Ladies and gentlemen, good day. Welcome to Premier Energies Limited Q1 FY 2027 earnings call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar. Thank you, and over to you, sir.
Thank you, [inaudible]. Good morning. On behalf of ICICI Securities, I welcome you all to the Q1 FY 2027 earnings call of Premier Energies Limited. Today, we have with us from the management, Mr. Chiranjeev Singh Saluja, Managing Director, Mr. Nand Kishore Khandelwal, Chief Financial Officer, and Mr. Vinay Rustagi, Chief Business Officer. We'll begin with the opening remarks from the management, which will be followed by Q&A. Thank you, and over to you, sir.
Thank you, Mohit. Am I audible?
Yes, sir. You may go ahead.
All right. Good morning, everyone. Thank you for joining us today for our Q1 earnings call. I am Chiranjeev Saluja, Managing Director at Premier Energies, and I am joined today by my colleagues, Nand Kishore Khandelwal, Group Chief Financial Officer, Vinay Rustagi, Chief Business Officer. With the ongoing wars, commodity price inflation, and shifting trade flows, the environment around us has been quite unpredictable. I am pleased to say that we are navigating this period successfully with disciplined execution, combined with investments in scale, technology, and people. The company has reported another record quarter of revenue and profit growth. Our total revenue has increased 34% year-on-year to INR 2,508 crores. EBITDA and PAT have grown by 27% and 53% to INR 759 crores and INR 472 crores respectively. The profitability margins have been largely steady at 30.3% and 18.8% respectively.
These results include consolidation of our 51% stake in Transcon. The company reported excellent results in the quarter with a revenue and PAT of INR 110 crores and INR 18 crores respectively. EBITDA and PAT margins in the transformer company came in at 27% and 17% respectively. Amongst key business updates, our 5.6 GW fully automated solar module plant at Chitrakoot is operational. The 7 GW TOPCon cell line is in advanced stages of commissioning, with trial runs expected to start later this month. Our operational cell plants in Telangana delivered a record capacity utilization of 92%, showcasing our all-round excellence in plant operations. We won new orders totaling INR 3,011 crores for cells and modules, taking our total order book to INR 15,000 crores, including transformers. The overall business outlook for solar sector continues to be positive and encouraging.
Power demand this year has been exceptionally strong. Solar demand has been strong too, with nearly 12 GW of capacity addition in Q1 itself, with great momentum in the PM-Suryodaya Yojana and PM-KUSUM schemes. On the enabling resolution taken by the company, we would like to clarify that we are in a hyper-growth phase of this industry. During this phase, it is important that we have flexibility to expedite organic growth path or capitalize on any inorganic growth opportunities, which may help maximize shareholder wealth. As a result, we will continue to take such enabling resolutions every year. As we speak, I can confirm that there is no concrete plan to raise any primary capital in the near future.
Over the next few quarters, as new cell and transformer capacities come online, a major step is expected on the back of operating leverage, both in operations and financial performance of the company. This will help us maintain industry leadership position and scale, technology, cost of manufacturing, and continue to deliver industry-leading margins. We are very confident about future prospects of the company. Thank you. We are now open for questions.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Apoorva Bahadur from IIFL Capital. Please go ahead.
Hi, sir. Thank you for the opportunity, and congratulations on a strong set of results. I must say this presentation.
Thank you.
Quality is very good. A lot of details, so extremely helpful. Sir, I just want to pick your brain on a couple of things. One is, I think on the data that you provided in the presentation on rooftop and PM KUSUM demand. How much should we assume or estimate the DC overloading for PM KUSUM?
Hi, Apoorva. This is Vinay here.
Hi, sir.
Hi, Apoorva. In PM KUSUM, there are obviously three components, as you know, A, B and C. Most of the installations are coming in B and C. In B, which is the solar pump part, the overloading is basically one. In PM KUSUM C, where basically most of the projects are ground-mounted projects in sizes between two to 10 MW, sometimes larger, the overloading is between 1.3 and 1.5, as we usually see. On a blended basis, I would expect the overloading to be about 1.2, 1.25.
Understood. This 2 GW of demand in this quarter would be about 2.5 GW for modules.
That's right. Yes.
Roughly your total demand for both these segments would be around 6 GW on a quarterly basis. How do we see this for the remaining nine months, sir?
I think there is actually great momentum in both the schemes. As you can see, and that is what we're trying to show you in these charts. In Surya Ghar Yojana, there is a kind of a month-on-month increase, and we're expecting the average over the next nine months to be about 1.2 GW-1.3 GW. In KUSUM, the government has already given a deadline of March 27 for implementation of all the ongoing projects. Actually, we are expecting a huge step up in the KUSUM scheme. I would expect the installation over the next nine months to be something between 6 GW-8 GW, possibly higher than 8 GW.
