JM Financial

JM Financial Institutional Securities Limited

29 August 2016

Power for all by 2022:reality or dream

Despite multiple initiatives towards complete rural electrification in the past, 35% of India's rural households are still bereft of electricity access. In this report, we analyse the key factors inhibiting rural electrification, including past execution challenges, affordability, availability and other socio-economic factors.

The current rural electrification programme - DDUGJY - incorporates enhanced monitoring and transparent execution processes, and would be driving spend of c.USD12bn in power T&D across the duration of the programme (FY16–22). But will every Indian household (which is connected to grid) have 24x7 electricity by 2019 and will every Indian household get electricity access by 2022?

Photo

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Rural electrification - In execution mode

Access to electricity is a key socio-economic development indicator—an area

where there is still a significant gap in India. As of May’16, 35% of rural

households (HHs) are bereft of electricity with sharp variation across the

country; 87%/71% HHs in Bihar & UP have no reported access, while there is

universal electricity access in states such as Punjab, AP and Gujarat. As

electricity is a concurrent subject (both centre and state can legislate), lack

of effective monitoring and co-ordination can be attributed to the wide

variance across states. Delay in execution is evident from the low actual

spend in past programmes; for example, even by May’16, only 25% of the

XIIth

(FY12–17) plan’s amount allocated to rural electrification (RE)

programme has been spent and 81% for the X–XI plans (FY02-12) has been

spent. The current central government has launched DDUGJY as the flagship

RE programme with an aim of “Power for All”, which envisages 24x7

electricity availability to every connected HH by FY19 and electricity access

to every household by FY22. DDUGJY incorporates real-time monitoring of

work progress, independent verifications through GVA engineers and is

likely to see improved execution. RE, along with the urban T&D development

plan (IPDS), is expected to drive massive spending of c.`1.6tn (USD 24bn)

over FY16–22; benefiting companies across the electricity chain (Exhibit 33).

Our preferred picks are NTPC, Techno Electric, V-Guard and Voltas.

Five states account for c.80% of un-electrified households: The problem of

RE in India is highly skewed towards few northern and eastern Indian states. Five

states (UP, Bihar, MP, Odisha and Assam) account for c.80% of un-electrified (UE)

HHs (Exhibit 1).These states account for c.38% of total population, are

economically weaker (GDP/capita at 55% of the national average) and also have

inferior power generation infrastructure (18% of national installed power

capacity). However, due to the way village electrification is currently defined (if

10% HHs have access to electricity, whole village is termed as electrified), even

Bihar and UP report c.98% of villages as electrified, even though only 13%/29% of

rural HHs have electricity access in these states (Exhibit 2). Therefore the criteria

for declaring a village as electrified should be relooked and focus should be on

monitoring HH electrification more than village electrification. 1.

Cost of electricity is not a constraint for adoption: Our interaction with rural

households during the Rural Safari (Rural Safari III), analysis of power usage

data and current tariff rates clearly indicate that the cost of electrical power is

only c.4% of monthly HH consumption (Exhibit 3) and is thereby not a

constraint for adoption by rural HHs (total energy spend ranges between c.8–

12% of HH expenditure as per NSSO). Our analysis and interactions indicate: (a)

lack of timely and usable power (with steady voltage), (b) availability of

alternative sources such as kerosene reduce incentive for electrification, while

leakages (& illegal connections) depress reported electrification numbers. 2.

DDUGJY presents a c.̀ 825bn (USD 12bn) spend opportunity: From less than

1% of villages in 1950, 98% of villages in India were electrified, as of May’16

(based on current definition). After steady growth till the early 1990s,

electrification progress slowed down due to DISCOMs’ deteriorating financial

conditions and picked up again from 2005, driven by dedicated programme

RGGVY (Exhibit 7). However project delays, centre-state co-ordination issues and

lack of sufficient EPC contractors across states have likely led to the programme

remaining behind target (60% for intensive electrification, 57% for BPL family

connections, as of May’16, for X–XII plan (FY02-17). DDUGJY, the flagship RE

program (FY16-22) has allocation of Rs430bn for new projects & Rs393bn from

earlier RE programme and is likely to drive strong T&D spend.3.

Arshad Perwez

[email protected]

Tel: (+91 22) 66303080

Suhas Harinarayanan

[email protected]

Tel: (+91 22) 66303037

Exhibit 1: Five states have c.80% of Un-

electrified rural households (58mn out of

156mn total households)

18.2

14.7 4.7 4.3

3.5 2.9 2.5 1.9 5.1

57.8

0

10

20

30

40

50

60

70

Source: Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

Exhibit 2: Village electrification at c.98%

levels even in states which have much

lower household electrification

13.0

% 28.7

%

34.2

%

37.1

%

47.6

%

57.3

% 74.1

%

65.4

%

0%

20%

40%

60%

80%

100%

House-holds electrified (%) Villages electrified (%)

Source: Ministry of Power

Exhibit 3: Cost of electricity access is not a

constraint for rural adoption of electricity

D etails A mo unt (R s)

House-ho ld M onthly Consumption 6,755

Non-metered tariff 175

M etered tariff (100 units) 310

Average tariff (blended) 243

E lectric ity bill as % o f H H expense 3.6%

Electricity Tariff per household

Source: NSSO, JM Financial, Note: For a marginal household

29 August 2016

JM Financial Research is also available

on: Bloomberg - JMFR <GO>,

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S&P Capital IQ and FactSet.

Please see Appendix I at the end of this

report for Important Disclosures and

Disclaimers and Research Analyst

Certification.

India Strategy

India | Strategy

29 August 2016

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/India_Strategy_Rural%20Safari_2016%20(1).pdf

India Strategy 29 August 2016

JM Financial Institutional Securities Limited Page 2

Rural Electrification progress in India

India, with c.1.2bn+ of population and 267mn HHs, has a significant gap in

electrification, particularly in rural India (69% of population). As per the last census

(2011), c.93% of urban HHs used electricity as their primary source of energy, while

only 55% of rural HHs had electricity as their primary source of energy.

The situation has improved over the years, but even at May’16, 35% of rural

households still do not have access to electricity.

Exhibit 4. RE remains a challenging task: 35% of rural HHs still do not have access to electricity (May ’16)

58mn of rural HHs still do not have access to electricity

Top-2 states account for 56% and top-5 for c.80% of UE rural

HHs

Electrified House-holds (mn), 110

Un-electrified House-holds (mn),

58

18.2

14.7

4.7 4.3

3.5 2.9

2.5 1.9

5.1 57.8

0

10

20

30

40

50

60

70

Source: DDUGJY

Out of the c.58mn rural HHs, which are UE (May’16), 56% are in only two states—UP

and Bihar; these states along with MP, Odisha and Assam account for c.80% of the UE

HHs. However, given the definition of village electrification even Bihar and UP

report c.98% of villages as electrified, (Definition: if at least 10% of HHs have

electricity access in a village, the whole village is termed as electrified),

Exhibit 5. Village electrification at near 100% levels even in states that have

much lower HH electrification:

13.0

%

28.7

%

34.2

%

37.1

% 47.6

% 57.3

%

74.1

%

76.2

%

79.7

%

85.6

%

86.3

%

87.1

% 94.6

%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

House-holds electrified in the state (%) Villages electrified in the state (%)

Source: DDUGJY

Bihar has 13% rural households with

access to electricity, while 98% of

villages are electrified!



