Ladies and gentlemen, good day, and welcome to the Adani Transmission Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Ladies and gentlemen, good day, and welcome to the Adani Transmission Q1 FY 2023 earnings conference call hosted by Edelweiss Securities. We have from the management side today, Mr. Anil Sardana, MD and CEO, ATL; Mr. Vijay Jain, Lead Investor Relations. I now hand the conference over to Mr. Anil Sardana, CEO and MD, Adani Transmission. Thank you, and over to you, sir.
Good morning. Thank you, Mike. Let me also add that, I'm joined by my senior colleague, CFO Mr. Rohit Soni, and also other colleagues from the IR and finance team. In terms of, very quick information from my side, the Q1 FY 2023 had similar robust performance as previous quarters. Let me start with our operational performance. We maintained transmission availability, supply availability, as also achieved distribution losses, which all confirm the fact that the operational aspects are as robust as they ought to be or as we aspire them to be. 1 million units sold during the quarter at our distribution network were 20% higher year-over-year basis. It clearly shows that the demand profile is now moving up.
In addition to that, our commitment to make sure that we were to return the perpetual debt which was causing a bit of issues with the rating agencies and some of the investors were paranoid that with the moving share prices, the other alternate means to get quasi-equity or equity would be a challenge. Therefore, we're very happy that we completed the primary equity transaction with International Holding Company , wherein they acquired 1.4% stake at a price which augurs well for investors, augurs well for establishing on ground the worth of the company. Having mobilized about INR 3,850 crores, we could return the PERP as well as the accrued interest, because from cash flow perspective, we were not paying the interest.
To that extent, now there is no additional debt in form of the long-term perpetual debt, and therefore, with the rating agencies that issue is off the table. We also announced acquisition of Mahan-Sipat transmission line from Essar. That's in the works as we talk. We hope to consummate that transaction in sooner times based on the clearances and the statutory approvals as are applicable. The company's quest to be within the top-ranking companies in the world on ESG side is a newfound aspiration, which I must express to the analyst colleagues. The company is genuinely putting its might in terms of covering all around areas on environmental, social, and governance aspects.
We have done very deep-rooted exercise in terms of benchmarking with some of the world's best-rated ESG companies, not just in the energy sector, but also otherwise, to learn for ourselves as to what exactly we need to be doing to catch up on the gap areas, if I might state so. On our side, while that effort will continue, we are very thankful to CRISIL, that in their ESG yearbook released in May 2022 recently, they indicated ATL within the top three companies in the power sector on the ESG ratings. Similarly, our ESG ratings done by S&P Global gave us a much better score, compared to last year, 20% improvement. We are not stopping there. We are now looking at another 20% improvement in the next round.
The FTSE rating of 2021, the MSCI rating of 2021 also stay in our radar, and we continue to work towards improved rating. In fact, many of you might have seen that the annual report that we published, we actually set up a record of sorts, not by virtue of that record, but by virtue of the pride that, you know, we gave so much of disclosures. That we ended up with 501 pages of annual report. It's got all the data, details and our commitments and our trends in terms of various aspects. On various, you know, commonly understood aspects like zero waste to landfill, single-use plastic-free, being water neutral or water positive.
I'm very happy to tell the analyst colleagues that that's where we put our stakes firmly in the ground with third-party accreditation of having got certified at all our wind farm sites. These are international companies which have accredited us that we are zero waste to landfill now. Similarly, most of our units are now single-use plastic-free. You know, from July the country has taken that part. We're very happy that our advocacy has worked to a point that the country has adapted those norms. We will continue to work on. Similarly, on the water side, we are much lower than what is the norm, industry norm. Even in our generating stations we are far, far lower than what is the industry norm.
We are very happy in the way our team has rallied to pick up threads and make sure that we will come out with benchmark numbers across various aspects of ESG rating. Let me very quickly, you know, kind of talk about the results because that's where some of those things that you see in your documents, you always would want to have details in the manner the management views it. First and foremost, because of the two special items. One is the mark-to-market, which is non-cash at AMEL level, where you know, we had about INR 115 crore delta between this quarter and the quarter last year-on-year. As also a INR 288 crore of the net of the MAT entry, the difference because of having recognized the NEGPTCL order.
