Ladies and gentlemen, good day and welcome to the Premier Energies Limited Q2 FY 2027 earnings conference call hosted by ICICI Securities. 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.
Thank you, Alaric. Good morning. On behalf of ICICI Securities, I welcome you all to Premier Energies Q2 FY 2027 earnings conference call. Today, we have with us from the management, Mr. Chiranjeev Singh Saluja, Managing Director, Mr. Nand Kishore Khandelwal, Chief Financial Officer, Mr. Vinay Rustagi, Chief Business Officer, and Mr. Sudhir Moola, Chief Strategy Officer. Now, I would like to hand over the floor to the management for the opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Mohit. Am I audible?
Yes, sir, you are. Please go ahead.
Good morning, everyone. Thank you for joining us today for our Q2 earnings call. I am Chiranjeev Saluja, Managing Director at Premier Energies, and I am joined today by my colleagues, Mr. N.K. Khandelwal, Group CFO, Sudhir Reddy, Director, and Vinay Rustagi, Chief Business Officer. The company has reported another sterling quarter with total revenue increasing by 38.2% YoY to INR 2,656 crore on a consol basis. EBITDA and PAT have grown by 17.8% and 30.8% YoY to INR 760 crore and INR 462 crore respectively. EBITDA and PAT margins in the solar manufacturing business came in at 29.3% and 17.9% respectively. The PAT margin has moderated slightly because of increase in depreciation and reduction in other income. Transcon, our subsidiary, has reported another good quarter with revenue and PAT of INR 122 crore and INR 18 crore respectively. EBITDA and PAT margins came in at 15% and 8%.
Amongst key business update, our 7 GW TOPCon cell line has been commissioned. Trial runs are currently underway, and commercial production is expected to start later this month. Our operational cell plants delivered a record capacity utilization in the quarter, showcasing our all-round operational excellence. A highlight of the quarter was new order wins totaling INR 4,001 crore for cells and modules in a highly competitive market, taking our total order book to INR 16,260 crore. The transformer business also saw a healthy intake, reflecting higher capacities, taking the total order book in the transformer company to INR 330 crore. I am happy to update that all our expansion initiatives, including battery energy storage, are on track. Solar capacity addition has been steady throughout this year, with growth in PM Surya Ghar Yojana compensating for slight weakness in the utility scale segment.
We expect project commissioning progress to accelerate over the next six months, taking the annual capacity addition to around 50 GW AC territory, surpassing last year's numbers. More importantly, the long-term outlook for the sector remains compelling, with the government looking to reduce dependence on fossil fuel imports and fighting climate change. Recent policy announcements on bolstering transmission and storage capacity additions are expected to unlock the next cycle of growth for the solar sector. Commodity price inflation in wake of the Middle East war has hit the solar sector with material increases in prices of key raw materials and delay in delivery timelines. However, I am pleased to say that we are navigating this period successfully with careful supply chain management and investments in scale and technology. As new capacity ramp up over the next few quarters, we expect a major step up in financial performance of the company.
At the same time, we are also evaluating several new primary and secondary growth opportunities. Our balance sheet strength, as reflected in low cost of capital and an A+ credit rating, is a key pillar of our business competitiveness. We remain focused on disciplined growth, leveraging our key operational strength alongside prudent risk allocation. Thank you. We are now open for questions.
Thank you. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 will wait for a moment while the question queue assembles. The first question comes from the line of Shubham Borade with ICICI Securities. Please go ahead.
Yeah. Hi. Thank you for the opportunity, and congratulations on a good set of numbers. I have two questions. First being, where are we in battery manufacturing, and what we will be able to localize in the near term to achieve the 40% DCR requirement? Second would be, what is the status of our approval of new 7 GW capacity from MNRE, and has it stabilized?
Sorry, Shubham, we can't hear you. Can you please repeat the second question again?
Yeah, the first question was clear. Just repeat the second question.
Yeah, sure. What is the status of our approval of new 7 GW capacity from MNRE, and has it stabilized? I hope I was audible.
Sure. Okay, I'll let Sudhir Reddy answer the first question on our battery manufacturing plans and localization plans, and the second question, I will take it after him. Sudhir.
Thank you. On the Battery Energy Storage System, we expect to operationalize the Battery Energy Storage System in Q2 2027. With respect to localization, we are working out on localizing the container manufacturing. We are trying to localize some of the fire suppression systems inside it to achieve the 40% localization that is being asked by the government for the various subsidy programs. Also, on the software part also, we have tied up for providing Indian-made EMS for the Battery Energy Storage System. So that's our plan on the Battery Energy Storage. I hope that's clear.
