INDIAN ECONOMY

The Indian economy demonstrated consistent expansion and stability throughout FY 2024-25, reinforcing its status as one of the world's fastest-growing major economies. The National Statistical Office's (NSO) Second Advanced Estimate (SAE) data indicate an estimated real Gross Domestic Product (GDP) growth of 6.5% for FY 2024-25, following a substantial 9.2% increase reported in the First Revised Estimates for the preceding financial year. This sustained growth trend underscores the nation's strong economic fundamentals, supportive governmental policies, a vibrant services sector, and resilient domestic demand, collectively strengthening confidence in India's long-term growth prospects.

Key governmental reforms and substantial investments in both tangible and digital infrastructure, along with initiatives such as 'Make in India' and the Production-Linked Incentive (PLI) scheme, have played a crucial role in enhancing the country's growth momentum and fostering greater self-reliance.

The services sector recorded a steady expansion of 7.2% throughout FY 2024-25, fuelled by strong performance across diverse areas such as finance, property, professional services, public administration, and defence.

India's economic standing continues its upward trajectory. As on March 31,2025, it is positioned as the world's fifth-largest economy by nominal Gross Domestic Product (GDP) and the third-largest based on purchasing power parity (PPP). The nation has established ambitious targets of achieving a US$ 5 trillion economy by FY 2027-28 and a US$ 30 trillion economy by 2047. These aims are to be accomplished through substantial infrastructure investments, ongoing reform initiatives, and the extensive adoption of technology. Reflecting this commitment, the capital investment budget for 2025-26 has been increased to ?11.21 lakh crores, representing 3.1% of GDP.

OUTLOOK

The Indian economy is projected to grow at 6.8% in FY 2025-26. It is anticipated to become the world's third-largest economy in the coming years, propelled by investments in infrastructure, increased private capital expenditure, and the expansion of

financial services. Continued reforms are expected to underpin this long-term growth trajectory.

This favourable outlook is supported by India's demographic strengths, increasing capital investments, proactive governmental initiatives, and robust consumer demand. Improved rural consumption, aided by moderating inflation, further strengthened this growth path. The government's emphasis on capital expenditure, fiscal responsibility, and enhancing business and consumer confidence is expected to foster both investment and consumption.

Government programmes such as Make in India 2.0, reforms aimed at improving the Ease of Doing Business, and the Production-Linked Incentive (PLI) scheme are designed to strengthen infrastructure, manufacturing, and exports, positioning India as a significant participant in global manufacturing. With inflation projected to align with targets by 2025, a more accommodative monetary policy is anticipated. Infrastructure development and supportive public policies will facilitate capital formation, while rural demand will be supported by initiatives such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

(Source: PIB, Economic Survey)

INDIAN POWER INDUSTRY

India holds the position of the third-largest producer and consumer of electricity worldwide, with a total installed capacity of 475.2 GW as of March 31, 2025. The power sector is fundamental to the development of the nation's infrastructure, driving economic advancement, and enhancing the quality of life for its citizens.

The Indian power industry has undergone a notable evolution, transitioning from a state of power deficit to one of surplus capacity. This achievement has been facilitated by the integration of a unified national grid, improvements in distribution networks, and the achievement of universal household electrification. With a diversified energy portfolio encompassing conventional sources such as coal, natural gas, and hydro, alongside renewable energy sources like solar, wind, and biomass, India is steadily progressing towards a sustainable energy future.

As of March 31,2025, India's installed thermal energy capacity reached 246.9 GW, and its renewable energy capacity amounted to 220 GW. These sources collectively represent 98.25% of the total installed power capacity, excluding nuclear energy.

Driven by population growth, increasing electrification rates, and rising per capita electricity consumption, the nation's energy demand continues on an upward trend. India has set a commitment to exceed 500 GW of non-fossil fuel-based installed

Power Generation Capacity

India's power generation sector is highly varied, drawing on both traditional sources like coal, gas, and nuclear, as well as renewable sources such as wind, solar, and hydro.

Electricity generation grew to 1,829 BU in FY 2024-25 from 1,739 BU in FY 2023-24, reflecting a growth rate of around 5.2%. As of September 2024, power generation reached 951 BU. Thermal power continues to dominate, contributing 74.5% of the nation's electricity.

Thermal power generation is predominantly coal-based, contributing 87.6% of the total share, followed by gas at 10.3%, lignite at 2.7%, and diesel at 0.2%. The western region holds the largest thermal capacity, accounting for 35.7% of the total.

