Ladies and gentlemen, good day, and welcome to the Suzlon Energy Limited Q1 FY 2025 earnings conference call, hosted by ICICI Securities. During this call, the company management may make certain statements which reflect their outlook for the future or which could be construed as forward-looking statements. These statements are based on the management's current expectations and are associated with uncertainties and risks, as fully detailed in the annual report, which may cause the actual results to differ. Hence, these statements must be reviewed in conjunction with the risks that the company faces. As a reminder, all participants 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 the conference call, please signal an operator by pressing the star and zero on your touch tone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Mohit Kumar. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.
Thank you, Deepika. Good evening. On behalf of ICICI Securities Limited, I would like to welcome you all for the Q1 FY 2025 conference call of Suzlon Energy Limited. From the management, we have with us Mr. J.P. Chalasani, Group CEO. Mr. Himanshu Mody, Group CFO. We'll begin with opening remarks, followed by a Q&A session. To be fair to others, request each participant to ask not more than two or three questions. Over to you, sir. Thank you.
Thanks. I hope you had an opportunity to review our results and investor presentation. We will now share with you an overview of the industry, and we will walk you through our Q1 FY 2025 performance. We will then take your questions. Q1 FY 2025 continues to increase the growth momentum started in FY 2024, with unparalleled performance across financial and operational parameters. This is one of the best quarters in seven years, wherein we have outperformed across the various performance parameters. This performance comes as a result of several strategic and transformative steps the company took in the last three to four years, which we have been briefing from time to time.
Robust, largest ever order book in the history of Suzlon, of 3.8 GW as on June 2024, is a testament of superior technology, accessibility of our S144 WTG model, and customer confidence in Suzlon. This also reverberates with 29 years of proven track record, with 32% market share on cumulative installed base in India. Suzlon also qualifies for government tenders post, and would be selectively pursuing these orders, as we mentioned, as we discussed during our last call. Our endeavor remains to pursue quality orders with higher value and better margins. Globally, India ranks fourth in total wind installations, with 46 GW of installed onshore wind as on June 2024. Suzlon continues its growth with deliveries of 274 MW in Q1 FY 2025, which is two times of 135 MW in Q1 FY 2024.
This quarter, industry did close to 770 MW of commissioning, which is obviously below the expectations. As per our estimates, there are a sizable number of turbines in pre-commissioning phase, which could not be commissioned for different reasons, and would be commissioned in Q2 FY 2025. Indian wind sector, as per our estimates, should achieve installation of 5 GW in FY 2025. Our OMS business continues to do well with 14.8 gigawatts capacity in India, with the machine availability ensured above 96%. Our top priority would remain timely execution of our robust order book, while upholding the highest standards of quality and ESG. Our pioneering business model of end-to-end offerings for wind energy value chain, fully integrated supply chain, track record of project execution, and best-in-class service cannot be easily replicated, which provides us with a strong, differentiated competitive advantage.
I would now like to invite Himanshu to take you through our financial performance.
Thank you, J.P. sir, and, good evening, ladies and gentlemen. I shall be using slide number 16 to 23 of our investor presentation, which is now available on our website, as the reference point for our discussion during this call. Q1 FY 2025 has seen us register robust improvement in all key performance parameters, and our fundamentals have further strengthened with a focus on the bottom line.
We have made deliveries of 274 MW in Q1, which is more than 2X as compared to Q1 of FY 2024. On the P&L front, Q1 FY 2025, there has been a renewed focus on our bottom line, which has resulted in a revenue of INR 2,016 crores in the quarter, witnessing an increase of 50% on a year-on-year basis. Consolidated EBITDA of the company stood at INR 370 crores, which is up by more than 86% and with an EBITDA margin of 18.4% on a consolidated basis. PAT for Q1 FY 2025 increased by 200%, or almost 3X, to about INR 302 crores in the quarter. This has made us register highest quarterly EBITDA and PAT in almost about seven years.
We are also pleased to report that our balance sheet as of June 2024 demonstrates a further position of strength with a consolidated strong net worth of four thousand two hundred and fifty-three crores and a net cash position of INR 1,197 crores. The last one year in FY 2024 has been a year of financial turnaround for us, whereas we focus on our balance sheet and also putting in place the working capital for the company. We would like to reiterate that Suzlon is well positioned for the growth and sectoral leadership to participate in the India energy transition, with FY 2025 being a focus of performance on the P&L side and working capital side in the company. Needless to say, we shall be focused on best-in-class product with our in-house R&D team.