Roughly around, say, 12 GW-13 GW in the rooftop space and maybe around 8 GW in this. Roughly around 20 GW for the next nine months.
Yeah. When I said 6 GW-8 GW , I was talking about the AC numbers. If in DC terms, that would be about.
Okay.
So-
It'd be around 23 GW- 24 GW in total.
That's right, yes.
Okay. Sir, any other segment also coming in for DCR this year? Do you expect any demand from C&I after the ALMM List-II deferment or from the EPC business?
No, I think the remaining demand will mainly come from the C&I segment. The government has said that any projects commissioned from 1st January onwards will have to use DCR modules. The demand will start arising from the last quarter of this year, which is basically October, November, December. That itself should also be a sizable volume for DCR markets.
Sure, sir. Understood. On the second bit, sir, I want to understand is this, how much of CapEx did we incur in this quarter on the solar business?
The total CapEx in the quarter was about INR 1,500 crores. Bulk of the CapEx was incurred on solar projects. Basically, both Seetharampur and Naidupeta. The remaining was incurred on Transcon, INR 250 crores.
Okay. INR 1,250 crores was in solar?
Yes.
Okay. Sir, lastly, if I may ask and squeeze in just one more question on this mix change that we are seeing now that our cell capacity is ramped up.
Yeah.
Do you see this sort of maintaining this 25% revenue in future from cell sale, or should more of this shift towards the DCR sales?
I think over a period of time, of course, the share of the DCR modules will go up. The other part of the picture is that DCR demand is going to continue over the next two years. We will decide depending on the mix of orders that are coming our way as to how much cells should be sold in the external market. We still have a pretty good pipeline of orders for cell sales over the next 18 months. I think that will continue, but the share of DCR over a period of time, I would say over the next 18-24 months, is expected to go up steadily.
Sir, on this one, I just wanted to sort of double-click a little bit. Even if we assume that in modules on the conversion cost or the conversion process, we earn a margin of, say, a rupee or rupee and a half per watt peak. Why would we sell just cells and probably leave some profit pool on the table for others to capture? Why not capture all of it?
Let me answer this, Apoorva. What you're saying will happen gradually. We have contracts signed where we need to supply cells. These were signed some time back, as we progress, you will see more and more DCR module and lesser amount of cells going out. Once our cell line gets operational, we are almost 10 GW cell and 11 GW module, which means we will not have lot of cells to sell.
Is it safe to assume that the order booking we did this quarter was mostly modules?
It is, yeah. It is gradually moving towards more of DCR modules than cells.
Understood, sir. Thanks a lot. All the best.
Thank you.
Thank you. The next question comes from the line of Kunal Shah from DAM Capital. Please go ahead.
Hi, sir. First of all, thanks for the detailed presentation and the split between solar cell module transformers. This is quite helpful. Firstly, the Q1 order momentum was strong, the order inflow. Just could you give some bit of insights now post the announcement of extension of the ongoing C&I projects until December. How are we seeing that the inquiry pipeline or the momentum like in July and August? If you can just give some bit of qualitative guidance here.
Our DCR order book was quite stable, quite strong, coming in every quarter. Post this extension of ALMM, we have seen a sudden influx of large orders of non-DCR modules, which has been kind of a positive for us because as we speak, we have a little bit of extra module capacity for the next two to three months. It has been kind of a big positive for us that while our cell line comes up, we had module line sitting for the next quarter, that's really now getting busy because of the influx of the non-DCR demand.
Understood. On the DCR, any color there on the DCR side of it?
DCR is we are sold out, we are selling only for FY 2028 now.
Understood. Got it. Secondly, sir, just as a continuation, the revenue mix from cells during 1Q was about 24% odd, right? The same in our order book is around 58% odd, right? Any sort of margin guidance that you can give over the next 15, 18 months as your business mix improves, how can we see the margin trajectory from the current 29% odd operating margin?
We are quite positive on the outlook for margins that we will be able to protect our margins. The new cell line coming up is going to get us a lot of operational leverage. As you can see, the transformer business is also throwing up healthy margins. DCR mix is changing from non-DCR to DCR. As far as we are concerned, we have been consistently updating that we will continue to deliver healthy margins, industry leading margins, and protect what we are delivering as of now. The order books have similar margins as to what we are delivering.
Understood. This is very helpful, sir. Thank you so much. I'll fall back. Thank you.
Thank you. The next question comes from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Hi, sir. Thanks for taking my question. Just on this ALMM extension, given the ramp-up in the DCR cell capacity, we are still not seeing many players who have commissioned also in last one year. The utilization is not even going beyond 20%. The new capacities, I wanted your view how you are looking up the ramp-up because in that scenario, if any C&I player, do you think he has a mindset of not blocking the capacity at this point in time? My question is, rather than deferring the demand, don't you see the demand coming forward because DCR capacity itself is not available? I just wanted your view on that, number one, n umber two, just what Kunal asked on the margins.