Renewable energy's share in installed capacity increased from 35.9% in FY 2019-20 to 46.3% in FY 2024-25, reflecting significant growth in solar, wind, and hydropower investments. This shift underscores India's commitment to cleaner energy, decarbonization, and building a sustainable energy future.

The total installed power capacity has grown significantly from 248,554 MW in March 2014 to 475,212 MW by March 2025. Coal-based power capacity has expanded from 139,663 MW to 221,813 MW over the same period. The renewable energy sector has seen a remarkable increase, with capacity rising from 75,519 MW to 220,096 MW in March 2025.

The distribution and transmission sectors witnessed notable advancements in FY 2023-24. Aggregate Technical & Commercial (AT&C) losses were reduced to 15.4% in FY 2023-24, driven by improvements in billing efficiency (86.9%) and collection efficiency (96.4%). The AT&C losses in 2024-25 is expected to be in the range of 12-15%..

To address increasing energy demand and facilitate the integration of renewable energy sources, India intends to add 80 GW of coal-based thermal power capacity by FY 2031-32. This new capacity is considered essential for stabilising the national energy grid, particularly during periods of peak demand or lower renewable energy generation. The deployment of ultra-supercritical and supercritical technologies will ensure that this expansion is undertaken with enhanced environmental efficiency, resulting in lower emissions intensity per unit of electricity generated.

India's power generation sector demonstrates significant diversification, drawing upon both conventional sources such as coal, gas, and nuclear energy, as well as unconventional sources including wind, solar, and hydroelectric power.

Electricity generation has shown consistent growth, increasing from 1,350 billion units (BU) in FY 2018-19 to 1,829 BU in FY 2024-25, representing a compound annual growth rate (CAGR) of approximately 5.9%.

Thermal power remains the backbone of India's electricity generation, supplying around 75% of total output in FY 2023-24 and 2024-25, with coal accounting for the vast majority. Renewables have steadily increased their contribution to about 21%, up from 19.1% in FY 2018-19 but thermal dominance continues, especially as coal usage surged to a record in FY 2024-25.

India's commitment to a sustainable energy future is clearly demonstrated by the growth in its renewable energy (RE) capacity. As of March 31, 2022, a substantial 157 GW of power was generated from renewable sources, including 46.72 GW from large hydro projects, representing about 39% of the country's total power infrastructure. This commitment has gained momentum, with installed renewable capacity reaching 226.74 GW by May 31,2025, of which 47.72 GW was from large hydro. This remarkable increase now accounts for approximately 43.5% of India's total electricity-generating capacity.

Sustaining this positive trajectory in renewable energy necessitates effective grid connectivity, particularly linking high-potential solar and wind regions to the Inter-State Transmission System (ISTS). Such connections are vital for efficiently transporting generated power to areas of high demand. Given that wind and solar projects typically have shorter development cycles compared to their associated transmission lines, proactive planning of this infrastructure is paramount for a smooth integration of renewables into the national grid.

In pursuit of these ambitious renewable energy goals, considerable advancements are underway. A strategically designed, comprehensive transmission system aims to handle the evacuation of power from an estimated 613 GW of renewable energy capacity by 2032. This crucial initiative not only highlights our dedication to increasing renewable energy production but also solidifies our resolve to build a future energy ecosystem that is both sustainable and efficient (Source - CEA, NEP-Volume II).

Transmission and Distribution Sector

The power distribution sector is undergoing a major transformation through the Revamped Distribution Sector Scheme (RDSS). This scheme has approved the rollout of 19.79 crore prepaid smart meters, 52.52 lakh DT meters, and 2.10 lakh feeder meters, with a total cost of ?1,30,670.88 crore. Efforts to reduce losses, amounting to ?1.46 lakh crore, have been approved, and ?18,379.24 crore has already been provided for these. These changes are successfully bringing down AT&C losses and reducing the gap between the cost of supplying power and the revenue earned. Furthermore, the scheme is focussed on providing on-grid electricity to all households of Particularly

Vulnerable Tribal Groups (PVTGs) and tribal communities, with ?4,355 crore allocated to connect 9.61 lakh homes.

(Source: PIB.gov.in)

India's transmission line network has seen consistent expansion, reaching 491,871 circuit kilometres (ckm) as of January 2025. This represents a compound annual growth rate (CAGR) of 3% since March 2019, when the network stood at 413,407 ckm. During the financial year 2024-25, an additional 8,830 ckm were added to the network, bringing the total to the aforementioned 494,374 ckm by March 2025. The total transformation capacity of the grid stood at 1,337 GVA as of the same period.