Our fortified financial position with optimized cost structure shall continue and be a focus area for us. Largest ever order book, as J.P. sir just mentioned, with a strong pipeline in active discussion. A supply chain that's fully geared up, in line with our order book commitments to our customers, and a regained confidence of all stakeholders, including financial and also suppliers and customers, and a strong bench strength with the management team that has a renewed zeal to deliver. With that, I'd like to conclude my presentation, and we can open the floor for any question and answers that the callers may have. Thank you.
Thank you very much. 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 handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sumit Kishore from Axis Capital. Please go ahead, sir.
Good evening. My compliments on a robust Q1 performance. My first question is, could you spell out the reasons for improvement in the WTG contribution margin in Q1? We also noted that your project or segment mix has shifted more in favor of captive C&I retail even on a sequential basis, now almost two-thirds. Is the pricing better in this segment versus state or central bids? That'd be my first question.
So, Sumit, hi. On the margin, you know, of course, whilst we've reported close to 23% of contribution margin on the WTG segment, it is not something that may be sustainable because this quarter saw a lower activity on the project execution side. Whilst, you know, from a readiness perspective, we had about 230 MW of turbines ready on the ground for commissioning, but we did only 70 so far because the balance, 160 MW, lies in the scope of our customers, which is out of our hand. You know, had that kicked in, there may have been certain delta revenue and cost, which may have pulled down the margin a bit.
But having said that, needless to say, still the margins would have been in the late teens or maybe around the 20% vicinity. So that's the answer to your first question. On the second one, you know, the mix, of course, is what it is between C&I and IPP, but in terms of our average selling price to both classes of customers, it is pretty similar. There is no visible differentiation in pricing across the customer classes.
Got it. And my second and last question is for S144, how many WTG sets have been delivered or installed so far? So if you could give your experience of how that particular turbine is operating in the field and any other experiences in terms of commissioning.
We commissioned close to about 100 MW as of now. So everything is in line or better than what's anticipated in terms of our design parameters. And in fact, we're also now going to the high wind season. So we're established for the time. We have not seen... Everything has been smooth and good, and better than what was expected in terms of the design power though.
... Okay, thank you, and wish you all the best. Thank you. Thank you.
The next question is from the line of Amit Binde from Morgan Stanley. Please go ahead.
Hello, sir. Hello?
Hi. Hi.
Hello. Yeah. So I had two questions. One, with your plan to change the timing of your merger, so is the qualification to NTPC getting affected because of that? And second thing that I wanted to ask on similar lines is, that you have made a framework agreement with CESC, so if you can give some details on that one, that's my first question. Or different?
On the NTPC, we did discuss last time. And we said that we qualify, and we participate in the bid, a large bid, and we're waiting for the results. And we will continue to participate in other public sectors as well. So we have no-
Right. So without this merger, de-merger procedure happening, still you are eligible for NTPC?
Yes.
Okay, great. And on the CESC framework?
CESC is the. This is a framework agreement which was announced by the CESC. As far as, as and when some of them get rectified into a definitive agreement, as per our policy, with confirmed advance, we will keep announcing.
Any indication on the size of the framework agreement that you can?
Any framework agreement is specific to company, so therefore let's leave it there. But as far as we are concerned, we have not considered that in our order book.
Right. Yeah.
It will be considered in our order book as and when each segment of the framework gets converted into a firm contract with anyone.
Right.
So therefore, it is not part of our 3.8 GW what order book we have announced today.
Got it, sir. So, and the other question that I had was, if you can help us understand how your deliveries would shape up, because now captive and IPPs are increasing more than the bids. So then would the delivery timelines be faster? And can we expect a ramp-up in the near, next two, three quarters?
Second question, I can't say, because that looks like a pattern.
Sure.
The deliveries would depend upon whether it is an IPP or it's C&I, anyone on this is with respect to the readiness of site. Like, so you remember last time also we discussed that the reason why, as a country, we are not able to move forward much quicker is the execution challenges on the ground.
Mm-hmm.
And as we mentioned to you some time back, in fact, our capacity, commission capacity, would have been 230 , not 70. So, but that balance 160 , we could not connect to the grid. When the line is pre-commissioned, everything is ready, either because the client's connectivity is not there or client BOP, in terms of that regular system, things are not ready.