Given the DCR mix going up on your execution, because you yourself said you sold out, 29%-30% margin, you think it's sustainable for next two to three years?
All right, Nitin. Thank you. To answer your first question, the view on the market is expected to be favorable throughout FY 2027 and 2028. Demand is very strong, right? We have a constrained supply situation. New capacity, as you have seen, is taking longer than expected to come online and longer than expected to even ramp up. This is what we are seeing in the last 12 to 18 months. The C&I clients are very selective on whom they want to work with. They look at the size of the balance sheet, they look at the size of the plant, the automation, the advanced technology, proven track record. We believe, and we are seeing this, that the C&I players are blocking capacity for FY 2028 today. They're not waiting or they're not deferring.
We have in fact signed up orders with C&I customers which are going into FY 2028. That is the answer to your first question. On your second question on margins, we have consistently informed that the margins of 29%-30% ±100-150 basis points, we will be maintaining. This is because for the simple reason that our seven GWs cell line is coming up, our transformer capacity is growing almost from 4 GVA to 16.25 GVA. By FY 2028, we have ingot wafer lines coming up. It is more of backward integration and scale, which Premier is working on. We are quite confident that we will be able to maintain healthy margins.
Coming to the transformer business, can you give us some guidance where you're seeing Because your 16 GVA going to 64 on the higher side is also very margin accretive because of what other industry players are reporting. In your next, let's say FY 2027, 2028, where are you seeing this revenue ramp-up for transformers and the profitability?
I think Vinay will take this question.
Yeah. Hi, Nitin.
Hi.
Nitin, as Chiranjeev just mentioned, in the transformer business, there's a huge step-up in capacity coming forward. There's also a shift towards the more lucrative HV and EHV segments, which is coming up. The company is also quite aggressively now looking at the export business, which seems pretty large, particularly, I would say, in North America, Europe, and even Africa. I think on the whole, given the ramp-up in capacities, we are expecting the business size to largely, I would say, treble over the next three years. Profit margins historically across the cycle for the transformer businesses have been about 15% in terms of EBITDA and about eight to 10% at the PAT level.
We expect that our margins should be slightly ahead of this, given the low-cost base of the company and all the levers that they've got in place for growth as well as cross synergies with Premier.
Just because your capacity is coming up, you reported INR 100 crore, which is just one month, INR 600- INR 700 crore revenue is doable in this year, it should go towards what, INR 1,300- INR 1,400 crore next year? Is just a ballpark?
I think the initial ramp-up after capacity expansion is usually a little bit slow because of the time it takes to get all the products certified and type tested, and start getting orders from the clients. In general, I would say our revenue outlook will be slightly south of what you said, in the current year. Like I said, over the next two years, it will obviously ramp up quite substantially. Last year the company had done about INR 400 crore of revenues. Over the next three years, we expect this to be more than triple of that level.
Got it. Thank you very much, team. All the best.
Thank you, Nitin.
Thank you. The next question comes from the line of Mayur Patel from 360 ONE Asset. Please go ahead.
Yeah, hi there. Congratulations for another set of results and very strong execution. Just one question on BESS. Is there a thought to tie up with some technology partner and backward integrate once you start the assembly? Is there any thought around that?
Morning, Mayur. Thank you. On battery energy storage systems, we have already acquired the land, and construction started. We are looking to partner with a technology partner for the containerized solution. We are going slow on this because we're also waiting for guidelines from the government on how the non-tariff barriers project is going to take over on the BESS segment. There is a draft guideline which was sent out, we are waiting for more details from the government side to look at further expanding into BESS manufacturing. Our BESS plan of 12 GW, 15 GW phase I is already underway. Construction is started and technology partner would be, I think, finalized in the next two to three months.
Next step, is there an ambition to also get into cell manufacturing for BESS in future?
I would say there is, but at the appropriate time.
Okay. Perfect. Lastly.
Our focus now is on gigawatts base for now.
Lastly, 7 GW new capacity. Is it fair to assume that the revenue will start coming in from, say, November, December of this year?
We are actually targeting the first set of revenue to come in September.
September. Okay. Just like you have ramped up the TOPCon 1.2.
It will ramp up. Yes, it'll take time to ramp up. I'm saying the first set of revenue would come in September, but if you talk about line reaching close to 50%-60% utilization would be November.
March quarter, we can assume around 60% kind of utilization level from this new facility.
We are targeting at least about 70%.