These enhancements are vital for accommodating the growing electricity demands across the nation and ensuring an uninterrupted power supply between different regions.

National Electricity Plan (2023-2032)

The Government of India has finalised its National Electricity Plan for the decade spanning 2023 to 2032. A key objective of this plan is the modernisation of both central and state transmission systems to effectively support a projected peak electricity demand of 458 GW by the year 2032. This ambitious undertaking, with an estimated investment of ?9.16 lakh crore, will expand the national transmission network from its 4.91 lakh circuit kilometres (ckm) in 2024 to 6.48 lakh ckm by 2032.

Simultaneously, transformation capacity is scheduled to increase from 1,290 GVA to 2,342 GVA within the same timeframe. To further enhance grid infrastructure, nine new High Voltage

Direct Current (HVDC) lines, contributing an additional capacity of 33.25 GW, will supplement the existing 33.5 GW HVDC network. Inter-regional power transfer capacity is also projected to rise from 119 GW to 168 GW. This strategic plan focussed on transmission networks operating at 220 kV and above, thereby supporting the nation's increasing electricity needs and enabling the integration of renewable energy (RE) sources and green hydrogen initiatives.

Enhancements to the Transmission System

During the preceding calendar year, 2024, significant enhancements were implemented within India's transmission infrastructure. These included the addition of 10,273 ckm of transmission lines (at 220 kV and above), an increase of 71,197 MVA in transformation capacity, and the augmentation of inter-regional transfer capacity by 2,200 MW. These upgrades are crucial for effectively meeting the growing electricity demands across various regions and ensuring a seamless and reliable flow of power.

India has experienced a substantial surge in power demand over the last ten years, primarily driven by rapid economic expansion, industrial growth, and increasing urbanisation. PGInvIT provides power to several of India's most economically advanced states, which have historically demonstrated strong and consistent growth in power consumption, underscoring their vital contribution to meeting the nation's energy requirements.

BUSINESS OVERVIEW

POWERGRID Infrastructure Investment Trust (PGInvIT) stands as a major initiative in India's energy landscape, established by POWERGRID, the country's largest transmission company and a Maharatna Central Public Sector Enterprise (CPSE). As the first infrastructure investment trust sponsored by a government entity in India, PGInvIT is dedicated to owning, constructing, operating, maintaining, and investing in power and transmission assets.

Founded in September 2020 under the Indian Trusts Act, 1882, and registered with the Securities and Exchange Board of India (SEBI) in January 2021, PGInvIT is backed by the expertise of POWERGRID, an experienced investment manager, and IDBI Trusteeship Services Limited, a respected trustee.

Initial Portfolio Assets

The initial portfolio of PGInvIT comprises five operational Special Purpose Vehicles (SPVs), each holding a transmission licence granted by the Central Electricity Regulatory Commission under the Electricity Act, 2003. These projects, executed through a tariff-based competitive bidding mechanism, boast a strong operational track record with high availability. They are eligible for assured transmission charges and incentives for a duration of 35 years from their respective commercial operation dates. PGInvIT is committed to optimising the performance of these assets through its project management team at POWERGRID.

The assets within PGInvIT include 11 transmission lines - six at 765 kV and five at 400 kV - spanning a total length of 3,699

The transmission charges are secured for the duration of the relevant TSAs, which typically extend for 35 years from the Commercial Operation Date (COD) of each power transmission project. These agreements are subject to renewal in line with the terms of the TSA and the regulations established by the Central Electricity Regulatory Commission (CERC).

Net Distributable Cash Flow (NDCF) and Distribution Per Unit (DPU)

Net Distributable Cash Flow (NDCF) represents the free cash flow generated from the underlying operations of PGInvIT. The cash flows received typically include interest income, dividend income, and principal repayments. In accordance with the InvIT Regulations and PGInvIT's Distribution Policy, the Trust is required to distribute at least 90% of its Distributable Income to Unitholders.

For FY 2024-25, the NDCF amounted to ? 10,810.15 million, resulting in an aggregate Distribution Per Unit (DPU) of ? 12. The DPU reflects the cash flow distributed on a per unit basis to Unitholders, with total cash distributions for the fiscal year reaching ? 10,919.99 million.