These two, if you see, the cash profit at both ATL standalone and AMEL standalone. If I was to convey to our analyst friend, we are on year-on-year positives on both sides having removed these one-time items. INR 467 crore cash profit without one-time and ATL standalone INR 413 crore last year Q1. AMEL INR 263 crore cash profit compared to Q1 FY 2022, INR 219 crore. INR 731 crore against INR 633 crore, an increase of 16% in the cash profit. That's what management considers as key sign, because that's where our performance best starts. Now in terms of similar levels of work on revenue as well as.
Revenue of course, I won't take pride entirely because it is also because of the higher cost of input power, not the higher cost of sales, but it will get captured in terms of the revenue gap in the distribution business. The operational EBITDA again, consolidated, an increase of about 10%, INR 1,213 versus INR 1,107 Q1 of FY 2022. Friends, that's the way the details are in the management policy. Some of the aspects related to debt discipline. We have our debt service coverage ratio maintained at 1.9 in entire FY 2022. Fixed asset coverage ratio 1.3, maintained same as previous year. FY 2022 we saw 1.3.
Net debt to EBITDA, slight increase 4.9, because of some of the projects under construction. Net debt to net worth, 2.7 as was previous year. Now, the total external debt about INR 27,252 crores at the end of Q1 FY 2023. If I include the sub debt then INR 29,479 crores. That's the way the numbers stack up. Just in case you would want to have any details on that if they differ from the cells that you have fed in, you can always let us know and we'll support you. Those are the details that I thought I will share with you.
Now I will look forward to your questions and anything that we would have missed out. We will cover it through your Q&A. Thank you so much.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we wait for a moment while the question queue assembles. We have the first question from the line of Mohit Kumar from DAM Capital. Please go ahead.
Yeah. Good morning, sir.
Morning, Mohit.
What's your thought on Electricity (Amendment) Bill and the fact that the government is thinking of allowing multiple licenses? Do you think it's a better or can you please comment on that? Yeah.
Mohit, we have discussed quarter-over-quarter basis.
Earlier there was a licensing, so this is different. Yeah, this is different.
Yeah. No, no, of course, you're right. I'm saying that, you know, every quarter when they get back to the cabinet, you know, they make amends in the Act draft itself. Eventually, what will make to the parliament and get approved from the parliament, one will have to wait and see, because there has been a lot of tinkering that's gone into that part. Now, my impression about the Act is it's always welcome sign to be progressive in terms of making good some of the issues that have been bothering the, investor community in terms of, large investments in GenCos, large investments in TransCos. Because the last mile continues to be indisciplined, if I must say so, at the hands of several state-owned DISCOMs.
At least the good part is that the Act amendment looks forward to disciplining them and making sure that they will have to operate through letters of credit. They will have to have advances provided, and the empowerment is being given to the SLDCs to accentuate you know that effort. Now, in addition to that, there are other issues with regard to the other gaps that existed in terms of the regulatory commission, the APTEL. The fact that the APTEL does not have teeth in terms of enforcing their orders to the state commissions and therefore you know a large amount of contempt powers are being given. Those are all welcome signs. In addition to that, of course, the important point about RPO.
The fact that there will be, suo moto tariff increase in case, those RPOs are not met are all very important aspects in terms of India's commitment, on the INDCs as well as the 2030 commitment. I'm not talking about the net zero commitment of 2070 because that's too far into the play arena. I am talking about what's imminent and what's, you know, is something that all of us have to be careful about, achieving by 2030. That's my simple answer to the point. We will welcome amendment to get released as soon as possible.
Understood. Secondly, sir, on the TBCB, you know, the bidding, of course, the Q1, we haven't seen any bids. How do you see this panning out in the next, in nine months? Are we seeing seeing more bids happening or is something which is holding up the, you know, the bids right now?