Yeah. So our plan is to do cell to pack and pack to container. This is what the manufacturing plant, what we are setting up. On your second question on 7 GW cell line at Naidupeta, we have already made our application to the National Institute of Solar Energy for the inspection of our plant and to get it enrolled in the ALMM. We are expecting the inspection to happen anytime in the third week of November. The plant is, as we already said, is already commissioned, and trial runs are going on. I hope that answers your question.
Yes, sir. Yes. Thank you. Just if I can squeeze in one more. What is the status of wafer and ingot manufacturing, and have you placed the orders for equipment, and what would be the total cost for the project? Thanks.
Yeah. Sudhir will answer this question.
Yeah. We have started working on the ingot-wafer plant. In fact, the land has been already procured quite some time back. Also, the license and permitting for that place, which is in Naidupeta, very next to our 7 GW plant, have been in position for that plant. Water allocation has been done. Electricity power approval also has been done, and we have laid the power lines to the plant in 169 acres. We hope to commission the Phase 1 by December 2027, and Phase 2, which is additional 5 GW, taking the total capacity about 10 GW, by June 2028, which is to more align with the ALMM-3, and we will look for guidance from government on that if there is any timing changes.
Sure, sir. Thank you. Thank you. That would be very good. Thank you.
The next question comes from the line of Apoorva Bahadur with IIFL Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, on this battery manufacturing, I just wanted to double-click a little bit more, especially on our partnership with RCT. It would be very helpful if you can explain what would RCT bring to the table? Does the JV have access to its proprietary tech from Wärtsilä?
Sudhir will take this question.
Yeah. I mean, just to give a background, RCT is a German company, and they have been in the Battery Energy Storage business for quite some time, and they have placed a lot of their Battery Energy Storage solutions both in Europe and in U.S. as well. So they have both CE and UL-certified products in their thing. That said, our partnership with RCT is going to give us this reach for us into those markets with the Battery Energy Storage solutions going to be manufactured in India. It also gives us access to some of their EMS solutions that they already have and have been using it for their European and U.S. customers as well. So it gives us both the product access to the product portfolio as well as their customer base that they're currently serving in these two markets.
We hope to replicate some of their learnings from their already established products in the market into the Indian market.
Okay. Also, sir, the LFP cell imports for these plants, have we tied up for those? Which vendor and which geography? Who from China, basically?
Yeah. Apoorva, we have been working with the tier 1 manufacturers of cell in China. We have not have a firm tie-up as on date. But as the plan progresses, we will enter into a firm supply arrangement.
Understood, sir. Very helpful. Secondly, also wanted to know your thoughts on the inventory buildup and sort of the depletion in cash conversion that we are seeing in over the last couple of months. How does it resolve? I understand that because we are building new capacity, so we would be needing some of the materials, but I think there's a buildup in finished goods inventory as well. Would love to know your thoughts on this.
Yeah. Hi, Apoorva. This is Vinay here. The buildup is largely on the raw material side. There is no major change in the finished goods inventory. The buildup is mainly because of two reasons. One, of course, there is a ramp-up happening in Seetharampur and now with the Naidupeta plant also getting commissioned. There is expected to be a big scale-up in operations of the company, both on the cell and the module side. In advance of this ramp-up, we have to have all the inventory position and the stocks kept up with the company. When you look at the inventory position and compare it with the historic revenue performance, the number seems artificially higher. The second thing which has happened in the quarter is that, particularly with the war situation, some of the delivery timelines have been impacted.
Shipping lines, there is some congestion in some of the ports. We have basically also been maintaining some extra buffer on the raw material inventory, which has led to this slightly inflated position. I would say this is temporary in nature. As these new plants stabilize, revenue starts coming into the numbers, you will see the numbers fall back to the normal scenario.
So we should expect this by March quarter, or do we expect a little bit more time for this?
I would say latest by March quarter, yes.
Okay. And lastly, sir, if you can also share the latest DCR ALMM-2 price trends. I believe that the C&I demand is also around the corner.
It is around the corner.
Yeah, Apoorva, I can take this question. In the DCR segment, we have got three markets which we address. One is the retail market where we have the highest selling point. There, the price prevailing in the market is anywhere between INR 23- INR 24 per watt on a DCR module. Then the next segment is the KUSUM C and the C&I market, where we expect realizations to be around INR 21.5. At the bottom, maybe INR 21. Then you have the IPP segment, which is now coming in, which is a large IPP. There, we see prices going to as low as about INR 20.5 or even INR 20, if you are talking about up to March 2027. Now, when you average out all these prices, you get an average of around close to INR 21.5-INR 22 on the DCR module.
When you talk of cells, it is ranging between $0.12- $0.14, which is Mono PERC around $0.12-$0.125, and TOPCon at about $0.14, $0.145. If you talk of non-DCR module, we are seeing a lot of aggressive pricing there. But as a company, with our high-quality BOM and highly automated manufacturing lines, we are able to get a price premium there. So there, we are looking at prices anywhere between INR 12.75- INR 13.