Okay. That means March quarter would imply almost more than 2x of the current cell production. If margins and yields remain at this level, that's the way we should look at it.
Yes.
Perfect. Thank you so much, sir. All the best.
Thank you.
Thank you. The next question comes from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah, thank you for opportunity. My first question is related to the module business. As you had highlighted in the call that there is an influx of non-DCR. Is that the reason why our overall realization on the sequential basis on the lower side?
Non-DCR business is not profitable as we speak. We can see this in the industry that the non-DCR business, because there is about 250 odd GW of module lines and the entire demand in India is about 60 GW, out of which almost about 30 GW is DCR. You know, the non-DCR demand being 30 GW and capacities being over 200, there is a serious situation over there. Non-DCR business is not profitable as we speak. It is only that people, if you have more capacity of moduling, you would want to run your line rather than keep it shut. The business is moving towards DCR module.
This influx of Non-DCR orders, which we have got in this quarter because of government extending up to December, we have got slightly better prices compared to last quarter because everybody is in a rush to commission and connect before December. They are actually targeting November. There is a slight increase in margins in this coming quarter for Non-DCR business. In the long run, if you have more of module capacity and less of cell, then you are in trouble with the module capacity. If you are purely module manufacturing then.
Yeah. Got it, sir. What about the orders we have received, especially in the module, that largely is of a DCR?
No. Of course, we have DCR orders which is coming in every quarter. We spoke about an influx of Non-DCR order because of this five-month extension.
Yeah. Also, just to clarify, that in the call you had also highlighted that whatever the order book you have is largely to do with the DCR module. If I look at your cell number as well, there is a good growth of order inflow in the cell as well in this quarter, if I look at Q4 to Q1. If you can highlight, how has been the pricing for those cell orders especially, and the timelines?
There is a little bit of a difference. The module orders are for this financial year, but the cell orders go into FY 2028 and FY 2029 also. In terms of pricing, most of our cell pricing, which are long term, is variable. Wafer is variable, silver is variable, and so is the exchange rate. Pricing is more or less been stable on the solar cell side, that is the monocrystal cell. TOPCon cell, we don't sell. We use it for our own consumption because as of now, we do not have a large capacity of TOPCon, but once our new capacity in Tirupati starts off, we have some contracts for supplying TOPCon cells. The prices are quite stable, and we don't see any dilution in prices over the last quarter to this quarter.
Just to follow up on this question. The way forward, how we will see this order book. You are going more towards a DCR module versus the cell orders and whatever the cell, because there is a good order book of cell actually you have. The way forward, how we will look at order inflow in the cell to come in continue, or you are more in line towards a DCR module order?
More towards DCR module, because once now our module line has come up, the 5.6 GW, our focus will be more orders towards DCR module.
See, there's just one thing I want to add to that. Yes, there is a large percentage of the order book which is coming in from cells, but most of those orders are placed, are distributed over a long period of time, over FY 2028 and even stretching into FY 2029. Whereas bulk of the module orders are for delivery over the next six to nine months. If you look at it on a total basis, the cell orders look very large. If you were to compare it on a quarter-by-quarter basis in terms of what is their order book set for delivery, then the number of module orders is larger than the cell orders.
Okay. Got it. Really helpful. Lastly, on the cost side, if you can highlight how has been the spread, especially in the DCR, because the rupee depreciation and the supply cost, which has increased. How has in the DCR the spread is moving?
It's not moved much because most of our orders are on dollar-based, so the exchange doesn't make any difference. If you see, silver has actually dropped. There has not been a big change in the spread and no material change.
Thank you, sir, and all the best.
Thank you.
Thank you. The next question comes from the line of Ketan Jain from Avendus Spark . Please go ahead.
Thank you. Good morning, sir. Congratulations on a good set of numbers. Just two bookkeeping questions. I understand that our depreciation has come off from FY 2026. What would be the expected run rate for depreciation in FY 2027 based on our new capacity additions, and Yeah.
I think, Ketan, hi. This is Vinay. In terms of depreciation, basically it has come off because of last year we had taken accelerated depreciation. Now we are back to the usual five-year depreciation for all our new cell and module lines. Over the next three quarters, over the next two quarters particularly, you will see more depreciation coming in because of the Seetharampur line has got fully commissioned, and then of course the 7 GW Naidupeta line gets commissioned later this month. I would expect a small increase in depreciation in the next quarter, and then full effect coming in through Q3 and Q4, where we will see roughly about INR 240 crore-INR 250 crore of depreciation quarterly.
Understood. Got it. What would explain the stark increase in other expenses and employee cost, other expenses are up around 50% and employee is around 70%?