Mohit, I think, there have been headwinds in terms of the fact that, the, movement related to renewable projects has slowed down. There is now a wave for renewable projects to, get accelerated on the quest of, green hydrogen. You must have, seen the movement that, SECI has been told to aggregate the requirement of, green hydrogen, whether it is the urea, whether it is methanol requirement, whether it is, ammonia requirement in, refineries, as also, other requirements, as put forth by various users because gray hydrogen and gray ammonia are already in use. SECI will come out with that aggregated tender for the entire green hydrogen to displace first the import part, so that the import part gets replaced by the indigenous generation of green hydrogen.
This could well be dollar-denominated so that the cost of RE will reduce. Now, why I'm telling you all of this, because this will then fast-forward very large corridors of transmission because these quantities are going to be humongous. Imagine, I'll just tell you the load of RE. Therefore, corridors to evacuate this kind of an RE and to maintain this kind of an RE is going to be very large. There'll be, you know, aspects like banking at the CTU level and stuff like that, which is a part of the hydrogen mission, details that are already there in front of you. Our sense is that today, close to about INR 52,000 worth of transmission TBC assets have been already approved. Out of which INR 24,000 only is right now under different stages of tendering.
That number will balloon once the aspect related to RE as well as aspects related to GNA both start getting integrated. I would say one will have to wait for a few more quarters before we see the movement on that. Until then, we will have to make do with the orders that we have in hand so that our CapEx guidance that we have given continues to be steadfast, as also that we continue to fill up our order pipeline amongst the tenders that are due in the days ahead.
Understood, sir. Lastly, sir, have you tendered all the packages for HVDC or is still something pending? And when the work is expected to start, and when they're expected to commission? And is there a provision for, if I remember correctly, laying a double line in this particular, you know, and increase the capacity in the future? Is that so?
Yeah, Mohit, very, very important question. First of all, the award for the converter station and HVDC links on both sides have been made to a very reputed global company. Those people had made the announcement themselves. The award for the transmission part cable has also been issued. The clearances part has progressed fast. Both sides land has been completely done. The engineering part has been awarded to a Canadian consultant and detail engineering part as also to an Indian consultant for tandem working. The work on ground has started in terms of the soil investigation, the initial works like boundary wall, the filling, all of those works have started. Now, your second part of the question was, are we working towards the two circuits or single circuit?
We are laying single circuit, but all the civil works and the right of way will capture the second circuit also. That the second circuit once gets approved, will get executed faster, and one does not have to lay a new trench nor a new right of way. It will all be worked out in this phase one itself. That's the answer to your question.
What is the commissioning timeline, sir?
The timeline stays steadfast at 48 months from the date that the MERC had approved. I guess that's March 2025, if I recall. Yeah. March 25, 2025. Yeah.
Understood, sir. Thank you and all the best, sir. Thank you.
Thank you. Thank you, Mohit.
Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question from the line of Apoorva Bahadur from Investec. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, wanted to understand, I am looking at your presentation. Year-on-year, distribution losses have increased slightly and the collection efficiency is down. Any specific reason to it?
No, no, Apoorva, don't go by those small changes here and there because those occur because of the denominator being different. Therefore, neither the collection efficiency is worrisome because 99 versus 100, so you don't have to worry about the coming up saying that it's kind of dropped. It's going to be because if a payment comes on the first day of the next month, it will go to the next quarter. The collection efficiency is brilliant. It's great. Distribution losses of 6.95%, again, that's fantastic. I think team has been doing a splendid job and we don't have to worry about that different numbers. Because these are all just the math part which happens slightly changing the figure, and we have to go by what evolves naturally.
They are all fantastic. They don't have to worry at all.
Good. Good to hear that, sir. Secondly, I think, in the last call you had highlighted that we will be venturing into smart metering as well.
Right. Yes.
If there's any update you would like to share on that, how is the progress so far been?
I think again, a very good question, Apoorva. Thanks for asking. I didn't cover it in my first bit. Yes, you are right. There is ambitious plan of 25 crore meters that the Government of India has floated. It's also part of the RDSS which Prime Minister recently announced. There are five states which have right now joined the bandwagon. Out of which two states are the northern and eastern states, which is UP and Bihar. The other two states in the western side, Madhya Pradesh and Gujarat. Two states in the south, which is Telangana and some of the DISCOMs in Maharashtra like BEST, as well as AEML, if I might just add, take the liberty. Now these.