Thank you, sir. Just one more thing on this. I think on the DCR price, you said up till March 2027. So for these larger projects, maybe for C&I and IPP, the delivery timelines could be further beyond that. Is there a difference in pricing, say, for year-end C1 and C7?
Yeah, so for the pricing for IPP, which I stated is all for next year, because IPP would not want modules immediately. Their planning is well in advance. So there, we are looking at around INR 20 for IPP and not C&I. But then there is a mix. You have retail, you have KUSUM C, and you have [inaudible].
[inaudible].
So when you average out, we are getting a better realization. And the demand at the retail level is quite strong.
Understood. Thanks a lot, sir. All the best.
The next question comes from the line of Sumit Kishore with Axis Capital. Please go ahead.
Good morning. Thanks for the opportunity. My first question is, it is still early days on China's proposed technology export controls, but do you see this, or how do you comment on the perceived risk of delay or deferment in implementation of ALMM for C&I and ALMM-3 later by June 2028?
Morning, Sumit. I will ask Sudhir to take this question. Sorry, Vinay is taking it.
Let me just step in. Yeah. Hi, Sumit. I think on the China policy front, this is obviously a draft announcement right now. It is going through a consultation process, and we will know the final outcome, I would say, in the next three to four weeks. We kind of should reserve in terms of comments on what is going to really happen there. Obviously, we are anticipating some kind of controls, and we are kind of working with our technology and vendor partners as to finding the best way around some of these restrictions. Bear in mind also that if you look at the Chinese machinery suppliers, for them, the domestic business is almost completely shut down, given that China is now trying to reduce capacity instead of increasing capacity.
All the business for these machinery suppliers is basically coming from the export market, and India being the largest of these export markets. These machinery suppliers are working very closely with the government to try and get some relaxations in terms of the technologies, in terms of orders which have been placed already, and other possible areas. I think we are very hopeful that notwithstanding these restrictions, we will be able to find a way around. But like I said, let us wait for the final policy announcement before we can make any conclusive judgment on this.
Yeah. Just to add what Vinay said, even the policy is not clear as of now, as it is talking about some high-end, high-technology, or new technology equipment. Luckily for Premier, we have imported those new-age and high-technology equipment for our Naidupeta cell line. So, we are at an advantageous situation where those machines are already in our manufacturing line, which have been kind of proposed for a ban. On cell line, we are fully covered. On ingot-wafer, we will be waiting to hear from the Chinese government after the November 15th, but we are quite hopeful that there would be a solution and that we would be able to get our equipment well on time.
Sure. My second question is, you commented on realizations across DCR, non-DCR. Could you also sort of give some color on the EBITDA spread in Rupee per watt peak that you are making on cell module, and non-DCR module? How has that moved, say, on a quarter-on-quarter or year-on-year basis?
Yes, Sumit. Hi. Unfortunately, we do not give out the spread information on a product-by-product basis. But of course, we have given you indication of the prices. If you look at just the pricing, the cell and module pricing has been largely stable on the DCR side. Non-DCR pricing obviously has come down quite sharply.
Yes.
From about INR 14+ , INR 14, INR 15 last year, to about INR 12.5 right now. So, that has obviously impacted the NDCR margin. Equally, the BOM cost in terms of the cell remains largely stable, with the wafer pricing from China going up and down a little bit. But then the silver prices again have kind of softened after they went up about three to six months ago. Then we have seen some changes, recent increases in cost of commodities like aluminum, copper, polymer films, et cetera, which has impacted profitability again on the module assembly business. Beyond that, I cannot give you, unfortunately, any specific numbers.
Sure. Just one clarification. When you said that, how do the localization rules on BESS really work? So, with your existing CapEx earmarked for BESS assembly, would that be enough to meet the 40% localization guideline, or would you have to do more CapEx on the manufacturing side?
No, I think Sudhir wants to comment on this. Yeah.
See, I think to achieve the 40% localization, certain components have to be localized within India. We will work with those other component manufacturers to localize it. It is not necessary that we have to go ahead and manufacture all these components within India. Some of these, there are manufacturers in India. We just have to qualify their product to our designs.
But on an overall basis, the cell to pack and pack to container will qualify for the 40% easily.
Okay, got it. Thank you. Thank you so much for answering that.
We would not need to do any. We would not need to do any additional CapEx.
Manufacturing is not required at this level. For 40% localization, we can manage with other components aside to the BMS and the cells.
Got it. Thank you, and wish you all the best.
Thank you.
The next question comes from the line of Kunal Shah with DAM Capital. Please go ahead.
Yeah. Hi, sir. First of all, with the 7 GW line now in place, how do you see the ramp-up schedule over here for the second half of FY 2027? Basically, any guidance on the quantum of production that we can do here on the 7 GW line?