The definition for village electrification has been revised two times in the past two

decades, still if only 10% of HHs in a village have electricity, the whole village is

considered electrified. Therefore, for a reliable measure to track progress, the

government could enhance the definition to a higher percentage of HHs electrified in

a village and then track the electrification progress.

Exhibit 6. Criteria for village electrification: Should it be revised?

Timeline Definition

Till Oct

1997

A village should be classified as electrified, if electricity is being used within

its revenue area for any purpose whatsoever

1997-

2005

A village will be deemed to be electrified, if the electricity is used in the

inhabited locality, within the revenue boundary of the village for any purpose

whatsoever

2005

onwards

A village would be declared electrified if:

(a) Basic infrastructure such as distribution transformer and distribution lines

are provided in the inhabited locality as well as the Dalit Basti hamlet where

it exists

(b) Electricity is provided to public places such as schools, panchayat offices,

health centres, dispensaries and community centres

(c) The number of households electrified should be at least 10% of the total

number of households in the village

Source: Department of Power

How has RE progressed in India?

There have been multiple programmes undertaken by the Indian government over

the years for RE. The plans are made by the central government, while the

implementation is undertaken by respective state governments/DISCOMs.

RE saw strong push during 1970 & 80s as number of electrified villages increased

from 19% of total villages in FY71 to 83% by FY91. However, on account of

deterioration in DISCOMs’ financial positions, RE slowed down sharply during the

‘90s and picked up only after 2005 with dedicated program such as RGGVY and now

DDUGJY (Dec’14 onwards).

Exhibit 7. Historical progress in village electrification: 98% of villages electrified by May’16 (total villages: 593,000)

1970s & ‘80s saw strong growth in village electrification Village electrification picked up from 2005 onwards

105

272

481 508 495

440

498

561 582

-

100

200

300

400

500

600

700

-

100

200

300

400

500

600

700

FY71 FY81 FY91 FY01 FY04 FY05 FY10 FY13 May'16

Villages Electrified ('000) Total villages - RHS

83% of Villages electrified by FY91

Decline in FY05 due to change in definition

16,599 15,511

24,106

20,101

2,333 2,663 3,286

19,262

12,232

1,892

-

5,000

10,000

15,000

20,000

25,000

30,000

Electrification of villages per annum (no.)

Sharp de-celeration in 1990's

Source: CMIE, Ministry of Power



Exhibit 8. What does RE require?


Exhibit 9. Multiple programmes undertaken over the years for RE

Programme Period Details

Minimum needs

programme

Vth Plan

(1974–79)

100% loans for last mile connectivity. Discontinued in 2004-05 because of lack of response

from states

Kutir Jyoti Programme 1988–89 Aims: (a) Single-point connection to BPL Households, (b) 100% grant; merged with AREP in

2002 and now with RGGVY

Pradhan Mantri Gramodaya

Yojana 2000–01 90% loan, 10% grant; discontinued in 2005 with launch of RGGVY

Accelerated Rural

Electrification Programme

(AREP)

2002 Interest subsidy of 4%; merged with AEP

Accelerated Electrification

Programme (AEP) 2004 AEP of one lakh villages and one crore households; 40% capital subsidy and 60% loan

Rajeev Gandhi Grameen

Vidyutikaran Yojana

(RGGVY)

Mar’05

Aims: (a) electrification of all villages and habitations, (b) providing access to electricity to

all households, (c) free electricity connection to BPL families; programme was extended for

XI (2007-12) and XII plan (2012-17) and subsequently subsumed in DDUJGY

Deendayal Upadhyaya

Gram Jyoti Yojana

(DDUGJY)

Dec’14

Aims: (a) Separation of agriculture and non-agriculture feeders, (b) strengthening of sub-

transmission and distribution system, including metering at distribution

transformers/feeders/consumers, (c) subsumed component of all previous ongoing RE

schemes


Apart from supplying power at

affordable price, RE schemes have

fallen short of other goals



Key inhibitors for electricity adoption/electrification

in rural India

We analysed key inhibitors for electricity adoption in rural India through our

visits, and interaction with industry experts and government officials in

electricity department. The key factors we came across are as follows:

(A) Low usability reduces incentives for electrification

For effective use, electrical power should be available in a narrow voltage range and

with consistent timings. Our interactions indicate that voltage fluctuations are quite

common particularly in the rural regions of North Indian states. In addition, villages

get electrical power for only a limited duration (4-8 hours/day in few North Indian

states). Maintenance of electrical systems also needs to improve; for example, if

there is a fault in a village transformer, the resolution and replacement takes days on

end.

All these factors reduce the incentive for villagers to go for electrification, as

they continue to spend on kerosene/other alternative means for lighting and

power. A comparison across states in India also reflects a strong co-relation between

rural HH electrification and power availability per day.

Exhibit 10. Rural HH electrification and power supply per day show strong

correlation

Improvement in power supply per day can induce more rural HH’s to go for

electrification, where ever available

Bihar

UP

MP

Rajasthan

Karnataka

Punjab

Maharashtra

TN

Kerala

Gujarat

Odisha

Assam

0%

20%

40%

60%

80%

100%

120%

0 4 8 12 16 20 24

Ele

ctrf

ied

Ho

use

-ho

lds

(%

)

Power Supply per day (No. of hours)

Source: Census (2011), DDUGJY

Though data on power supply per day for states is from the previous census and we

believe available supply has improved from those levels, the key takeaway is the

strong correlation between power supply and electrified households.

The overall power supply situation (against demand) has improved in India over the

years (Exhibit 21), and from a deficit of c.8-10% five years back, India is expected to

have 1.1% excess power supply in FY17. However, for a successful RE programme,

energy requirements for states with low RE should be fulfilled on a priority basis

(power supply deficit in UP/Assam/Bihar was 12.5%/5.6%/1.3%, respectively, during

FY16).

UP/Assam/Bihar, which have high

UE HHs (63% of India), reported an

overall power deficit of

12.5%/5.6%/1.3%, respectively,

during FY16; a successful RE

programme necessitates improving

power availability in these states



(B) Does adverse economics lead to lower adoption of electricity in rural India?

We also investigated the average cost of availing electricity for rural households to

assess whether the cost in itself prohibits a large section of rural population to

access electricity.