All these companies are participating into smart meter induction now. We have taken a kind of a budgetary outlook in terms of the current tenders, and we believe these stack up to something like INR 10,000 crore worth of smart meters already on offer. We clearly believe that we will have at least a good share of wallet out of this. We have been pre-qualified in Madhya Pradesh, pre-qualified in Bihar. UP is in the last stages. We are executing 700,000 smart meters in Mumbai. We have been pre-qualified in the first round in DST. We're moving big time into smart meters. We will have a large share of wallet because these are all going to be on TOTEX model, where the investment will be by us.
We will give month-on-month billing, which will mean that we will be part of their O&M, and we will get our money on monthly basis. It will be a very good trickle and with reasonably good margins. It's on, and it's looking very good.
We'll be owning and leasing these smart meters and also developing and running the back-end infra. Am I correct?
Absolutely. Absolutely right. We will be owning them. We will be owning the back end. We will be owning the entire value chain, and we will execute that ourselves, and we will maintain that ourselves.
Great. How much would be the budgeted capital allocation over here? What's the type of CapEx you see in totality for this scheme?
Right now we have budgeted that by 2027. Though, of course, that looks a bit conservative from our side, but something like INR 10,000 crore.
Okay, great. Returns would be similar to our utility business.
This is a non-regulated business, and I would presume better than that.
Okay, great. This is very useful, sir. Last question from my side, and again, this is on the privatization, not for the DISCOMs, but for the TransCo. We are hearing a couple of state governments are looking at it, and also there was some push from the center side. Sir, do you see this happening? If it happens, what type of model will the entire TransCo be privatized, or will specific assets be monetized?
Apurva, you will see both kind of models. Today you see the monetization that PowerGrid is doing in which some assets are being monetized. If you look at some of the large TransCos, they are looking at all the assets being monetized. Both models will exist. As you rightly used in your narrative, you rightly said that central has also come out with a draft policy, and states are seeing a lot of merit in it because they lose no control. Control will still rest with their state transmission utility and their independent system operations. They will have the advantage that once this is offloaded, the entire spending will be done by the developer who takes over.
It will not reflect in their budgets, and it will give them a lot of advantage in terms of cash generating.
Sure, sir. This is very useful. Thank you so much. I'll get back to you for more questions.
Thank you, Apoorva.
Thank you. We have the next question from the line of Kunjal Mehta from JP Morgan. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. A couple of questions from my end. Firstly, on the transmission front, as you did speak about INR 2,000 crores of opportunity, and we also have the CTU plan on the intrastate side. Just trying to understand what is happening on the intrastate part. I mean, is there any, you know, step up from the states with respect to the spends over there? A part of the similar question is that, you know, recently we are seeing transmission projects with grid storage, et cetera, coming in. What is Adani Transmission planning? What are Adani Transmission's plans over here? If you can elaborate a little bit, please.
Sir, Adani Transmission will continue to pursue these opportunities, whether it is on standalone transmission execution with that substation or it is combined with storage, as you said. Storage, in any case, is a part and parcel of any grid operations. It's a very needed requirement. Though, of course, in our country it's more seen from the point of view of, you know, the renewables. As far as my personal opinion is concerned, large storages should be actually a part and parcel of the grid system instead of people putting UPS in their buildings and their offices and in their, you know, facilities. It should be the power quality should be the responsibility of the grid operations.
We will welcome this move, and we will certainly participate in all of these and continue to maintain our share of wins as we have done in the past.
Do we have the capabilities in-house already or, what are our plans over here, sir, in building up the capabilities, if need be?
Oh, no, we have capabilities in-house. We in fact already maintain inverters, which is far more difficult at the yards that we do for AGL, which is Adani Green, and we therefore have capability. In fact, I just want to say as a personal part, we put 10 MW of battery way back more than six years, seven years back in Delhi, when nobody was even talking about storage. We put it in the substation in the grid and gave the benefits to the customers.