Hi. Thanks. I will take this question. I think our plan is, considering that we will be getting our MNRE inspection, we have applied for it, and we should be getting our ALMM inspection done and the approval soon. We expect to do about 25%-30% CUF ramp-up in December on the Naidupeta plant, and gradually move towards about 70% CUF by end of March.
Okay, 70% by end of March. So, that is the exact rate that you are guiding for, right?
Yes.
Understood. Secondly, sir, on the total order book now, what proportion here would be the DCR piece? Because in the module mix shown in the PPT, there would be some component of DCR modules as well, right? So, out of the 16,500-odd order book, what is the DCR proportion here?
So, yeah, Vinay can take this.
Yeah. Hi, Kunal. So we have given you the breakup between the cell and module business, which is about 48% each of the total order book. And then within the module business, very roughly, I would say about 20% is also for the DCR business. So in total, I would say about 68%-70% of the total order book is for the domestic manufacturing business. The DCR business.
Got it. And sir, do we sort of retain the guidance of maintaining stable margins when we execute this current order backlog?
So I will take this question, Kunal. The orders have been won at the prevailing current price environment. And we are hopeful that we will be able to maintain margins subject to cost environment volatility. But as of today, while we speak, all the orders are at current pricing environment.
Understood. And lastly, sir, having acquired the transformer piece for a couple of quarters now, could you provide some concrete guidance on the scale-up or any sort of milestones here? Like, how do we sort of see this business scaling up and sort of adding to the overall consol piece?
Sure. Vinay will take this question.
Kunal, hi. I think we have said that the 4 GVA part of the new transformer capacity is already being commissioned. The company has completed all the type testing for all the full range of power transformers, except for the EHV segment. For the larger transformer category, customer acceptance and type testing usually take some time. I would say about anything between 8-12 months, depending on different product sizes. The conversion to export orders also usually is a long drawn process. I would say that we, in addition to this new transformer expansion, are expecting a gradual ramp-up over the next three years to about 80%-90% of the total capacity, with the current capacity and the other 4.5 GVA capacity on the IDT and the other range of power transformers ramping up, I would say, over the next one year or so.
In general, we are expecting the business to, like we said last time, more than treble in revenues over a period of three years.
Understood. This is very helpful, sir. Thank you so much and all the best.
Thank you.
The next question comes from the line of Bharani with Avendus Spark. Please go ahead.
Yeah. Good morning. Can I get the proportion of—
I am sorry to interrupt, Bharani. You are not quite audible. I would request you to use your phone on the handset mode in case if you are using a hands-free device.
Is it better now?
Yes, go ahead.
Yes, Bharani, we can hear you.
Okay. Yeah. Sorry for that. Wanted to check the proportion of sales done in the DCR market in the second quarter in the modules segment.
Bharani, I could not hear you, but I think your question was about the percentage of DCR sales in the quarter.
Correct.
We don't give out any mix between DCR and non-DCR business on a quarterly basis, unfortunately, Bharani.
My second question is, in the opening remarks, there was mention of growth prospects both organically and inorganically. Would like to have some color on what are these inorganic area segments that we are looking at?
I think in general, what I really want to say is that the fundamentals of the sector are extremely attractive, with several growth opportunities present, both in the solar technology space as well as all the other adjoining areas, whether you look at battery technologies, inverters, green hydrogen, electrolyzers, et cetera. Largely, the focus of the company going forward is going to be leveraging our core strength in solar manufacturing and trying to focus on organic growth. Having said that, we will look at acquisitions very selectively, wherever we feel that we can use these acquisitions to cut our time to market, particularly when the valuations are also very attractive. I think in general, we are looking at a multiple, a lot of these opportunities both in India and even internationally, but the focus is on organic growth and closely linked to the solar sector.
Okay. When you're telling internationally, does this involve the erstwhile plan we had to have capacities in U.S.A., or is it outside U.S.A., like in Europe or other geographies?
Sorry, Bharani. There is a lot of disturbance in the call. We cannot hear you.
Oh, sorry.
Operator, is the disturbance only our line or is it for all the lines?
No, sir. It is his line. He is speaking a little distant from the microphone and probably not on the hands-free mode.
Is it better now?
Yes, please go ahead.
Can you please try now?
No. I was just checking when you said the international geographies, is it the U.S. plan we had earlier that we are restarting, or is it a completely new geography, like in Europe or some other area?
I think we have been pretty open that U.S. and Europe remain geographies of interest to us. Both these markets, there is a very strong policy push towards domestic manufacturing, and we are focusing, we are looking at both these markets and evaluating several opportunities. I think that those are the two main international areas of interest to us.
One last question. You mentioned that we had already placed orders and got the high-tech equipment for the cell line. How about for the ingots and wafers?