Right.
If we add the current fleet of 770 of capacity, then capacity also would have been around 930, and our share would have been at 58%, which is what normally we can maintain.
Right.
So it all depends. It's nothing to do with the... Right? Like, for example, NTPC awards the BOP contract in advance. Okay? Then after a time gap, they award for the turbines, like what we participated now, for those projects, BOP is already awarded by them. So therefore, the expectation is that in that case, the preparation is much better. The supplies would be much quicker.
Right.
So it depends upon each quarter, what mix of projects are scheduled. Based on that, the tax situation happens. The supply is not an issue. Once again, I'm underlining, supply is not an issue, issue with the readiness of the projects.
Readiness of the projects. Right. So just, on this one, so your realization of revenue for the bit of, the installation part would still be left unrecognized, right? It. So that would get recognized when the installation happens for this 160 MW?
Yes, that's correct.
Right?
That's correct.
Right. And the last part that I want to understand is the penalty that was noticed like you had put out a press release 3-4 days ago of INR 20 million. So that one would we recognize that in our income statement in this year as a cost, or in this quarter? Or would you-
No.
be recognizing it after contesting?
No, no. We'll only recognize it only once, as in when it rectifies. You know, right now it is, you can say, at the, it's a contingent liability, but it is not rectified. We'll, of course, once we receive those notices, at our end, we will be, as a company, defending the notices, and only as and when it is paid or rectified, is when it will go through the P&L.
All right. Got it. So currently, no provisioning or anything would not be made for that INR 20 crore?
No, no.
Okay. Got it, sir. Those are my questions. Thank you.
Thank you.
Thank you. The next question is from the line of Rohit Bhairwani, Vijit Global Securities Private Limited. Please go ahead, sir.
Yeah, thank you for giving me the opportunity, and congratulations on a great set of numbers for Q1 FY 2025. Just wanted to understand the reason for decline in revenue for operation and maintenance. Quarterly, there's a decline of around INR 50 crores-INR 70 crores.
Yes. Hi, Rohit. So the reason, because in Q4 of FY 2024, where our revenue was a little over INR 500 crores on the O&M side, there were certain one-time billing on VAP and VAS sales, plus certain contract renewals that got delayed during the year, which was all booked at the time of Q4 before the financial year end. That caused a fillip for an increase in the Q4 revenue of O&M. Certainly, that is not a steady state, so you should not analyze Q4 FY 2024 revenue as steady state. What you see in Q1 FY 2025 and also other similar quarters is what you should take as analyzed revenue, other than any VAP, VAS sales that we do during the year.
Okay. Okay. And just wanted to understand the timeline between commissioning of a wind turbine and by when does the operation and maintenance of that coming into the picture? Let's say you have done 274 MW in this quarter, so around by when can we expect the O&M of this to start coming in?
There's a difference. I'll just make a small correction. We've done deliveries of 274 MW in this quarter, but what is commissioned is 70 MW. I will use 70 MW as a reference point. Let's say 70 MW has got commissioned in Q1 of FY25. Anywhere between two to three years is our warranty period that we give to our customers. Which means that Q1 FY 2027 or Q1 FY 2028 is when this 70 MW would start earning revenue from an O&M basis.
Okay. Okay. Thank you so much, and all the best for your upcoming quarters.
Thank you.
Thank you.
Thank you. The next question is from the line of Aashish Upganlawar in InvesQ. Please go ahead, sir.
Yes. So we've come a very long way in the last one and a half years in terms of the entire turnaround of the business. Congrats on that. So just to understand the addressable size that Suzlon can achieve, we have a target that the government has laid down for itself in terms of 10 gigawatts a year and private as it is going on. So for us from here, where do we see the best case for us? Because execution on the ground remains different from government side, plus the issues on the evacuation side. So just some idea on that will help us frame our thoughts on that, just Suzlon.
Let's talk about sector that would give you what Suzlon will do, because there's always a correlation between how much sector does and how much Suzlon.
Right.
This year, we are expecting anywhere between 5 MW to 500 MW is what country will do, compared to 3,250, what we did last financial year. Our expectation is that this year, in FY 2023, would go up to anywhere close to 6.5 GW-7 GW. Thereafter, from FY 2028 onwards, we expect it to be anywhere between 8 GW-9 GW. Why we are saying this? Also, the reason is that one is gradually we hope the hurdles on the ground will get removed, because more and more capable people are coming in, and then there are some actions being taken on the land. Also, the Government of India, as we mentioned last time, has now started acting on, removing the hurdles for wind.