Exhibit 11. Sample electricity consumption in a rural HH

Low usage Wattage No. of hours Units (kWh) per month

2 CFL Bulbs 15 5 2

2 Fans 100 6 18

1 TV 100 4 12

Total units consumed monthly

32

High Usage

2 Bulbs 100 8 24

2 Fans 100 16 48

1 TV 100 8 24

Total units consumed monthly

96

Source: JM Financial, Industry experts, Note: CFL: Compact Fluorescent Lamp

We have estimated average power usage at the marginal village HH, based on our

periodic visits to villages as part of the Rural Safari (Rural Safari III). As per various

estimates, average electricity usage is likely to be below levels of 100kWh per month

per household. Even NSSO survey has indicated rural per capita consumption of

electricity at 8.9 units/month, implying c.45 units/month for an average household

(i.e., a five-member family).

Exhibit 12. Power consumption (per capita, kwh) of rural users 1/3rd

of urban

users

5.7

20.0

7.9

24.3

8.9

25.8

0

5

10

15

20

25

30

Rural Urban

2004-05 2009-10 2011-12

Source: NSSO

Tariff levels in rural India vary across states with both metered and unmetered

connections (as shown in the exhibit below). For our analysis, we have taken the

average rural monthly per capita expenditure (MPCE) of three states (UP, Bihar and

MP), which have the highest UE villages. The base data used is from the NSSO survey

of 2012, and we have estimated rural consumption growth during FY13–16 at half

the rate of growth in the personal consumption expenditure (PCE), given weak rural

income growth.

The average marginal rural

household’s power consumption is

likely to be limited to 100 units

http://jmflresearch.com/JMnew/JMCRM/analystreports/pdf/India_Strategy_Rural%20Safari_2016%20(1).pdf



Exhibit 13. Sample electricity rates charged to rural consumers across states

State Category Per unit charges (`)

Fixed Variable

Uttar Pradesh

Unmetered (< 2KW load) 180 Nil

Unmetered (> 2KW load) 200 Nil

All load (Metered) 50 2.2

Bihar

Unmetered 170 Nil

Metered

First 50 units - 2.1

51-100 - 2.4

100+ units - 2.8

MP

Up to 30 units - 2.9

Up to 50 units 30 3.7

51-100 55 4.4

Source: State Regulatory commissions

Exhibit 14. Rural electricity tariffs account for only c.3-4% of HH spend,

hence cost is not an inhibitor for electricity usage in rural areas

Details Amount

Rural MPCE (`) – Top-3 UE states 1,351

Household size 5

Household monthly consumption (`) 6,755

Electricity charges per connection in rural India (`)

Un-metered tariff per connection

UP 180

Bihar 170

Average – Unmetered 175

Metered tariff for 100 units

UP 270

Bihar 225

MP 435

Average - Metered 310

Average blended tariff 243

Electricity expense as % of HH consumption 3.6%

Source: NSSO, Company, JM Financial, Note: MPCE: Monthly Per Capita Expenditure

Based on the average of metered and un-metred connection, the tariff for 100 units

(kWh) comes out to `243. Compared to the overall household consumption, it

amounts to only c.4% of total spend and thereby is not a significant constraint, in our

view.

Even as per NSSO surveys, the combined spending on fuel and lighting for rural India

has been in the range of 8–12% over the past few years, thereby rural users would be

willing to spend on electricity at the current rates, if it is provided to them, in our

view.

Average electricity bill for a rural

household is c.Rs300 and constitutes

only c.4% of total household

consumption



Exhibit 15. Monthly fuel & lighting cost per capita over the years for rural India

Fuel & lighting cost has been around 6–10% for rural India

Fuel & Lighting Spend - c.10–12% of total spending for lower

percentile (relatively poor) and c.6–8% for higher percentile of

population

2.5 4.17.9

11.8

20.7

36.6

56.8

114.1

0%

2%

4%

6%

8%

10%

12%

0

20

40

60

80

100

120

1973 1978 1983 1988 1994 2000 2005 2012

Fuel & Lighting - Rs Fuel & Lighting (% of total consumption) - RHS

64.575.6

83.292.4 96.6

103.7111.3

119.6130.0

148.2

169.4

202.8

114.1

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

Fuel & Lighting - Rs Fuel & Lighting (% of total consumption) - RHS

Source: NSSO

(C) Is it driven by behavioural issues?

Our channel checks also highlighted few reasons other than quality of available

power, which could be a factor in driving extremely low levels of electrification in

some states, particularly the top-five UE states.

Exhibit 16. Top-5 un-electrified states (c.80% non-electrified homes) –

Accounts for 38% of total population, 21% of GDP, 18% of installed power

78.6%

40.1%

18.1%21.0%

37.9%

55.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Non-electrifiedhouseholds (%)

Total ruralhouseholds

Installed Power GDP Total population Per capita income(as % of national

average)

Top-5 states with non-electrified households (mn)

Source: Census, DDUGJY, States included – UP, Bihar, MP, Odisha, Assam which account for c.80% of UE HH

The states with lowest HH electrification also have lower literacy levels on an average

(thereby reducing the drive for electrification of homes) and reported electrification

numbers is likely to be depressed due to non-reporting/unauthorised access of

electricity connections.

(a) There have been multiple instances where two family use a single electricity

connection and share the bill (fixed), thereby depressing the reported

electrification data.

(b) There are electrical connections that are accessed illegally across many states,

which reflects in high aggregate technical & commercial (AT&C) losses for the

Illegal connections, sharing of one

connection by multiple families also

leads to under-reporting of

Household electrification



distribution companies; for example, FY15 AT&C losses were at 46% in Bihar,

25% in UP, 39% in Odisha and 34% in Haryana, among others.

Exhibit 17. Co-relation of low literacy rate and lower HH electrification levels

Bihar

UPAssam

Odisha

MP

Maharashtra

Karnataka

TN

Gujarat

AP

Punjab

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

60% 65% 70% 75% 80% 85%

Ru

ral H

ou

seh

old

ele

ctri

fica

tio

n (%

)

Literacy Rate (%)

Source: Census (2011), DDUGJY

(D) Does Rural Electrification project execution needs improvement?

There has been no dearth of programmes undertaken by the central and state

governments over the years for the power sector, including for RE; still 35% of UE

HHs in May’16 indicate significant gaps in execution.

Village electrification process has multiple stake-holders – From project formulation

by the implementing agency/state DISCOMs to project sanction and fund

disbursements by the nodal agency (REC) to project monitoring committees which

necessitates close co-ordination for successful implementation.