This is nothing but just advanced hiring for all the capacity expansion that is going on in the company. The Seetharampur line got commissioned in March, we had to start hiring people, I would say more than three months in advance of that. Similarly for the Naidupeta line, we've been hiring people over the last six months already. We have to prepare in advance in terms of all the hiring, making sure that all the training is done for all these people. Then of course, even at the corporate level, there is a jump in hiring, because we made a few acquisitions and we are building out new businesses. I think that explains the increase in manpower cost. At the same time, I should also say that there is also very active discussion on cost-cutting and optimization in terms of resources across the company.
One of the major advantages of the scale-up and the operating leverage that we are getting is that we are able to substantially reduce the number of people that we employ, let's say, on a per gigawatts basis. A good case in point is the Seetharampur line, where we estimate that manpower cost will be roughly about 40% lower on a per gigawatts basis than it has been on the other lines. Because these were all scattered 0.5 GW lines, 750 MW line, et cetera. While at the aggregate level, the costs are going up, but on a per unit basis, the cost will actually be much lower over the next few years.
Understood. Thanks for that. It was a great answer. Just wanted to check one more thing. Is the assumption right that the finance expenses would ramp up in Q3 and Q4 once the new line add up?
I think in terms of the finance expenses, yes, there will be some increase. As you know, the bulk of the increase in capacity for the new lines has been actually funded by equity. The increase in expenses will be actually relatively quite small.
Understood. As you explained for employee, what about other expenses? Why it is up to 50%? What attributes.
Sorry, just give us a second. You mean other expenses? Income or expenses?
Other expenses.
I think in other expenses
From INR 120 - INR 180 crores.
The expenses increase is primarily attributed towards the operational cost of Seetharampur post-capitalization, wherein the ramp-up is happening in July, that is subsequent to the quarter. All the buildup of the cost, the power cost and all, has been taken into other expenses.
Understood. It is primarily because of the Seetharampur module facility. Understood. Thank you, sir. Those are my questions.
Thank you.
Thank you. The next question comes from the line of Shweta Rajani from Anand Rathi Wealth Limited . Please go ahead.
Good morning. This is Shweta Rajani here. I just wanted to circle back again on the realizations that we have achieved for this quarter.
Hi, Shweta. Where are you calling from?
Anand Rathi.
Okay. Hi, Shweta. As we said earlier, the realizations in the quarter were pretty stable for both DCR modules as well as for sales. On the DC side, there was some softening as the prices have been coming off because of the oversupply in the market. That answers your question, hopefully.
On the DCR side, you're not seeing any kind of sequential decline or any pressure in terms of pricing?
No. On the DCR market, the market is highly segmented. There is across C&I, rooftop, and KUSUM segments because each of these segments, the customer profile is very different. The nature of demand is very different. There are obviously differences because of technology in terms of monocrystal and TOPCon.
Right.
Just to give you an idea, for the retail market, Surya Ghar Yojana, the modules are sold at about $0.24-$0.245 kind of cents range. Whereas in the KUSUM market, because the project sizes are larger, the prices can be slightly lower at about $0.22 or so. C&I market will be slightly lower still, depending on technology and timing of delivery.
Okay. How do you foresee this going for this year ahead? How do we build in the realizations for the year?
I think for the year, like we said, Shweta, most of the order book is already in place, particularly for DCR modules as well as for cells. Those are all booked at the current prices. There is no change that we see, I would say, even over the next 12-15 month kind of trajectory.
Got it. That answers my question. Thank you.
Thank you.
Thank you very much. The next question comes from the line of Shyam Maheshwari from Aditya Birla Mutual Fund. Please go ahead.
Thank you for the opportunity. Congrats team on a good set of numbers. I just had one question and from a strategic point of view, sir. I think yesterday there was a circular in the U.S., possibly importing or implementing some minimum import prices on cell and module imports into the U.S. I think cell import price was somewhere close to about 22 W. From a strategic point of view now for sir, does it now make sense to sort of start cell manufacturing in the U.S. or maybe module manufacturing in the U.S.? Any thoughts there from a strategic point of view you have?
Shyam, we already have a JV to set up cell manufacturing in the U.S. We have been trying to finalize the location where we want to set this up, we have been a little slow and cautious looking at the regime there. We have concrete plans to set up cell manufacturing in the U.S. With this MIP proposal, which has come up, yes, it makes sense to manufacture in the U.S.
Interesting. Let's say if we go ahead with this, by when should we start expecting output from this facility?
I think it's about 24-30 months.
Interesting. That's it, sir. Thank you so much.
Thank you. The next question is from the line of Prakhar Porwal from Ambit Capital. Please go ahead.