For the ingots, we still haven't placed the orders for the ingot and wafer. Only for the wafers, we had earlier tied up with a vendor, and we had put in a small deposit with them. Those agreements are being registered with the Chinese government under the export control, so that these are considered as pre-existing agreements.
Okay. Thank you so much, and all the best.
The next question comes from the line of Kunal Shah with DAM Capital. Please go ahead.
Yeah. Hi, sir. Just one thing, just recently, right now, there is a news flash about a potential block of GEF at a 7%-10% discount to the current price. Could you clarify the stance over here? Because one of the investor complaints typically have been around the noise around these liquidity events, et cetera, and fundraising, et cetera. Could you just provide some thought over here?
Yeah. Kunal, we have also seen some messaging going on. These are all rumors. There is no block, nothing from the promoters, and there is also a rumor, I think, going on that GEF, the private equity player who has invested in us, has appointed Citi as the banker, which is also false information. I think these rumors just create confusion. There is no block from the promoters. There is no block planned even in the next couple of quarters or even the couple of years. From promoter side, we are very clear, no block. And from GEF also, we verified with them, they have not appointed Citi, and there is no block.
Understood, sir. This is very helpful. And sir, on the potential QIP also, could you just provide some clarity there, whether it's just an enabling resolution or we are actively looking there as well?
Yes, we have time and again stated this, that it was just an enabling resolution. We have enough cash flow from operations to fund our CapEx plans, which we have announced. There is no QIP planned in the near future.
Understood. This is very helpful, sir. Thank you so much for the clarity.
The next question comes from the line of Praveen Sahay with PL Capital. Please go ahead.
Yeah. Thank you for the opportunity. Sir, related to the DCR pricing, there is some order from the SECI for the next year as a very discounted rate. So, where do you see this INR 20 realization by the next year? Will it going to go down to the order which we had seen at the pricing happened?
I think you are talking about the order which one of the companies won in the SECI bid, right?
Yes, sir.
Yeah. This, I think, was clarified earlier also. Let me clarify again. That cannot be treated as a base to arrive at the market pricing because this company is setting up their cell line, which would be getting commission, I think, this quarter or next quarter. They had participated in this bid almost a year ago, and the bid got finalized about, I think, three months ago. They had given this introductory pricing to get credentials in the market. SECI tender, I would say, was to be treated as an IPP tender. I said IPP pricing in the market for next year are around INR 20, and I think they have taken this order at about INR 17 or INR 18, which was at a discount to be able to get credentials, and that is not reflective of the market prices.
It was more as an introductory offer to fill up about 10%-15% of the line capacity.
Thank you for the clarification. Next question is related to the inventory. As you had explained, there is two reason why the inventory level has increased. These inventories are also built up, also depends on your order book. We are not going to see, with these kind of inventory built up, any impact on the margin profile.
Just hold on. Just hold on. Operator, can you come in? We are not able to hear. Line is pretty bad. Do you think we should log off and log in again?
Just give me one moment, sir. I will just double-check.
Whenever somebody is speaking, there is a lot of background noise.
Praveen Sahay, could you please say something now?
Yeah, am I audible?
Is this better, sir?
Yes.
Okay.
Yeah, little better.
Okay, go ahead, sir.
Yeah, okay. My question related to the inventory, sir, because the inventory increase you had well explained. My question is whether this inventory buildup also depends on the order book, so we will not see an impact of this high order inventory buildup in the future margin profile?
Yes, I mean, all our production, both cell and module, is linked to orders. We produce goods in the factories based on firm orders from customers. So, inventory buildup is definitely against expected orders from our customers based on the exact delivery and production timelines. As these orders, as the factories ramp up and production starts coming through the gates, the inventory position in relation to sales will normalize.
Okay. Sir, last question related to the CapEx. Can you give the FY 2027, what would be the number we are looking for?
So, in the bulk of our CapEx for the cell and module expansion has already been completed. Now we are mainly looking at some marginal leftover payments for the Naidupeta cell plant, and then the battery and the aluminum plant. Plus we are undertaking open access captive projects. I think on the whole, the CapEx for the next two quarters should be moderated, I would say, to about INR 700 crore territory, which means the total CapEx for the financial year should be around INR 2,400 crore.
Thank you, sir, and all the best.
Thank you.
The next question comes from the line of Sahil Sheth with Anand Rathi. Please go ahead.
Hi, sir. Congratulations on a good set of numbers. My first question is on our cell order book. If I see on a quarter-on-quarter basis, our order book has declined by about INR 8 billion, while our execution on the revenue side, we have booked revenue of around INR 4.7 billion. Just wanted to know why is the decline in order book greater than what revenue we have booked for the quarter?
Sorry, Sahil, are you talking specifically about the cell order book?
Yes, sir.