Exhibit 18. Village electrification process

DPRs preparation by the

Implementing Agencies/

State DISCOMs

Submission to RECfor processing

Letter of Award tothe successful

bidder and signingof Agreement

The TurnkeyAgency

commences works

Completion ofworks in a village

The ImplementingAgency invites

tender oncompetitivebidding basis

Sanction Letterswith reference to

the project isissued

Submitto StateGov. forapproval

Put up toMonitoringCommittee

forapproval

Evaluatethe Bids

Inspection byElectricalInspector

Village handedover to SPU

forenergization

andmaintenance of

VEI

Source: Ministry of Power, Note: DPR – Detailed Project Report, REC- Rural Electrification Corporation, SPU: State Power Utility, VEI: Village Electrification Infrastructure



Exhibit 19. Significant execution delays in past RE programmes: Need for enhanced monitoring and project

management

As of May’16, disbursal of only 81% of amount for X, XI plan

(FY02-2012) and 24% for XII plan (2012-17)

Significant delay and likely miss in achievement of targets in

last RE programme

344

59

79

179

81.3% Disbursed

24.6% Disbursed

-

50

100

150

200

250

300

350

400

450

X (2002-07), XI (2007-12) Plan XII Plan (2012-17)

Amount Disbursed - Rs bn Amount yet to be disbursed - Rs bn

120

589

40

114

355

22

-

100

200

300

400

500

600

700

Electrification of UEVillages ('000)

Intensive Electrification ofVillages ('000)

Electrification of BPLHouseholds (mn)

Target (X,XI & XII plans) Achieved (till May'16)

Source: DDUGJY

Exhibit 20. Some reasons ascribed for delays/lack in execution of prior Rural

Electrification programs

Reasons

Delay in award of project

Detailed project report (DPR) was not prepared based on survey, resulting in 9–12

months delay after sanction of projects.

Delay in providing BPL list by the states

Repeated request for approval of revised cost estimates

Non-deployment of dedicated team for implementation of project

Milestones not monitored during implementation of project

Delay in obtaining statutory clearances (forest, railways, NH and others) and allotment

of land for sub-stations by states

Delay in execution on extremism affected areas, hilly terrains, difficult and far flung

areas

Inadequate upstream network

Delay in energisation due to theft and inspection by electrical inspector

Source: JM Financial

We reckon some factors, which have led to inadequate or faulty execution of RE in

the past are as follows:

(a) Most plans are made by the central government and execution is the

responsibility of state governments. In some of the projects, there is a limited

set of EPC companies, who have the capability to execute projects. Our

discussions indicate that in a number of occasions, these companies take up

projects across multiple states and then execution is delayed on ground due to

manpower challenges.

(b) Distribution companies or DISCOMs have structural dis-incentive for RE due to:

(i) high initial capital cost on account of geographical spread of villages, (ii) low

load density and unfavourable consumer mix (low spending consumer), (iii)

high cost of delivery and low tariff leading to further financial distress, and (iv)

increase in thefts and pilferage, leading to high aggregate technical and

commercial (AT&C) losses.

(c) Therefore, in case of large project implementations, enough feedback should

be taken from the state governments/local agencies and accordingly monitoring

should also be more rigorous. There have been media reports highlighting

instances of claims of village electrification turning out to be untrue after

investigations.

RE programs are made by centre

and executed by state governments

and DISCOMs; hence proper co-

ordination and monitoring is

essential

DISCOMs have structural dis-

incentives for RE due to high cost,

unfavourable customer mix, increase

in theft and pilferage leading them

to book higher AT&C losses



We also interacted with industry experts such as Gyanesh Pandey, Co-Founder of

Husk Power Systems to understand rural behaviour towards electrification. HPS,

http://www.huskpowersystems.com/), is an off-grid rural electrification venture

established in 2007–08.

Interaction with Gyanesh Pandey, Co-Founder of Husk

Power Systems

HPS installs low power (25–100KW) generators using rice husk (agricultural

waste) and provides electricity in villages of Bihar and partly in Eastern UP.

Gradually, they have expanded their operations to Africa (Uganda and

Tanzania) and have included solar PV (Photo voltaic) solutions.

Basic electricity connection from HPS costs Rs150-160 per month per

household - HPS has more than 70 operating plants and provides power to

150,000+ villagers at present. The small power plants of HPS provide electricity

for 5–7 hours to roughly 400 HHs over a 3km radius. HPS charges `150–160 per

month for 2 CFL bulbs and a mobile charging unit (basic package) and charges

increase proportionately with additional devices. Earlier, the model was to

provide 7–8 hours of power. Now there is a demand for 24x7power as well,

which is being addressed by solar solutions.

A section of rural India has limited aspiration for electrification - After living

without electricity for generations, there is also a section of rural population that

has adapted to a lifestyle without electrical power and may not be too eager to

access electricity. As an example, in one of the villages, where HPS started its

operations in 2007–08, c.30% villagers have still not taken up electrical

connections. As per UE villagers, they are comfortable to lead their life without

electricity. The most cited reason for electrification is that it will help children

study. Electrification does help, but there is a very small percentage of villagers’

children who actually benefit from the light from electrification. The actual

beneficiaries are women who get proper lighting for household cooking and

other chores, in my view.

Extremely challenging to achieve “Power for all” goal by Mar’19 (India) - It is

a great initiative that the government is bringing grid to all villages and thereby

it will be easier for getting connections across broader rural population, but at

the same time, this is a very ambitious target and extremely difficult to achieve

given the challenges on the ground.

Uncertainty in policy and long gestation period restricts private investment

in Indian rural electrification - It is quite difficult to generate returns on

investments in the power sector. It is a very long-term investment and private

capital is not patient enough. Regulatory uncertainty, issues of delays in

payments of grants/subsidies, lack of clarity in the long-term plan has led to a

lack of private investment in RE (particularly off-grid).Though HPS started its

operations in India, we now finds that it is easier to implement such projects in

countries such as Uganda and Tanzania. Some of the African countries have

clearer policies for small energy producers and provide exclusive rights for 8–10

years, while the producers can commit on the tariff.



Do we have enough power generation capacity for

100% RE?

Given the strong growth in capacity addition (3x over the past 15 years, Appendix 1),

power deficit has continued to decline over the past five years and India is expected

to be a power surplus country from FY17 onwards.

Exhibit 21. Driven by the strong capacity addition, electricity deficit has

reduced from c.8–10% to a power surplus scenario at present

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

FY98 FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14 FY16 FY18E FY20E

Electricity Deficit (%)

Source: CEA, JM Financial

We have estimated the required power capacity in case of complete RE. If we assume

per household consumption of 100 units (100 kWh), the incremental HHs usage

would amount to 70bn units. This amount of energy usage can be easily covered by

incremental capacity of 10GW, or only 3.4% of the current installed power capacity in

India.

Exhibit 22. Incremental power generation needed for complete household

electrification

Details Amount

Rural UE HHs (mn) 58.0

Units (kwh) consumed per month for incremental UE HHs 100

Units consumed per year (BU) 69.6

Power required for 100% RE (GW) 7.9

Power required for 100% RE at 80% PLF (GW) 9.9

Installed power generation capacity - FY16 (GW) 294

Incremental power generation capacity in case of full rural household

electrification as % of existing capacity 3.4%

Source: DDUGJY, JM Financial

India’s power generation capacity

has gone up 3x in past 15 years

leading to electricity deficit reducing

from c.8-10% few years back to

power surplus in FY17



Exhibit 23. However, few states would need significant additional power

supply in case of complete RE

States UE HH (mn)

Incremental

energy demand

in case of 100%

RE (MU)

Existing

energy

demand

(MU) -

FY17E

Incremental

energy

demand as

% of FY17E

demand

UP 18.2 21,840 110,850 19.7%

Bihar 14.7 17,640 26,369 66.9%

MP 4.7 5,640 74,199 7.6%

Odisha 4.3 5,160 29,805 17.3%

Assam 3.5 4,200 9,309 45.1%

Total 45.4 54,480 250,532 21.7%

Source: DDUGJY, JM Financial

As shown above, on an overall basis the required capacity for power generation is

quite limited or c.4% of existing capacity.

