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MOSL: UTILITIES-The Prevailing ‘Discom’fort; Rajasthan DISCOMs-Government subsidy crucial

Utilities: The Prevailing ‘Discom’fort; Rajasthan DISCOMs: Government subsidy crucial

 

• Rajasthan accounts for ~6% of the country’s electricity demand (fifth largest). The state is also home to an estimated 6.5m agricultural households (fourth largest), implying large exposure to this highly subsidized consumer category. In this report, we have consolidated and analyzed the financials of all three DISCOMs in Rajasthan (AVVNL, JVVNL and JdVVNL).
• ~40% of the DISCOM’s power is sold to agricultural consumers. Thus, dependence on government subsidy is huge and represents ~21% of the DISCOM’s total revenues.
• At an EBITDA level, losses have reduced ~30% from FY15 levels to INR74b in FY19 led by sharp tariff hikes for its industrial and domestic customers. This, though, could impact the offtake ability of such segments. Further, Rajasthan’s DISCOMS have proposed 11.8% tariff hike (across categories) for FY20. AT&C loss, while~625bp lower over FY15-19, remains high at ~25%.