In fact, just two weeks back, they issued the guidelines and revised guidelines and micro-siting, removing some of the hurdles. So if that is the rate, 5.5, then next year about 7, then following year, about 8-9 is what is the opportunity. Then, you know, you can always think that what should be our... Where would we be from that point of view, rather than me saying that how much we are going to do. And we always know that what is the correlation between what country does and what Suzlon does.
Sure.
I would like to take that as a guidance rather than, you know, giving you guidance on a company plan.
Correct. Correct. So what's the executable capacity now as we stand today? And, just to understand how much we will have to do in case these numbers on the overall macro of India come in FY 2028.
Come again?
So what's the current capacity in terms of how much we can deliver in case the demand side picks up, as you said, FY 2026, 2027. So what is the capacity right now?
Our supply capacity today is anywhere between 3.5-4 GW.
Okay.
We can look at per year, which will get further expanded, let's say in FY 2026 and FY 2027.
Okay, got it.
Please understand, I keep on clarifying this. When you talk about manufacturing capacity, manufacturing capacity is provided you are, your machines are constantly loaded.
Right. Right.
Meaning that month to month, there is a load of the paper. It cannot happen that 4 gw means that, you know, first quarter, nothing happens, and second quarter little, third quarter, nothing happens. Then you'll get constrained. Capacity, what is lost in a quarter, in a month, is lost.
You say 70%, better assumption to go with?
Sorry?
70% utilization would be a better assumption to go with, or we can, I mean, given the, seasonality issue and-
My guess is with respect to the offering, on the particular projects which are scheduled for delivery in that quarter.
Yeah. Yeah.
It could be 100%, and, you know, it could be as low as 50%-60%. It all depends. It would vary from quarter to quarter, depending upon which projects are scheduled to be delivered during that quarter. Some projects are well situated, like, for example, I said that if NTPC, within the, let's say one, there, there's an advanced preparation by NTPC, so therefore it's much more predictable for supply of Suzlon turbine. This, this will keep changing. I'm not trying to dodge your question, but you know, it all depends upon quarter to quarter. We need to keep-
I understand. Yeah. Yeah. Yes. Thank you, sir.
Thank you. The next question is from the line of Bharani, Avendus Spark. Please go ahead, sir.
Yeah. Good evening, sir. Am I audible?
Yeah. Yeah, you are.
Yeah. So, this guidance is given for the year of 5.5 GW of execution at the country level. Does it include C&I or is it only Discoms?
Total wind capacity connected to the grid.
Including C&I?
Yeah.
Okay.
Except for those, if at all there are any which are not connected to the grid, they are behind the meters.
Understood. Okay. So this is the total potential. And the second question is on the auctioning or awarding of projects. So we know government wants to achieve about 50 GW overall for the year and about 10 to 15 on wind. So where are we on that target in the first quarter? Meaning, how much has been auctioned or awarded?
Bidding is huge. I think we lost count of bidding. In fact, there is a huge amount of bidding, completed projects awarded, where, you know, they're now changing the bid, the one waiting for the PSA. PSA to be signed, so that they can move out. Even if you look at currently, as we speak, just in the month of June, the different awards, particularly about 3.7 GW awarded project, just in one month of June. And today there is about 7.5 GW of the bids submitted, another 13 GW of bids called for. Targeting about the bids awarded and pending for execution, which is close to 20 GW. Okay? And we already have another 4 gigawatts awarded in the month of June, another 20 GW bids either submitted or called for.
So, I don't think that in... This is all in addition to the C&I. And in fact, if you look at our order book, 2/3 is C&I, and one-third is the PPA. So, I don't think that there is any concern with respect to whether the government is coming up bidding or whether there is enough volume. What, as a country, we need to only concentrate on is how much can we commission each year. So, I don't think there's any issue with respect to the market availability or not. That is, at least for the next two years, at least two to three years, we really don't need to worry about whether there are opportunities in the market.
Okay, that's clear. My final question is clarifications in nature. So you mentioned about two seventy-four we delivered, but commission is around 70. So that means the revenue is recorded for the entire 270 , when the cost is recorded only for the 70. Is that how to understand that?