However, digging a bit further, given the distribution of the existing power supply,

incremental demand from complete RE in the top-5 UE states, presents a different

picture. The incremental increase in power demand (from FY17 levels) from the

addition of rural HHs ranges between a low of c.8% for MP to a high of 67% for Bihar

and averages 22% for the top-5 UE states. Therefore a prudent policy for providing

power to these states needs to evolve, for the success of RE in India.

Due to low installed power

generation capacity (18%), the top

Un-electrified states would see

significant power demand

requirement over the next few years



How DDUGJY plans to address Rural Electrification?

The current central government announced DDUGJY scheme in Dec’14 (FY15) with

the overall objective of universal RE.

The scheme entails:

(a) Separation of agriculture and non-agriculture feeders, facilitating improved

quality power supply to non-agricultural consumers and adequate power supply to

agricultural consumers in the rural areas, and

(b) Strengthening and augmentation of sub-transmission and distribution

infrastructure in rural areas, including metering of distribution

transformers/feeders/consumers. The scheme also subsumes existing RE

programmes.

Exhibit 24. Key components of current RE programme - DDUGJY

Feeder Separation

•Helps in effectiveDemand Side & PeakLoad Management

• Regulated supply toagricultural consumersand continuous powersupply to non-agricultural consumersin rural areas

Strengthening of sub-transmission and

distribution system

• Creation /Augmentation of newsub-stations,transformers, HT & LTlines

• High VoltageDistribution System(HVDS) & AerialBunched Cable (ABC)

Metering

•Metering at all inputpoints and allconsumers for existingunmeteredconnections,

•Replacement of faultymeters &electromechanicalmeters

Micro-grid and off-grid distribution network

•DecentralizedDistributed Generationusing renewableenergy sources in offgrid and gridconnected areas


What is the outlay under DDUGJY?

The estimated outlay for DDUGJY is `430bn, including budgetary support of `335bn

over the period of the scheme. The programme enables total spending of c.`825bn

over FY16–22, including unspent allocated amount of previous RE programmes.

Exhibit 25. RE program outlay of Rs823bn over FY16-22

Areas of spending – ` bn Target Investment

- ` bn

Number of feeders to be separated/laid 16,500 248

New sub-stations 1,620/

1,615 41

Augmentation of existing sub-stations

33/66 kV lines 21,900 CKms* 15

Installation of distribution transformers

54

Meter installation - Consumer end/distribution

transformers/feeders 65

Total

421

NOFN & PMC

2.8

Other costs

6.4

Total

430

Amount already allocated for RGGVY but not spent in

previous electrification programmes, now part of

DDUGJY

393

Total Spend on RE programmes 823

Source: Ministry of Power, NOFN: National Optical Fiber Network, PMC: Project Management Consultant, CKm – Circuit

Kilometres

Feeder separation helps in demand

management and regulating supply

to agricultural consumers and non-

agricultural consumers



Key spend areas under DDUGJY programme

The detailed breakup of projected spending of `421bn, under DDUGJY (new

projects), is provided below and is likely to benefit players in the T&D segment as

well as EPC contracting companies.

Exhibit 26. Key area of spending on DDUGJY new projects over FY16–22

Key areas of spending Share (%) ` bn

Aerial Bunched (AB) Cable 26.3% 111

Aluminium conductor steel-reinforced (ACSR) conductors 16.1% 68

Poles 16.1% 68

Project contract execution 16.0% 67

Distribution transformers 7.3% 31

Meters (whole current) 6.7% 28

Power transformer 6.3% 27

U/G cable 3.4% 14

Vacuum circuit breakers 1.8% 8

Total 100.0% 421


How is the funding done for the RE programme?

In this scheme, 60% of the project cost (85% for special states), is provided as grant

by the Central government, and additional grant of up to 15% (5% for special states)

is provided by the government on achievement of prescribed milestones.

Exhibit 27. Funding plan for DDUGJY

Funded by

Nature

of

support

Quantum of support

Special category

states Other states

Government of India Grant 85% 60%

DISCOM Own

Fund 5% 10%

Lender (FIs/Banks) Loan 10% 30%

Additional grant from GOI on

achievement of prescribed

milestones

Grant 50% of total loan

component i.e.5%

50% of total loan

component

i.e.15%

Maximum grant by GOI (incl.

additional grant) Grant 90% 75%

Source: REC, Note: Special Category states- All North Eastern States including Sikkim J&K, Himachal Pradesh and

Uttarakhand.

How are projects managed under DDUGJY?

There are multiple stages to cross before a project is executed under the RE

program. Project formulation is done through the preparation of detailed project

reports (DPRs) by the implementing agency/state DISCOMs after initial need

assessment is done with nodal agency (REC in case of DDUGJY).

There are multiple committees formed to check the cost of project as well as to

monitor it over the period of execution. Projects are expected to be completed within

24 months from the date of issue of letter of award (LoA) by the utility.

There are detailed reports available online to track the progress of each and every

project under the DDUGJY scheme and up to the village level. In addition, the RE

programme also provides a real-time monitoring Application (mobile App) which

provides status of electrification progress across villages.

Central government provides 60% of

project cost as grant which can go

up to 75% on achievement of

prescribed milestones (90% for

special category states)



Exhibit 28. DDUGJY dashboard: provides real-time output and details up to the village and project level


Exhibit 29. DDUGJY dashboard provides details of engineers termed as Grameen Vidyut Abhiyanta (GVA) who verify

the electrification details in their area; increases transparency of the process




DDUGJY fund allocation across states and key segments

The allocation of RE scheme is largely in line with the UE population in the states. UP

and Bihar have been allocated 33% of DDUGJY spend, and the top-5 UE states will

obtain 48% of total on-grid allocation on new projects. Including the allocations from

earlier schemes, UP and Bihar have been allocated 39% and top-5 states 60% of RE

budget, as of May’16.