Understood. Sir, if you can also elaborate little bit on, you know, on the intrastate transmission CapEx spend. I mean, what is happening on that? I mean, which are the states that are, you know, actively participating? I understand UP and couple of other states are doing that, but just want to understand what is the current momentum like and on that front.
Yeah, I think you caught it very well. There are states like UP, Rajasthan, you know, Karnataka, now Maharashtra, and recently Gujarat has called for draft document where they want to now get into TBCB. Very few states, I would still say that openly, have caught on to doing this through tariff-based competitive bidding, inviting developers like Power Grid or ATL or others to partake in their need to do intrastate, as you rightly said. By and large, it's also shows their desire to get into the mainstream in terms of what's the latest with regard to technology, what's the latest with regard to operation capability. Some of the others who are very inclusive and which in many case are showing signs of fatigue or burnout in their distribution have similar approach towards transmission.
Either they are not doing it, or if they are doing it, they are doing it with vested interest in view and doing it at much higher price, et cetera. That's why the center is now trying to put those conditions through RDSS. Those of you who have taken interest in going through some of the conditionalities of the revamped distribution sector scheme will realize the fact that all of that has now been integrated there. That if they want the loans and grants from the government of India, they better shape this in nickel and dime, because this is different than the previous ones where there used to be money doled out through tendering or awards, but now this time this is through performance.
Let's hope that this RDSS scheme, which is as large as INR 300,000 crore, will aid and abet the hope that we all have been having that the distribution companies will shape up.
Sir, if I may ask you-
Yeah, please go ahead.
Sorry, if I may ask you, what is the opportunity size that you are looking at solely on the intrastate part? I mean, the actual opportunity which is out there for bidding.
I would say that the numbers that we have told you, INR 52,000 crore of pipeline approved by CEA has very few lines of these states. I would stay very clearly focused onto what gets approved. Because, you know, while we may have conceptual discussion, but let's stay on numbers. What gets approved is what gets delivered. I would say that INR 52,000 crore has mostly in interstate rather than intrastate.
Understood, sir. Thank you very much. All the best.
Thank you. Thank you.
Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question from the line of Swarnim Maheshwari. Please go ahead.
Yeah, thanks. Sir, couple of questions. First one, on the smart metering side. Now, see the basic requirement for a smart meter or the basic purpose for a smart meter is really to bring down the AT&C losses. Now, we are implementing that at our Mumbai distribution in a big way, where we actually see that our AT&C losses are already like, you know, one of the best and in mid-single digits. So what really is the, you know, purpose of this? Is this transaction, you know, purely financial in nature? What is it?
Very, very good question. I must compliment you for sifting through this factor, which we have debated for so long, not just internally, but with even policymakers in terms of what's the role that smart meter has to play. Now, if we slice and dice Mumbai network, where we are executing the 7 lakh meters against 25 lakh customers that we have, how have we driven this magical number? It comes from the fact that amongst our entire network in Mumbai, there are customers in the eastern region and areas in the eastern region where we still have losses in pockets. This is as high as 40 and as high as 30%. Now these are areas which are large rehabilitated areas, slums and likes of them.
In order to make sure that eventually that we will deliver power where we can interrupt an individual customer if the billing has not been paid for on an individual basis from remote, all of that is possible through smart metering. Therefore, we have very judiciously chosen this number of 7 lakh to be deployed in areas which are still those bad blocks and tough areas where because of political interference, legacy issues, non-clarity of their existence, notices from the courts that they be demolished and stuff like that, different categories. We have all aggregated that into the 7 lakh numbers. Therefore, this is going to be commercially accretive, as you rightly asked the question, and this will bring tremendous amount of empowerment to our operations staff, which today is doing this work more by physical dogmatism, which at times doesn't work against the mighty and connected.
This is the answer to your question. Thanks for that question.
Sir, thanks. Basically, as we understand, you have really done kind of a bottom-up analysis and you have studied everything. This 7 lakh square meters would actually entail how many smart meters that we are talking about. You did mention that by 2027 you expect to get this installed totally.
