, minimise losses and improve grid reliability.

Strong growth of transmission system at higher voltages has grown due to increased requirement of the transmission network to carry bulk power over longer distances and at the same time optimise the right of way, minimise losses, and improve grid reliability.

The transmission sector, a crucial part of the power industry, required more attention to meet the growing demand for electricity and the expanding generation capacity. Existing investments from budgets, internal funds, and PSU loans were insufficient to meet this demand. To address this issue, the Electricity Act allowed private companies to participate in the power transmission sector through a competitive bidding process called tariff-based competitive bidding (TBCB). The National Tariff Policy of 2006 provided guidelines for this process, aiming to promote competition, attract private investment, and increase transparency in constructing transmission infrastructure. India stands out as one of the few countries that have opened its transmission sector to private participation, generating significant interest from private businesses. The Electricity Act, 2003 coupled with TBCB for power procurement, encouraged private participation in the power transmission sector and has supported the growth of transmission lines in India sector.

The total transmission line length (above 220 kV) has increased at 3.3% CAGR from fiscal 2019 to fiscal 2024. This increase can also be attributed to an increase in the commissioning of the 765-KV lines, growing at a CAGR of ~6% over the same period. 765 kV lines have higher transfer capacity and lower technical losses thereby reducing the overall number of lines and rights of way required to deliver equivalent capacity. Performance in a transmission line improves as voltage increases and as 765 kV lines use one of the highest voltage levels, they experience comparatively lesser amount of line loss. 800 kV lines have also shown strong growth momentum, rising at 9.5% CAGR over the last 5 fiscals, majorly owing to strong investments by the central sector.

Inter-regional power transmission capacity of the National Grid has grown strongly from 99,050 MW in fiscal 2019 to 118,740 MW in fiscal 2024, at a CAGR of 3.7%. Subsequently, transformation capacity rose from 899,663 MVA in fiscal 2019 to 1,251,080 MVA in fiscal 2024, growing at a CAGR of ~6.8%.

TRANSRAIL LIGHTING LIMITED COMPETITIVE STRENGTHS
1. Track record of established presence and growth in power transmission and distribution vertical through their implementation and execution skills
2. Established manufacturing facilities
3. Strong and diversified Order Book
4. Strong in-house designing and engineering
5. Experienced promoter(s) with strong management team, technical expertise and business divisions with specialized domain knowledge
6. Quality assurance
7. Strong and consistent financial performance

TRANSRAIL LIGHTING LIMITED GROWTH STRATEGIES
1. Leverage their technical expertise, specialized domain knowledge and experience to expand their core competencies in power transmission and distribution segment, both domestic and international.
2. Expand their EPC portfolio into other allied/ancillary infrastructure sectors
3. Focusing on expanding the market for their conductors and to leverage their new age HTLS conductors
4. Expanding their international business
5. Enhancing the Company’s pole and lighting business in various product categories

TRANSRAIL LIGHTING LIMITED RISK FACTORS & CONCERNS
1. The business is substantially dependent on tenders being floated by government authorities, public sector undertakings and utilities, from which they derive a significant portion of their revenues.
2. The Company was a subsidiary of Gammon India Limited (“GIL”) in the past.
3. They have an outstanding FIR filed by the Central Bureau of Investigation, Anti-Corruption Bureau, Lucknow, Uttar Pradesh (“CBI”) for the Gomti River Project.
4. The Company along with their Promoter, Ajanma Holdings, are proposing to acquire a part of the business of Gammon Engineers and Contractors Private Limited (“GECPL”) which is facing restructuring by its lenders.
5. The business is substantially dependent on the revenue from operations generated from their top one, top five and top ten clients.