Exhibit 30. DDUGJY new project allocation by states

Total allocation (on-grid) spend for DDUGJY

Feeder Separation (agri. and non-agri.) to see 35% allocation in

the scheme

0

10

20

30

40

50

60

70

80

UP

Bih

arW

BM

PR

ajas

than

Mah

aras

htra

Kar

nata

kaO

dish

aA

ssam

Cha

ttisg

arh

Jhar

khan

dG

ujar

at TN

AP

Uttr

akha

ndJ&

KK

eral

aT

elan

gana

Har

yana

Aru

nach

al P

rade

shP

unja

bH

PT

ripur

aM

anip

urN

agal

and

Nag

alan

dM

izor

amM

izor

amS

ikki

m

DDUGJY Allocation - Rs bn

Feeder Segregation, 34.8%

System strengthening &

RHH, 50.4%

PMA charges, 0.5%

Metering, 9.4%

SAGY, 1.0%UEV Electrification

works, 3.7%

Source: Ministry of Power, DDUGJY, Note: RHH- Rural House hold, SAGY: Saansad Adarsh Gram Yojana, PMA: Project Management Agency, UEV: Un-electrified Village works

Feeder segregation (between agriculture and non-agriculture) would get 35% of

allocation, while strengthening of transmission system and metering would get the

rest of allocation.

Exhibit 31. Spending allocation varies significantly across states under DDUGJY schemes (new projects) reflecting

underlying conditions

DDUGJY Grid

Spending UP Bihar WB MP Raj Maha Kar Odisha Assam Chattis.

All

India

Feeder segregation 46.9% 75.8% 27.2% 28.6% 23.6% 32.4% 43.0% 8.5% 0.0% 32.9% 34.8%

System strengthening

& RHH 47.4% 21.2% 60.8% 55.3% 61.5% 66.3% 26.8% 43.9% 58.1% 59.0% 50.4%

PMA charges 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

Metering 4.2% 2.4% 10.4% 14.3% 13.1% 0.0% 26.4% 26.6% 5.5% 3.3% 9.4%

SAGY 0.9% 0.0% 0.0% 0.3% 0.4% 0.9% 3.2% 2.2% 3.9% 0.4% 1.0%

UEV electrification

works 0.1% 0.0% 1.1% 1.0% 0.8% 0.0% 0.2% 18.2% 31.9% 3.9% 3.7%

Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Share of DDJUGY new

projects spending 18.1% 15.2% 11.1% 7.4% 7.3% 5.6% 4.5% 4.3% 3.3% 3.3% 100.0%

Source: DDUGJY, Note: WB: West Bengal, MP: Madhya Pradesh, Raj: Rajasthan, Maha: Maharashtra, Kar: Karnataka, Chattis: Chattisgarh



Beneficiaries from Rural Electrification

Data from NSSO and our primary checks indicate sharp variance in penetration of

electrical goods across states, with lower than average penetration in low HH

electrified states such as Bihar, UP, Jharkhand, Assam, MP etc.

We believe the penetration of electrical goods will significantly improve in these

states over the next few years driven by

(a) Additional households accessing electricity (c.58mn or 35% of rural HHs in India),

(b) Increase in duration of available power per day (as part of RE program mandate),

and

(c) Improvement in quality of power supply with lower voltage fluctuations (through

better T&D infrastructure).

Exhibit 32. Penetration of TV and electric fan in select states

0

100

200

300

400

500

600

700

800

900

1,000

TV penetration (per 1000 HH) Electric Fan penetration (per 1000 HH)

Source: NSSO

We reckon a number of companies in the electricity chain would benefit from

investments in RE as well the as push towards improvement in urban transmission &

distribution infrastructure programme (IPDS, Appendix 2).

Exhibit 33. Beneficiaries from investments in RE

Power Generation

•NTPC

•Coal India

Transmission & Distribution

•PGCIL, KEC, Techno Electric

•Alstom T&D

•REC, PFC

•Crompton, Siemens

Power Consumption

•V-guard

• Havells

•Bajaj

Electricals

Voltas•

Source: JM Financial



Our Preferred picks….

Exhibit 34. Valuation table

Company Reco. M Cap

(` bn)

CMP

(`)

Chg.

(%) 12M

TP

Upsid

e (%)

EPS EPS

CAGR

(%)

P/E (x)

PEG

EV/EBITDA P/BV RoE

TTM FY16 FY17E FY18E FY16 FY17E FY18E FY17E FY18E FY17E FY18E FY17E FY18E

NTPC* BUY 1,308 159 33 189 19.1 12.4 11.2 13.3 3.3 12.8 14.2 12.0 4.3 11.3 9.7 1.4 1.3 10.0 11.0

Techno

Electric BUY 37 640 22 700 9.4 21.3 32.5 36.2 30.3 30.0 19.7 17.7 0.6 13.5 12.3 3.1 2.7 17.0 16.5

V-Guard

Industries* BUY 52 1,727 98 1,650 -4.5 37.1 48.0 59.0 26.1 46.5 36.0 29.3 1.4 23.5 19.5 8.9 7.1 27.3 27.0

Voltas BUY 126 379 39 385 1.5 10.4 13.5 15.4 21.7 36.4 28.1 24.6 1.3 22.5 19.2 4.6 4.0 17.5 17.5

Source: JM Financial, Note: * indicates stand-alone financials, Valuations as on 26th

August 2016

NTPC

NTPC is the largest power utility in India owning and operating 40GW on assured

regulated RoE-based norms. Coming from a low base of 1-2GW of annual

commissioning, we believe NTPC will report higher earnings growth in FY18-20

period driven by high project capitalisation (4-5GW during FY17-20). With 20GW

of under-construction capacity to commission by FY19–20, NTPC will add 40% of

its existing 40GW commercial base, in the next 3–4 years.

Since this entire capacity has signed PPAs at assured RoEs, earnings growth will

closely follow project capitalisation. Since new capacity addition is at a higher

capex rate in `/MW terms, addition to regulated equity (and hence RoE) is

expected to be higher at 65–70%. With bunched capitalisation targeted towards

FY17-end, earnings growth will be visible from FY18.

The only lingering concern which remains is the HC decision on CERC regulation

for coal cost (“as fired” vs. “as received”), which as per our analysis can impact 2%

of the RoE. Hence, we factor a sustainable core RoE of 18%, considering the risk.

We continue to find NTPC attractive at 1.3x FY18 BV, given the superior RoE

profile coupled with high earnings growth in FY18–20.

Techno Electric

Techno Electric and Engineering (TEEC), a niche player in T&D market, will be a

prime beneficiary of pick up in T&D capex over the next 3–5 years. We expect

Techno Electric to report sales and earnings CAGR of 19% and 30%, respectively,

led by a strong order book of Rs27bn (2.6x TTM sales); supported by

management guidance of annual order intake of Rs20bn.

The company has strong return ratios, as it reports RoCE of 35%+ in the EPC

segment (90% of sales), and has a build-up of BOOT asset portfolio that will

stabilise the earnings profile over the next 3–5 years.

T&D investments are on a multi-year growth path on: a) under-investment in past

as transformation capacity to generation capacity ratio stands at 1x against

global benchmark of 4x, b) increased renewable energy investment leading to a

shift towards dynamic load projects, wherein TEEC has an edge, and c) increasing

share of EPC in a project on increasing complexity of projects.