No. I think there are two parts to that puzzle. Let's not mix up. Mumbai, INR 7 lakh will get executed much faster. That in fact will get executed over a year itself. As far as what I told you about INR 10,000 crore was till 2027, but eventually my sense is we might even do it much faster. Those are two different aspects. I did not include INR 10,000 crore with the INR 7 lakh included in that. That seven lakh is outside of that because that we started executing much before this RDSS was invoked.
Fair enough. Sir, in those small pockets where you know there are those notorious customers where we plan to do that smart metering, what would be the losses? Are the losses like pretty high at about mid-teens kind of a thing?
No, I told you those losses are as high as 40% in some of those areas because.
40%.
You cannot blame them because even their status is doubtful. Somewhere the court has told them that those areas have to be cleaned up, those areas are going under SRA. Their status itself is not clear. They are willing to join the mainstream, provided their status becomes clear. We are trying to say in that case, we should not, you know, deliver power or we should deliver through prepaid, and we are trying to say that. Today with the current technology it's not possible because let's assume if in a very dense cluster, 30% people pay. Now you cannot disconnect those 30% people. 70% people then enjoy the advantage of the current status.
While we cannot, you know, we can at the most try and discipline it, as I said, through physical dogmatism, but it doesn't work in very dense localities. The smart meter will do its trick.
Correct. Got it, sir. The second thing is more of a general thing, which is just wanted to understand that how we are looking at the competitive intensity. Of course, there have been new bidders over the last two to three quarters that we have seen coming from, you know, the other parts of the industries also. How do you look at this competitive intensity? I'm pretty sure you are, you know, checking your internal threshold limits, but how is the overall market that you're witnessing at the moment?
I think it's a foregone conclusion, and there's no rocket science in understanding that when someone sees that there are some players which are making good business meaning out of the opportunity, more players are likely to automatically join because there are no real entry barriers in terms of participating in TBCB, et cetera. So that's bound to happen. They have to understand the risk profile and the executing methodology as good as others who have been in the fray have understood it. It'll be nice to see those players also then joining us in terms of advocacy and pull theory, so that more and more states will then start to come to TBC.
I will always welcome competition as long as those guys don't end up the way most of the past players ended up giving their assets to us at much below the par value at which they were required to execute those.
Right. Now, sir, moving on this PGCIL, which is, you know, they have this monetization pipeline. Well, they have still not decided. Do you think that, you know, if there are about four or 5 assets every year that is likely to be bid out, you know, you will be actually making a big part of that in organic growth journey also. You would be actually making bids for that?
We are watching this with sort of interest in terms of what's evolving. However, if they go into the same invite as they did before, then you have the answer. Because if in the same invite, it's an extension of the same set of players who are gonna be there. If others are not willing to participate incrementally, then only anybody else has a room. Otherwise, it's not gonna be of any meaning. To me, it could be. It's just more of the same.
Okay. Sir, my final question is on Mundra. Have we started integrating that?
Sorry, can you?
Yeah. We have acquired the-
Oh, yeah. Oh, yeah. Absolutely. We have already moved the commission with the second license for the larger area. We have started integrating and as I told you, my guidance is that MPSEZ Utilities Limited will emerge to be the largest DISCOM in the country in million unit terms.
Oh, nice. Sir, just a basic, what's the current loss structure over there?
There's no loss. Today MUL operates mostly with very large customers, industrialized customers, port customers. There's no loss virtually. It's only technical loss, nothing else. There's no loss.
Okay. Sir, that's it from my side. Thank you so much, and wish you all the best.
Thank you so much.
Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. As there are no further questions, I would now like to hand over the conference to Mr. Swarnim Maheshwari for closing comments.
Sir, thank you so much for your useful and wonderful insights as always. Would you have any closing remarks over here?
Thank you, Swarnim, for organizing this, and thanks to all the analysts to have joined the Q1 FY 2023 call. I have nothing more to add because the questions really enabled me to cover every other aspect that I perhaps missed out in the opening statement. I wish you safe times and good luck. See you in the Q2 FY 2023 call. Thank you so much.
Thank you.
Bye-bye.
On behalf of Edelweiss Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.