Hi. Thank you for the opportunity. First question, KUSUM, actually, KUSUM B and KUSUM C, I think majority of the target has been already achieved in terms of B FLS. Yeah, KUSUM B and KUSUM C FLS now. KUSUM A earlier, I think it was the notion that it is not lucrative for discoms and even the pickup was very slow. As per the new participant's question, obviously, it reflects in number, but does that mean maybe a 10 GW overall target that was earlier laid out would come through by March 2027, as per what you mentioned in the earlier info?
Hi, Prakhar. I think the mix between A, B and C has actually been quite flexible. The government has been shifting capacities, particularly from component A, and then also from B towards C. On top of that, a lot of the states, particularly, I would say, Maharashtra and Rajasthan and UP, have also done large tenders for both B and C, even outside of whatever the government targets. I think on the whole, like I said earlier, there is active demand in both B and C. I don't know whether the B target of 10 lakh tons will be achieved or not. As of today, the total installed number has already reached 11.5 lakh tons as per the KUSUM portal. I think we are going to exceed those targets.
KUSUM , component A as well, because the chart that you've put in presentation that shows pickup in A, which was a 10 GW overall number. Even that, because I remember Vinay, in the first question, you mentioned that government has directed states to meet the entire quota by maybe March 2027. Even A, you are seeing that pickup again?
I think what is happening is the projects which had been basically tendered and auctioned in the past, they're finally coming to execution. In A, the level of subsidy given by the government is actually quite small, and hence, there hasn't been much pickup in the A component overall. Yes, there is obviously increase because historically not much has been added, but bulk of the capacity addition will still come in B and C going forward.
Understood. Just a second and last question on the OCI that you've booked. That would be on hedging on silver and forex?
Sorry, the question is not very clear.
The OCI loss that you've booked in your consolidated financials in the last two quarters, that is related to hedging positions on silver and forex?
It is basically silver and aluminum. This is all done in the normal course of business, and it will be unwound as and when these positions are utilized and settled.
To the P&L?
Sorry. Yes, that's correct. Yes.
Just actually, just the last one. On exports to other geographies like Europe, et cetera. Because recently there have been some developments in Europe wherein they want to move a little excess China supply chain. Is there some maybe inbound queries from there as well? Maybe Europe is still distinct in terms of export opportunities? That is the last.
No, Europe actually is in a takeoff stage. In fact, we are in advanced stages of opening our European office and even hiring a sales team over there. Already tenders have started coming out. There's been a large auction in Italy. Some large tenders have come out in France, and we expect more tenders to come out in Germany and other countries, which are basically procuring modules from China. I think that market is going to open up quite substantially over the next two to three years. We are actively looking at that market and doing a lot of work to understand the customer requirements, documentation, technology, after-sales, and opening an office there shortly.
Okay. Thank you and all the best.
Thank you.
Thank you. The next question comes from the line of Mayur Patel from 360 ONE Asset. Please go ahead.
Most of the things are covered. Just one clarification. When you say DCR module, it is the integrated module and cell supplied in the DCR market, right?
That is right.
Going forward, once you have 10 GW of cell capacity, you will try to consume most of it as DCR market opens up post-December for the DCR integrated module, right? Instead of selling more cells separately in the market.
That is right.
Okay, fine. Thank you so much.
Thank you. The next question comes from the line of Anupam Goswami from SUD Life. Please go ahead.
Hi, sir. Sir, as you said that there was an influx of Non-DCR modules, how do we see quarter two and quarter three ramping up in terms of DCR? Were there a huge rush in pre-buy and should we see some slowness here?
For DCR, we are not seeing any slowness. There is always a pre-buy. If you're talking about Q3, Q4, your question is on DCR or on Non-DCR?
Sir, DCR, sir.
DCR is all pre-buying. There is a huge demand.
Okay.
A lot of DCR projects are getting over in March. The KUSUM program is getting over in March, and then the KUSUM 2.0 comes. The PM Surya Ghar is getting over in March, and there is talk of PM Surya Ghar 2.0 coming. There'll be a big demand in Q3, Q4 for DCR.
Okay, sir. Sir, now that our modules and we'll use more our own manufactured cell, how is the spread looking in the DCR and vis-a-vis, let's say last year when there was non-DCR cell also, overall, how do we see the margin in overall?
The spread is similar. There's not been a big change in the spread. There is no material change.
Okay. Going forward with this mostly DCR cell, how do we see margins from here? I believe the prices is holding up, but what is the sense, if you can quantify what the spread and
Yeah. What we believe is that as going forward in future, more capacity of cell lines coming in, which will take time. It takes two years to build cell line, then to ramp them up and to stabilize them. We feel that even if there is a little amount of pricing pressure, with scale and operating leverage, we will be able to protect our margins.
Okay, sir. Got it.