Assets Under Management (AUM)

The valuation of PGInvIT's assets was conducted by the registered valuer, M/s INMACS Valuers Private Limited, which assessed the total Enterprise value at ? 90,041.83 million as of March 31,2025. This valuation underscores the Trust's sound asset base and its commitment to maintaining a strong financial position.

AUM is considered as Enterprise Value Less Cash and Cash Equivalents.

Borrowings

As of March 31,2025, PGInvIT's consolidated borrowings totalled ?10,723.19 million. During the year ended March 31, 2025, PGInvIT secured additional borrowings amounting to ?5,060 million to facilitate the acquisition of the remaining 26% equity stake in PPTL, WTL, KATL, and JPTL in December 2024. It made a loan repayment of ?35.10 million in accordance with the Facility Agreement and amendments thereto established with HDFC Bank Limited. This prudent management of borrowings reflects PGInvIT's commitment to maintaining a stable financial position while fulfilling its obligations.

Credit Rating

PGInvIT's strong financial position enables it to pursue an aggressive but structured growth strategy. PGInvIT has significant capacity to leverage debt for acquisitions, supported by strong lender confidence and a consistent payment track record.

Additionally, its 'AAA' credit rating from CARE, CRISIL, and ICRA since its IPO underscores its financial stability and credibility in the market.

Strategic Outlook

PGInvIT is strategically positioned to capitalise on the growing opportunities in India's power transmission sector. With the completion of the acquisition of the remaining 26% stake in KATL, PPTL, JPTL, and WTL in December 2024, PGInvIT has further strengthened control on its asset portfolio. This move aligns with its long-term vision of expanding its transmission network and enhancing operational efficiency.

PGInvIT's acquisition strategy remains focussed on identifying and securing transmission assets through a structured, debt-funded approach. The trust follows a disciplined evaluation process, ensuring that all acquisitions undergo independent valuation to maintain transparency and financial prudence. The corporate governance framework of PGInvIT provides a strong foundation for sustainable growth while adhering to strict compliance and regulatory standards.

The trust acknowledges the limited acquisition opportunities in the transmission sector at present. However, with an estimated ?9 lakh crore investment potential in the transmission sector up to 2032, as outlined in the National Electricity Plan (Transmission), PGInvIT is well-positioned to tap into this expansion. By strategically targeting assets and optimising its portfolio, PGInvIT aims to maximise shareholder value while strengthening India's power infrastructure.

PGInvIT is also actively engaging with state governments to align with the Government of India's monetisation guidelines. A key step in this direction was the policy advocacy workshop conducted by the Central Electricity Authority (CEA) in association with PGInvIT, NIIF and PFCCL on December 6, 2024, in New Delhi. Also, PGInvIT participated in the SEBI and GIDB's Workshop on REITs, InvITs and Municipal Debt Securities at Gandhinagar on December 7, 2024. These discussions are expected to pave the

way for new opportunities in the sector and facilitate further growth through asset monetisation initiatives.

Key industry trends continue to support PGInvIT's expansion strategy. Rising energy demand across India necessitates a well-developed transmission infrastructure to ensure uninterrupted power supply. The rapid growth in renewable energy capacity requires efficient grid integration, making transmission expansion a critical component of India's clean energy transition. Additionally, system strengthening initiatives are being prioritised to enhance reliability and reduce transmission losses.

PGInvIT remains committed to optimising its portfolio while leveraging policy-driven opportunities. By maintaining financial discipline, pursuing strategic acquisitions, and aligning with the country's evolving power sector dynamics, PGInvIT aims to solidify its position as a leading player in India's transmission sector.

CAUTIONARY STATEMENT

This Management Discussion and Analysis may include statements concerning the Trust's objectives, projections, estimates, and expectations, which could be considered forward-looking. These statements are made in accordance with relevant laws and regulations and are based on the management's informed judgements and current estimates. Words such as 'may', 'will', 'should', 'expects', 'plans', 'intends', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or

'continue', and similar expressions, are intended to identify such forward-looking statements.

It is important to note that the actual results or future prospects of the Trust could differ significantly from those expressed or implied in these forward-looking statements. Future performance is subject to various risks, uncertainties, and changes that are beyond the Trust's control. Key factors that could influence the Trust's operations include macroeconomic trends within the country, improvements in capital market conditions, changes in government policies, regulations, taxation, laws, and other statutory requirements, as well as other unforeseen factors.

The Trust assumes no obligation to publicly update, modify, or revise any forward-looking statements to reflect future events or circumstances that may arise.