Superior earnings growth in FY18-20

driven by high project capitalisation

Early beneficiary from spending

pick- in the T&D segment



V-Guard

V-Guard, a Kochi based company started in 1997 as a manufacturing unit for

voltage stabilizers and has over the years diversified into a range of products,

which include standalone UPS, digital UPS, electric and solar water heaters,

domestic/agricultural pumps, wires and cables, fans, induction cooktops, and

switchgears. V-Guard offers excellent mix of growing product portfolio, enjoys

significant brand recall in South India and is now creating the same swiftly in the

non-south region (spends c.8–10% of revenue vs. 4% in south), rapidly expanded

distribution reach, especially in non-south region (26% CAGR in distributors over

FY11–16).

V-Guard follows an asset light model, wherein c.60% of its production is

outsourced (mostly to SSI units that enjoy excise exemption), while keeping a

strong control over design and quality. This helps V-Guard to reduce its

capex/working capital requirement, leading to higher return ratios. V-Guard can

utilise its cash flows for brand building purposes, leading to higher growth in the

future. It has manufacturing facilities at Coimbatore (Tamil Nadu), Kashipur

(Uttaranchal), Kala Amb (Himachal Pradesh) and Sikkim.

V-Guard We estimate revenue/EBITDA/net profit CAGR of 16%/20%/26%,

respectively, for FY16–18E with strong RoE/RoCEs (>25%).

Voltas

Voltas incorporated in 1954 under Tata group, has seen a significant change in

its business model over the past six years, as share of the Unitary Cooling

Products (UCP) segment’s sales/EBIT increased from 25%/23% in FY10 to

44%/67%, respectively in FY16. The increase in share of the UCP segment augurs

well for Voltas because: a) it reduces cyclicality, b) improves return ratios/cash-

flows, c) has low NWC requirement. We believe improved predictability of earnings

will lead to re-rating of the stock.

Electro Mechanical Projects (EMP) segment (46% of sales) is set for turn-around

driven by (a) completion of legacy projects, (b) cautious approach by

management in winning new orders and (c) synergies resulting from integration

of water and RIEL in the domestic projects group. We expect adjusted net profit

to increase at a CAGR of 22% over FY16–18E, led by margin expansion in the EMP

segment (+250bps in 2 years) and strong sales growth in the UCP segment on

new product launches and increased penetration in room ACs.

Voltas reported average RoE of 36% and FCF of Rs1bn/annum over FY06–11. We

believe a recovery in domestic ordering activity is likely to propel RoEs back to

the 17–18% range, with FCF yield of 4–5%.

Expanding presence in non-south

markets, asset light model leads to

superior return ratio and cash flow

generation

Improving return ratio profile and

cash flows to drive valuations



Appendix 1: Electricity demand and supply growth

in India

Power demand in India has grown at CAGR of 5.7% between FY93-04 and increased

marginally to 5.9% during FY05–16. The GDP multiplier (power demand growth/GDP

growth rate) has averaged 0.88x over the past two decades. Even assuming GDP

growth rate of 8% in FY16–21E, total demand grows from 1.114 billion units (BU) to

1,564 BU in FY21 at a CAGR of 7%.

Exhibit 35. Power demand has grown steadily in India

Energy demand reached 1.1K BU in FY16, doubled in past 10

years

Power demand/GDP growth rate has averaged 0.88x over past

22 years

425 546

691 831

937 1,069

1,276

1,564

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

FY

98

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17E

FY

18E

FY

19E

FY

20E

FY

21E

Energy Demand (BU)

0.0

0.5

1.0

1.5

Power demand growth/GDP growth (x)

Source: Ministry of Power, CEA, JM Financial

Power generation capacity has seen a sharp jump during the past decade, from

average annual addition of 3.5GW during FY93-03, increased to 7GW in FY04–10 and

then further to massive 19GW during FY11–16. As a result, the total power

generation capacity trebled over the past 15 years to 294GW by FY16 (c.9% CAGR in

FY04–16).

Exhibit 36. Significant increase in power generation capacity over the past decade

New capacity additions scaled up from FY04, and accelerated

from FY10

Power generation capacity has trebled in the past 15 years,

from c.100GW to c.300GW at present

3.5

7

1918

0

2

4

6

8

10

12

14

16

18

20

FY93-03 FY04-10 FY11-16 FY17-21

Average annual Power capacity Addition (GW)

89 98 108 132

159

200

272

322

383

-

50

100

150

200

250

300

350

400

450

FY

98

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17E

FY

18E

FY

19E

FY

20E

FY

21E

Generation Capacity (GW)

Source: Ministry of Power, CEA, JM Financial



Appendix 2: Accelerated power development and

reforms programme (APDRP) Scheme (now IPDS) to

aid further urban T&D spending

The APDRP scheme was initiated in 2002–03, as additional Central assistance to

states for

(a) Reducing the aggregate technical and commercial (AT&C) losses in the power

sector (AT&C captures the total loss in the distribution network). Technical loss may

be due to ill-maintained equipment, substations and inadequate investment in

infrastructure, while commercial loss may be due to low metering efficiency, faulty

meter reading, theft and pilferages.

(b) Improving the quality and reliability of power supply. This was to be achieved by

strengthening and upgrading the sub-transmission and distribution system of high-

density load centres such as towns and industrial centres.

The restructured accelerated power development and reforms programme (R-APDRP)

started in 2008 was a revised version of the APDRP programme with total outlay of

`516bn for IT enablement and strengthening of distribution sector. The completion

period for projects was five years from the sanction date. The Power Finance

Corporation (PFC) was the nodal agency to operationalise the scheme under the

guidance of the Ministry of Power.

Integrated power development scheme (IPDS) to drive c.̀ 770bn (USD 11.5bn) of

T&D spending over FY16–22

The government has approved the IPDS scheme during 2015, which envisages: (a)

strengthening of sub-transmission and distribution network in the urban areas; (b)

metering of distribution transformers/feeders/consumers in the urban areas, and

(c) IT enablement of distribution sector and strengthening of distribution

network. This scheme subsumes the previous RAPDRP scheme.

In this scheme, 60% of the project cost (85% for special states), is provided as grant

by the government, and an additional government grant of up to 15% (5% for special

states) is provided on achievement of prescribed milestones.

Exhibit 37. IPDS allocation: `766bn of T&D spending in urban areas

Details (` bn)

Scheme allocation 326

incl. budgetary support 254

Amount carried from RAPDRP for 12th & 13th plans 440


Total project outlay 766


Source: PIB

http://www.arthapedia.in/index.php?title=Central_Plan_Assistance

http://www.apdrp.gov.in/Default.aspx

http://www.pfcindia.com/



Appendix 3: Detailed scope of project execution

under DDUGJY

Exhibit 38. Detailed Project scope for Rural Electrification - DDUGJY

Nature of work Detail of the work involved

Feeder Separation

(a) Physical separation of HT feeders for Agricultural and non-Agricultural consumers

Erection of HT lines for drawing new feeders and reorientation/re-alignment of existing lines

Installation of new distribution transformers and augmentation of existing distribution transformers

Re-location of distribution transformers and associated LT lines for regrouping of consumers

(Agricultural and Non-Agricultural)

(b) Virtual separation of feeders

Installation of new distribution transformers and augmentation of existing distribution transformers.