No, no, no. So the revenue is recorded for the entire 274, and, you know, COGS also is recorded for the 274 entirely. For the 70 MW commissioning, the corresponding revenue and costs are recorded. Whatever is not commissioned, we are yet to recognize costs or revenue associated with it. And also, please be clear that this 274 and 70 has no linkage. It's not that the 70 MW is what is out of this 274. Yeah. The turbine could have been supplied even couple of quarters back and commissioned now. So therefore, these two are independent of each other, and a quarter to quarter basis, we can't compare supply versus COD. So there's a time lag between supply and the commissioning.
Yeah, that is very clear. Thank you for answering and all the best.
Thank you. The next question is from the line of Nikhil Abhyankar, ICICI Securities. Please go ahead, sir.
Hello? Hello, am I audible?
Yeah, now you are audible. Yeah.
Right. Thanks. So thank you, and, congrats on a good set of numbers, sir. So sir, can you just elaborate on what exactly are the difficulties that we are facing in execution? And after that, I'll ask my follow-up on that.
No, it is not, when we talked about execution, it is nothing to do with Suzlon. I'm talking about as a sector. The reason why we are not able to go up to eight gigawatts, nine gigawatts, is, fundamentally there are two reasons I think you can say. One is the availability of the land and the pathways, and more importantly, continuous availability of pathways. You might have taken a pathway to take your turbine and everything, but there could be, after you've taken it, then again, there could be issues locally with people to do that. Because please understand that these projects were started, like, they are in an open area. They are not in a closed area like what you do a solar or you do a possibly a gas-based plant.
So that's the major concern today everybody is facing in terms of the land, and also because most projects got concentrated in Karnataka today. So therefore, there is more pressure there, and also the regulations in Karnataka for land acquisition is very cumbersome process. That's one state which still has, you know, you need to convert into non-agricultural, because many other states have changed over saying that, "Okay, if it is renewable, it's automatic conversion, you don't need to do that." So therefore, the whole process itself is too long in Karnataka. On top of it, everybody is in Karnataka, so the whole state is stressed out for that. That's one reason. Second reason why we are saying execution is in terms of connectivity. This is one reason where the substations, you know, there are timelines to come in.
Sometimes there's a delay, you know, in the substation coming up by a few months, so therefore that gets delayed. Third is that the BOP capability building, is capacity building is still happening in the country. Because no other OEM does end-to-end, except Suzlon. And even in our case, only one-third is EPC, the balance two-third is not EPC. That means we're not doing end-to-end, the third party BOP capacity building is still happening, so therefore they, they are seeing the delays in of, BOP, not at the speed at which is expected. So these are three major reasons why we are struggling for, capacity addition. But as I said some time back, there are different actions being taken in all these areas. We are gradually seeing.
In fact, our opinion is that there's significant amount of capacity which is ready for commissioning, even in Q1, not just ours of 160 in total, which would come quickly onto the grid in Q2.
All right. And so, just a follow-up on that: So how does the payment cycle work for all these orders? Is the payment done after a certain period of the supply or after the installation of the turbines?
So there are various milestones that are defined in our agreement, right from advance at the time of execution to you know dispatch of various components of the turbine and you know the turbine components reaching upon site. So based on the various milestones defined in the agreement we receive a chunk of the payment. I mean I don't want to say the you know percentage in terms of payment that is received till turbine reaches site but fair to assume that a large chunk of the payment is received by the company upon co-commissioning or erection of the turbine.
Also, please understand our supply contract is different from installation contract. These two are independent contracts.
Right.
So in supply contract, we have independent payment terms, but there could be some payments linked to the commissioning, when commissioning happens, even if that is a supply contract. So supply contract runs independent of installation. That's a separate contract. And in fact, if we have an EPC, there again, BOP contract is independent.
Understood.
So if you're doing land, land contract is independent. These all contracts are independent. They don't talk to each other in terms of entries or anything, payment terms.
Okay. And, just a final question. A global peer is looking to sell its India business, so, will we be looking to acquire?
First, first part of it, are we looking at it? We are looking at it. Like everybody is looking, we are looking at it. Are we looking at to acquire? I don't think so. That's, that's, let's see that what happens.
Okay, sure.
There is no definitive answer of yes or no for that.
Understood, sir. Thank you, and all the very best.
Thank you so much. The next question is from the line of Dhaval Doshi, Dymon Asia. Please go ahead, sir.