Yeah, so I think there the difference is mainly coming because in the last quarter, for example, if you see, we did not take any new cell orders. All the orders were for DCR or non-DCR modules. So obviously, as more production and dispatches were made, the total outstanding cell order number has come down.
Yeah, also because our module line capacity has increased.
Sir, you were not audible. Could you repeat?
Yeah, I am Chiranjeev here. Was just clarifying that our cell order book has decreased and DCR module has gone up because we commissioned our new 5.6 GW module line, right? With more module capacity coming in-house, we would prefer to use the cells for our own captive consumption and gradually reduce our solar cell sales.
Okay. Sir, apart from any executed cell orders, is there a movement where the order have moved from your cell order book to a module order book, or are there any order cancellations for the merchant cell sales?
No, no, there are no order cancellations at all.
Okay, got it. Sir, my second question would be, on the U.S. side with the changing political scenario, how do you now see the outlook for the solar industry in India, and how are we assessing the opportunity? Are we looking in terms of export or setting up any manufacturing facility in U.S. itself?
I think we log off and log on again because there is again a lot of disturbance. Can we get to the operator, please? Can we log off and log on again?
Sure, sir. I will call you back.
Yeah, we'll just do it right away.
Sure.
He'll call us back.
Yeah, you'll call us back, right?
Yes, sir. Ladies and gentlemen, please stay connected while I reconnect the management. Thank you. Ladies and gentlemen, the management is reconnected. Sahil, you may go ahead with your question.
Yes, sir.
Apologies, Sahil. We were not able to hear you, even though you were able to hear us well, but we could not hear you, so now I think it is much clearer. Could you repeat your question, please?
Yes, sir. My question was, on the U.S. side, with the changing political scenario over there and the MIP [inaudible], do you expect exports from India to revive to U.S., or are we looking of setting a local manufacturing facility in U.S. itself?
See, there are two ways to look at it. One is with the changing environment there, it is a big, big positive for the renewable side. If you talk of MIP, we are clear that Make in America is the answer, and hence we are at advanced stages to finalize our factory location in the U.S. We already have a JV partner, so we are progressing well on that side. We would set up cell manufacturing as announced earlier in the U.S.
So sir, by when are we looking to finalize this? Is there any timeline you have in mind?
Yeah, about 12-18 months is what we're looking at.
Okay, got it, sir. My last question would be, on the transformers business, in the previous quarter, we recorded margins of around 22%, while in the current quarter, it came down to 12%. What is the normalized level of margins we can expect going on in this business?
So yeah, I think we have been clear on this, that the normalized margins on this business is about 15%. Last quarter, we had a higher number because the steel and the copper costs went up, so we got a variable increase in those orders, whereas we had enough inventory which we had hedged for. That gave us a little bit of an edge in terms of the margins. But on a normal basis, we expect this to be a 15% margin business going forward.
Okay, got it, sir. That was very helpful and honest.
Thank you.
The next question comes from the line of Mayur Patel with 360 ONE Capital. Please go ahead.
360 ONE Asset. Thanks for the opportunity. Sir, just two things. Given the mix, I think this quarter, a margin of around 28% is also a function of more modules, like you explained. Going forward, as the Naidupeta cell facility gets ramped up over next six months' time to 70%, you say, and demand obviously after December, C&I picking up in a big way because of the DCR regulation kicking in, and this BESS big thrust from the government side, IPP hopefully should also pick up. KUSUM, you're saying, reading some news around from the ministry, there's a final leg of finalization of KUSUM 2.0. Do you think, again, the mix will start favoring us from the blended margins point of view going forward? Number one, and the 10 GW order book which you have, that will be executed over next 12 months' time, I assume?
Yes, about 12- 14 months.
Okay. But Mayur, hi, this is Vinay here. On the government policy and the demand front, I think the government is completely seized of the matter in terms of trying to diversify the energy mix and grow the share of renewable energy. I think we are going to see a lot of initiatives that even in the last one or two months, we have seen a very large Green Energy Corridor scheme. Now you have seen the BESS initiative with the VGF scheme, and the KUSUM and Surya Ghar Yojana, the second version of both these schemes is also due for announcement, I would say, over the next one or two months. I think we do expect the overall macro for the demand side is very, very attractive, and we do expect a lot of favorable policy announcements from the government.
That should obviously tilt the business focus and the mix of product towards the DCR modules, and that will help us to maintain and increase our margins.
Just to add what Vinay said, Mayur, that government is quite positive. If you look at the indications from them on Surya Ghar 2.0 and KUSUM 2.0, both these projects give us a better margin in terms of realization. We are quite confident that if Surya Ghar 2.0, KUSUM 2.0 comes in, the mix what we have today will only get better.