Thank you. The next question comes from the line of Kunal Shah from DAM Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the follow-up. Sir, firstly, on the comment that you made on Europe and demand actually looking solid from an outlook perspective. Similar to a JV for manufacturing in the U.S., can we also look for something like that in Europe in terms of manufacturing there, or are we looking more from an export perspective only?
Kunal, in the European market, the policy regime is still kind of taking shape. Under the Net-Zero Industry Act and some of the other policies that have been announced so far, module imports from countries with FTA will receive the same status as domestically made modules. As you know, India is in the final stages of signing the FTA with EU. I think we are looking at the market, following all the developments very closely. As long as the Indian modules find an easy acceptance and the FTA is signed as expected, I think export from India is going to be the first preference. We are completely open to the possibility of setting up a plant at some point, depending on demand growth, as well as the policy environment.
Understood. This is helpful. Secondly, sir, if we look at our journey, we were among the first to transition a line from multi PERC to mono PERC, and then among the first to sort of roll out G12R and Zero Busbar Cells, right? What lies ahead in terms of further tech upgradation from here on and a subsequent expansion versus the peers in terms of our technology and where we stand?
Kunal, as we speak, we are making G12R TOPCon cells, we've also launched the zero busbar cell. We are working with our R&D team, taking stock of what we expect would come up in the next five years, 10 years. Post TOPCon, we are looking at IBC, which is the back contact, we are also looking at tandem, which will take a little longer. As a company which has been into module manufacturing for almost 30 years and cell manufacturing for over 15 years, we generally keep a tap on what's happening around the world and are in sync with that.
Understood. Sir, one last question. What we hear in the market is the talent attraction and retention in the cell industry has been a bit challenging, especially with a lot of new companies sort of announcing their entries or are already entered. What has been our strategy to sort of offset for this aggressive attrition that we are seeing in the industry? This is something that we are hearing, but could you also give some insights for you?
Actually, this is a problem in the industry, we keep continuously training people. We impart a lot of skill development. In our plants, we have people whom we keep training continuously, so we are not facing this problem in a material manner. On the other hand, we have been Great Place to Work four times in a row now. Our ESOP scheme has been very successful. All these things have helped us to retain good talent.
Understood. This is very helpful, sir. Thanks, all the best.
Thank you.
Thank you. The next question comes from.
I think in the interest of time, let's take one question each because we have only seven minutes left.
Okay. Participants are requested to restrict your questions to one question per participant. Thank you. The next question comes from the line of Shubham Bhardwaj from ICICI Securities Limited. Please go ahead.
Hi. Thanks for taking my question. As our order book is at a record high and as per your remarks, Module orders are for next six to nine months, while cell orders are spread over FY 2029. How much of the current order book we can execute in next, let's say, nine months?
The total order book is INR 15,000, a substantial portion of this order book, at least about 40% - 45% of this order book would go into FY 2028. I hope that answers your question.
Yeah. Okay. Thank you. That's from my side.
Okay.
Thank you. The next question comes from the line of Karan Gupta from Asit C Mehta Investment . Please go ahead.
Yeah, hi. My question on the industry side. As we can see, a lot of chatter is coming from the government also that the transmission side or the grid side is not that much capable to transmit the renewable energy, right? Now, when the base capacity will expand or set up the duration time, do you see that the run rate of orders is coming off for the renewable side, for the module side? As you can see, the ramp-up of base capacity will also take time, and government is strictly pushing towards the base capacity, not the standalone solar module.
Yeah. Hi, Karan.
Recently we've been saying that we are seeing some curtailment of our energy generation. How do you see that risk?
Yeah, sure. Karan, we have tried to show in our presentation that definitely adding a lot of solar capacity does put a lot of pressure on the grid. There is a steeper and steeper duck curve as we are observing in the Indian market. At the same time, there is also a very good demand momentum in the industry. There are two, three very good mitigations in place. One, storage technology has become viable, not just because the cost of storage has fallen, but also because the arbitrage or the opportunity cost of storage has actually gone up.
Today there's an arbitrage of INR 7-INR 8 between the morning and the evening peaks as against the midday hours. That makes storage viable. There is already a huge pickup in storage capacity addition. This year, we are expecting almost, I would say, 20 GWh of storage capacity addition between the merchant and the non-merchant markets. That number should more than double over the next two years. I think a lot of storage capacity is coming up. On top of that, by FY 2029, you will see at least 40 GWh-50 GWh of pump storage capacity coming onto the grid.
You have to take into account that the distributed solar market, which is not really affected by any of these transmission constraints, which used to be about 15%-20% of the total market, today is almost 40% of the total market size. We are seeing much more growth coming from Suryodaya Yojana and PM-KUSUM schemes, even the C&I segment. C&I segment, mostly those projects are implemented at the intrastate level where there is much less grid congestion. They don't typically face the same kind of challenges as you're
Okay. Just a quick one. The margin of your merchant cells, I mean, DCR cells selling to the merchants. Just one question on the DCR cell margin side. How much margin you are making on the merchant cell? Yeah.