Re-location of distribution transformers and associated LT lines for regrouping of consumers

(Agricultural and Non-Agricultural).

Installation of rotary switch and associated hardware at sub-stations.

Strengthening of sub-

transmission and

distribution system

Creation of new sub stations along with associated 66 KV / 33 KV/ 22 KV/ 11 KV lines.

Augmentation of existing sub-stations capacity by installation of higher capacity/additional power

transformer along with associated equipment/ switchgear etc.

Erection of HT lines for reorientation/re-alignment including augmentation of existing lines

Installation of new distribution transformers and augmentation of existing distribution transformers

along with associated LT lines.

Installation of capacitors.

Renovation and Modernisation of existing sub-stations and lines.

High Voltage Distribution System (HVDS).

Arial Bunched Cable for theft prone areas

Metering

Installation of suitable static meters for feeders, distribution transformers and all categories of

consumers for un-metered connections, replacement of faulty meters & electro-mechanical meters.

Installation of Pillar Box for relocation of meters outside the premises of consumers including associated

service cables and accessories.

Micro-grid and off-grid

distribution network.

Decentralised Distributed Generation using renewable energy sources in off grid

and grid connected areas.

Source: DDUGJY



Appendix 4: Progress of HH electrification under

DDUGJY

During the past 14 months, c.2.7mn rural households (c.5%) have been electrified

through the scheme. The project has also completed electrification of 10,079

villages by Aug ’16 (out of 18,452 un-electrified villages) and aims to complete in

rest of villages by May 2018.

Exhibit 39. HHs electrified during the past 14 months (total: 2.7mn) under

DDUGJY scheme

-

200

400

600

800

1,000

1,200

HH's electrified between Mar 2015 and May 2016 ('000)

Source: DDUGJY

Bihar saw the highest addition in

rural electrification over the past 14

months



APPENDIX I


(Formerly known as JM Financial Institutional Securities Private Limited)

Corporate Identity Number: U65192MH1995PLC092522

Member of BSE Ltd. and National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd.

SEBI Registration Nos.: BSE - INZ010012532, NSE - INZ230012536 and MSEI - INZ260012539, Research Analyst – INH000000610

Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.

Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com

Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: [email protected]

Definition of ratings

Rating Meaning

Buy Total expected returns of more than 15%. Total expected return includes dividend yields.

Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.

Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification

The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:

All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their

securities; and

No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views

expressed in this research report.

Important Disclosures

This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide

information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for

the purpose of information of the select recipient of this report. This report and/or any part thereof, may not be duplicated in any form

and/or reproduced or redistributed without the prior written consent of JM Financial Institutional Securities. This report has been prepared

independent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst, Merchant

Banker and a Stock Broker having trading memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan

Stock Exchange of India Ltd. (MSEI). No material disciplinary action has been taken by SEBI against JM Financial Institutional Securities in the

past two financial years which may impact the investment decision making of the investor.

JM Financial Institutional Securities provides a wide range of investment banking services to a diversified client base of corporates in the

domestic and international markets. It also renders stock broking services primarily to institutional investors and provides the research

services to its institutional clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated

investment banking, investment management, brokerage and financing group. JM Financial Institutional Securities and/or its associates

might have provided or may provide services in respect of managing offerings of securities, corporate finance, investment banking, mergers

& acquisitions, broking, financing or any other advisory services to the company(ies) covered herein. JM Financial Institutional Securities

and/or its associates might have received during the past twelve months or may receive compensation from the company(ies) mentioned in

this report for rendering any of the above services.

JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short

position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such

securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) covered

under this report or (c) act as an advisor or lender/borrower to, or may have any financial interest in, such company(ies) or (d) considering

the nature of business/activities that JM Financial Institutional Securities is engaged in, it may have potential conflict of interest at the time of

publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually

own one per cent or more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research

Analysts) Regulations, 2014.

The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited

from buying or selling debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued

by company(ies) covered under this report. The Research Analyst(s) principally responsible for the preparation of this research report or their

relatives (as defined under SEBI (Research Analysts) Regulations, 2014); (a) do not have any financial interest in the company(ies) covered

under this report or (b) did not receive any compensation from the company(ies) covered under this report, or from any third party, in



connection with this report or (c) do not have any other material conflict of interest at the time of publication of this report. Research

Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities,

markets or developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM

Financial Institutional Securities may not be in any way responsible for any loss or damage that may arise to any person from any inadvertent

error in the information contained in this report. This report is provided for information only and is not an investment advice and must not

alone be taken as the basis for an investment decision. The investment discussed or views expressed or recommendations/opinions given

herein may not be suitable for all investors. The user assumes the entire risk of any use made of this information. The information contained

herein may be changed without notice and JM Financial Institutional Securities reserves the right to make modifications and alterations to

this statement as they may deem fit from time to time.

This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official

confirmation of any transaction.

This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any

locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or

which would subject JM Financial Institutional Securities and/or its affiliated company(ies) to any registration or licensing requirement within

such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors.

Persons in whose possession this report may come, are required to inform themselves of and to observe such restrictions.

Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala ([email protected]) on

+65 6422 1888 in respect of any matters arising from, or in connection with, this report.

Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities,

Inc. ("JM Financial Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to

conduct certain business in the United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6,

promulgated under the U.S. Securities Exchange Act of 1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S.

Securities and Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research

report" for purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S.

institutional investors" as defined in Rule 15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional

investor. If you have received a copy of this research report and are not a major U.S. institutional investor, you are instructed not to read, rely

on, or reproduce the contents hereof, and to destroy this research or return it to JM Financial Institutional Securities or to JM Financial

Securities.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible

for its content. The research analyst(s) preparing this research report is/are resident outside the United States and are not associated

persons or employees of any U.S. registered broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or

otherwise required to satisfy the regulatory licensing requirements of FINRA and may not be subject to the Rule 2241 restrictions on

communications with a subject company, public appearances and trading securities held by a research analyst account.

JM Financial Institutional Securities only accepts orders from major U.S. institutional investors. Pursuant to its agreement with JM Financial

Institutional Securities, JM Financial Securities effects the transactions for major U.S. institutional investors. Major U.S. institutional investors

may place orders with JM Financial Institutional Securities directly, or through JM Financial Securities, in the securities discussed in this

research report.

Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United

Kingdom (U.K.) by the Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional

experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)

Order 2005 (as amended, the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies,

unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an

invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000)

in connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such

persons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or relied

on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant

persons and will be engaged in only with relevant persons.

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