Got it. Just last question, [inaudible], sir. For the wafer ingot upcoming facility, if I recollect correctly, we have a technology tie-up with Taiwan-based Sino-American SAS, which is a very renowned company. Given the technology tie-up, still, how can you deal with this uncertainty around sourcing plant and machinery from China? Having this tie-up with SAS, does it help in some form?
This uncertainty is still not clear. November 15, we get more details on this. There is fine print in the draft which has been shared that a certain kind of ultra-thin wafers, manufacturing equipment would not be allowed, but maybe normal ingot wafer machines will be allowed. We will get more clarity. If you look at the Chinese equipment manufacturers, most of them have set up shop also in Southeast Asia, where they are assembling the equipment. We do not see this as a big risk in terms of our ingot wafer equipment sourcing. Coming to our partnership with SAS in Taiwan, that is more of a technology partnership. They have got deep knowledge and tech know-how on semiconductor wafers, and that will help us in choosing the right equipment, ramping up the line, and being able to produce world-class wafers.
Sure. Just one last thing, sir. Beyond next five years growth journey, does this SAS tie-up help us, say, going forward once we are fully operating at, including wafer ingot, everything is running steadily? After that, can we look at entering semiconductor wafers also, given your relationship and partnership with SAS? In future, I am not saying your next one.
Yeah. That is on our wish list, but it is too early to say or commit anything there. We as a company would want to grow in the semiconductor space. When we would do this, with whom we would partner is something which we do not have an answer today. We first want to set our CapEx plans, which we already announced, the execution timelines, everything to be completed as per what we had committed, and we would be looking at various opportunities.
Sure. Thank you so much. All the best to you and the team.
Thank you.
Thank you, Mayur.
The next question comes from the line of Amit with UBS. Please go ahead.
Yeah. Hi, sir. Congratulations on the stable set of results, despite current headwinds. Sir, I think I have one question which somebody in the previous questions tried to ask. On BESS now, Chinese companies, most of them are in losses. They are not able to lift prices. The regulation in China, even on the BESS side in the entire solar value chain, we have a point where the China government is very clear that U.S. and India can't be shared a lot of technologies. This 40% threshold for indigenization, right? I am sure there is a lot of thinking that has gone behind. Do you think this is enough for us and the sourcing of BESS capabilities beyond the current dynamics will help us?
Because the operating cash flow assumptions in the next, say, two to three years when we expand capacities, looking at the profitability pressure, do you think it has a serious risk of slowing down the entire renewable capacity framework in India? I just wanted your thoughts on this current deadlock in BESS framework, because minus BESS, the renewable growth is going to be a challenge.
Yeah. So let me take this question, Amit. See, on Battery Energy Storage System, what we are doing is cell-to-pack and pack-to-container, and there is no problem with China in terms of supplying equipment for cell-to-pack and pack-to-container lines. It is more on the cell manufacturing on the BESS side, and that is the reason why we have been cautious in not announcing large investments into cell manufacturing on the battery energy storage side. To answer your question on the 40% value addition, we will comfortably achieve that with cell-to-pack, pack-to-container, and the software bit of the battery energy storage system. And there is enough support from China for setting up these lines. There is nothing which is banned on that front.
On prices in China and BESS companies and solar companies making a loss there, that is because of huge overcapacity, which we are aware of, and there is an anti-involution policy which is being implemented to try and stabilize prices. We are seeing polysilicon prices, wafer prices on the upward trend because of that. I think we would see that also, a stabilization on the battery cell side, I think, going forward.
But as far as we are concerned, we feel that the time to invest in BESS business, what we are doing is the right time. And we, having our reputation and the brand which we carry in the market with our customers and the history of 32 years which Premier has, we will be able to win BESS business from our IPP customers and C&I customers, and we will qualify for the 40% local content.
Sure. I'm sure. Second and quick question is on the ongoing, the current demand in India and the capacities that are going to be activated now. Do you think the consolidation here, where a lot of marginal players go out of business or stop impacting the incumbents on P&L, it's going to be a longer drawn race, and hence the incremental returns on incremental investments, whether it's ingot-wafer, BESS, et cetera, will be materially lower for us in the next, say, particularly after, say, one and a half, two years? Do you have any sense on that? I know it is still wait and watch, but still your insights on this. Thank you.
You're talking about people who have just module business compared to backward integration? Is that your question?
No, even cell capacities. Module anyways is a passe. Even with cell capacities by CY 2027 and CY 2028, India will have more than 100 GW, right? Or at least 80, 90. I just wanted to understand.
Yeah.
Yeah.
Sure. Pure play module business, it's a very difficult time, right? I do see problems coming up on pure play module manufacturers in terms of standalone manufacturing for modules. That's going to be really, really difficult. Backward integration is required. Your question on cell manufacturing, even if we reach 100 GW with an average industry output of about 70 GW per annum, we are still looking at demand being quite strong. As we speak, the demand is almost about 50, 60 GW. With the growth rate we are expecting every year, we see this demand to mostly equal or surpass the supply, at least for another 12- 18 months, whereas if cell manufacturing reaches about 100. Then again, between the cell manufacturers, you need to carve out manufacturers who have scale and who are getting into ingot-wafer.