No.
I don't understand. What is merchant cell?
Cells in the market.
Okay. [inaudible], no. Yeah. You want to take?
Yeah. See, we've already.
Yeah. My question is basically to understand, if we are selling the DCR cell outside or the merchants, what is the profitability of those cells, rather than consuming in-house, in terms of margins and in terms of cost saving in-house? The margin on DCR side, if you can tell me. Hello?
I think the last question was about margins on cell sales.
Yes.
I was just saying that, we don't release as a company, we don't give out any kind of margins by product segment. Unfortunately, I'm not able to share any information on that.
Okay, fair enough. Just a broad direction on this side that we are making more profits or the profitability is high selling outside the cells compared to consuming in-house. Just trying to understand.
No, I won't say so. People are buying cells only because there's a lot of demand for DCR modules, and making DCR modules remains a profitable business. I think, there is no such thing as making cells is more profitable than making modules. We continue to be present in both the businesses, have a more diversified presence across segments and customers.
Okay, any percentage if you can share, how much we are selling outside and how much consuming in-house?
In general, we have said in the past that we want to maintain a business split of 50/50 for our cell production. 50% to be sold externally and 50% to be consumed internally. That proportion is going to get more and more skewed towards domestic consumption as ALMM List-II gets implemented and DCR demand picks up.
Okay. Thank you. Fair enough.
Thank you. The next question comes from the line of Raman KV from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes, I can hear you.
Yes, sir. I just have one question. You work super close with the industry. Last week, there was.
The current participant's line has been disconnected. Ladies and gentlemen, to ask a question, you may press star and one.
I think we've come to the end of the one-hour mark. We can take maybe one last question.
We have the next question from the line of Raman KV from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes, Raman, I can hear you.
Yeah. I just have one question from our end. I just want to understand the industry perspective. Last week, there was an article wherein it was stated that small module and cell manufacturer players were shutting down their manufacturing capacity because it was not fungible for them. Feasible for them, sorry. I just want to understand, because you work super close with the industry, how is the industry shaping out as more and more module and cell capacity is being added? Are you witnessing any industry consolidation?
Hi, Raman. Definitely. I think, the three or four main parameters on which all the players in the industry compete on, basically, they are scale, vertical integration, and technology. The shift to ALMM List-II and ALMM List-III is only going to accelerate these trends, and favor companies with the largest capacities, best technologies, and proven track record, et cetera. I think it is inevitable that some of these smaller manufacturers who are not vertically integrated will find the market very tough. Margins have almost completely, I would say, vanished at the module manufacturing end. The entire profitability pool has shifted upstream to the cell business. Henceforth, the market will be dominated by larger players, integrated players with cell, and going forward, ingot and wafer capacities. Consolidation, in our mind, is inevitable in the sector.
Just to follow up on this, a small doubt. When it comes to module manufacturing, there was no entry barrier for any business to come. With cell, there is a little bit of entry barrier. Going forward, will it be more backward integration into ingot, wafer, and polysilicon, which will create a entry barrier and which will make sure the margins are sustainable? Or will it be the volume share of integrated cell and solar cell and module and ingot wafer capacity? What will be the differentiating factor between the leaders?
See, all the upstream manufacturing is a highly capital intensive and technology intensive business. While there is no entry barrier per se, but just the fact that you require a significant investment in cell and ingot wafer lines, a lot of operational expertise, latest technology, that itself acts as an entry barrier. All these businesses benefit massively from scale. Any company which has got, let's say, scale of 10 GW will enjoy massive advantage in terms of cost of production, logistics, working capital, et cetera. They will be able to basically dictate the market in terms of volume as well as pricing. I think there are lots of, not entry barriers per se, but there are lots of advantages favoring companies with scale, vertical integration, and technology.
Thank you, sir. Thank you so much.
Thank you. In the interest of time, that was our last question. I would now like to hand the conference over to the management for closing comments. Thank you, and over to you.
Yeah, thank you. Thank you everyone for your interest. We appreciate your time and interest in Premier Energies. The business, as we said, is poised for rapid growth in the coming quarters with all the new capacities coming online. At the same time, we are also preparing ourselves for more competition. There is a lot of work going on behind the scene in terms of more cost competitiveness, making sure that we optimize every single part of our operations, we innovate on the technology front, and we build a good portfolio, a diversified portfolio of products and technologies. With that, we believe the overall outlook for the business, both in terms of top-line and bottom-line growth is very attractive. As usual, we are very grateful for all the support that we get from the financial community, and we look forward to working with you. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.