Somebody setting up a 1 or 2 GW cell line, competing with somebody who has got a large cell line five times the size, is going to be a different game. We feel that players which are going to be at scale, who have the financial bandwidth and execution skill to set up ingot-wafer, that is backward integration, will be the ones which will be the difference between men and boys.
Okay, sir. Thank you and good luck to you.
Thanks, Amit.
Thank you. Ladies and gentlemen, due to time constraints, we would take that as the last question for today. I would now like to hand the conference over to the management for the closing remarks.
All right. No, I think we can take one more question. We are still at 10:57 A.M. We can take one more question.
Sure, sir. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Amit Bhinde with Axis Capital. Please go ahead.
Yeah.
Amit, please go ahead with your question and kindly unmute your line.
Yeah. Can you hear me? Am I audible?
Yes.
Yeah. My first question is on the mix that you have in retail, C&I, and utilities in the order book currently. Related to that, some of the developers are talking about them getting quotes for DCR module at close to around INR 18, which has been set as a precedence by one of your competitors. How far are we in seeing the orders coming at INR 18? I mean, at, let's say, a quarter or two down the line?
Sir, to answer your question, even in non-DCR business today, people are accepting orders at sub INR 12, but we at Premier are not. We are at INR 12.75 and above. We do command a premium because of the high-quality automated lines which we have and the experience which we hold. I do not think the INR 18 is a benchmark, which should be taken. If somebody has quoted because of new lines or new business they are entering into, that would not be a benchmark for us.
Right. It is not a near-term risk that we should think about, is what you are saying, on the pricing front?
Yes.
Yeah. If you can also help me with the mix that you have in terms of retail, C&I, and utilities scale in the order book currently.
Yeah. As we said, with these Surya Ghar 2.0 and KUSUM 2.0 being announced, we see the mix may become better than what it is today, if not remain the same.
Right. But approximately, if you can help with the ballpark indicative numbers, if at all?
Yeah. No, we can take one more. Sorry?
If you can help with some ballpark indicative numbers on that?
So, it is very difficult to give that number on a quarter-on-quarter basis. But roughly, retail is about 35%-40%.
Okay. Right. And one more question that I had is that, now whatever CapEx plan that you have, would get over in the next year. So, how should we look at the next leg of growth for Premier? One of the things that was discussed was on the semiconductor side. It was spoken in one of the questions. Any other areas of business where you would deploy your cash flows?
As I said, that is our wish list. We do not have a firm plan now. Once we have a firm plan, we will, of course, share with the markets.
Yeah. Thank you. Those were my—
We can take one more question. We can take one more question, please.
Sure, sir. The next question comes from the line of Bhaskar Chakraborty with Jefferies Group. Please go ahead.
Thank you very much. Can you give us some color on the non-DCR order book that you have? What the kind of margins, on what basis that you are realizing currently?
In our 16,000-odd crore order book, about, as Vinay said, about 25%-30% is non-DCR. When you talk of non-DCR business, it is, of course, in the single-digit kind of EBITDA margins. In terms of pricing, generally, it is upwards of 12.75.
Thanks. In your balance sheet as of September 30, there is almost INR 2,900 crore of CWIP. Is that the cell line which has not yet been commercialized, and you will commercialize that in the second half?
That is right.
Some of the interest and depreciation expensing for that line will come in the next two quarters?
Yes. I think Vinay had given a number that in this quarter, we are expecting the depreciation number to be around INR 600 crore.
For the year.
For the year. For the year, not for the quarter.
Right. Yeah. Sure. Thanks. Thanks very much, and all the best.
Thank you.
Thank you, Bhaskar.
Yeah, I think we can go to the closing remarks now.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.
Thank you, everyone. Thank you for your time on the call. Overall, I think we discussed the whole range of demand, pricing, technology, and expansion initiative-related questions. I just have to say in the end that we are very pleased with another quarter of steady performance. The macro environment obviously has been challenging, but we've been able to kind of navigate that very successfully. Next few quarters, we are expecting a significant step up in the performance of the company, with the Naidupeta plant ramping up, Seetharampur volumes also picking up because of the increased cell production. Transformer volumes also will pick up quarter-on-quarter over the next two to three years. Then, mid to longer term, I believe that the macro for the renewables is very, very compelling.
The government is working on a number of initiatives, and with these new schemes, Surya Ghar Yojana and KUSUM around the corner, the demand outlook is extremely positive. We are very, very, I would say, encouraged by the growth prospects of the business, and look forward to working with you. Thank you so much.
Thank you, sir. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.