Congratulations on a good set of numbers. I'm sorry if I would have missed this point, but can you just touch upon what the current pipeline is looking like, in terms of the bids that you've submitted? Secondly, what kind of inflow numbers do we expect to go through as far as this year is concerned? I know you won't give me an exact guidance on this, but some color in terms of how do you see things for this year?
So first thing is we don't submit any bids. We're talking about the government-run bids. We don't participate in that bidding. There is IPPs which run the bids, and then we... IPPs come to us for equipment supply contract. Only bids we participate is the public sector for selecting the equipment suppliers, they run a bid, like NTPC, which was the question previously. That's where earlier we were not participating because we were not able to meet the financial criteria. Now, we meet that, and we started participating in the bids for NTPC and other public sectors. That's the only bid we participate, where there is a bid for equipment supply. Only private sector doesn't run a bid, they just invite you to discuss.
So if I have to rephrase my question, what are the kind of tie-ups or that we could have for which either the IPP or Suzlon itself is under various bidding process, and we could expect some kind of an outcome over this?
Nobody does. Yeah, nobody does. That, that, that arena has gone where people used to have a pre-bid tie-up. In the initial stages of SECI-1 , SECI-2 , SECI-3 , maybe up to five, six people use a pre-bid tie-up. But now every IPP is experienced, they know the pricing, so they, they will talk to you at the most for some budgetary quotes, but they take their own judgment on what would be the EPC related bid price and go ahead and bid. If they win the bid, then they'll come and talk to us, saying that, "Can you please supply?" and negotiate a contract. There is no pre-bid arrangement per se in anymore out there. It used to be there earlier. We did have many pre-bid systems, but in the current system, it doesn't exist. So people bid on their own without any pre-bid tie-up.
Okay. Some sense on what could be the order inflow for the year and the timeframe over which the existing order book needs to be executed?
What is going to come, obviously, you will know whenever it comes and we keep announcing it. So therefore, you would see that there is a large pipeline, like Himanshu mentioned it in opening comments. There is a large pipeline which is under discussion on the table, but till it is closed, contract signed, and we receive confirmed advance, then obviously we don't take that as an order. So there is no point in talking about how much is under discussion. There is substantial amount which is under discussion.
No, so what I was referring to was the kind of order inflow that we are budgeting or we are targeting, some sense of numbers, some growth numbers, and the timeframe over which the existing 3.8 gigawatt needs to be executed. Two separate questions.
3.8 GW? The 3.8 GW is between this year and the next year, most of it. Some part of it would be early FY 2027.
and on the order info, so any targets that you would want to give or?
No. No guidance on that, please.
Thank you. Thank you so much.
Thank you so much.
But again, as I said, that just to reconfirm, orders are not, need not be monetized currently. Because there are enough orders, it's a question of how much we want to pick up, and that's the reason in the opening comments, we also mentioned that we are looking at orders where we think there's a confirmed offtake would be there in a given definitive timeline. Our offtake will always be there, but is there a definitive timeline, and what is the quality of that order? That's important for us now.
Got you. Sir, can I squeeze in one more question, if it's okay?
Yeah, go ahead.
Yeah. You mentioned the executable capacity that we have is close to 3.5 GW-4 GW, right? Was that number correct?
Manufacturing capacity.
Manufacturing capacity.
Yeah, of course, manufacturing capacity.
And we're looking at expanding this, probably in FY 2026?
Yes.
What would capacity be, sir, the expansion?
Actually, we are looking at ... Obviously, that would, again, you know, you would indirectly draw how much is we are targeting the others. So therefore, let's leave it there. We are expanding it.
Mm-hmm.
So once the expansion is completed, we'll let you know what capacity we are for FY 2026.
Okay. Thank you.
Thank you so much, Mr. Doshi. The next question is from the line of Dhruv Muchhal, HDFC AMC. Please go ahead, sir.
Yeah, sir, thank you. So just one clarification, you mentioned that the developers no longer do pre-bid tie-ups. So does the assessment of what PLF they will generate, what kind of wind profile, that's all independent by them, and then they select the equipment which they have to? Is that how it works?
See, what happens is that people are now, some of them are developing their own sites, okay? Some IPPs. Obviously, they know what is the PLF likely to be there based on the wind data, if they have it. There are one set of IPPs are like that. Second set of IPPs, they don't finalize with you, but they sit with you or maybe they sit with a couple of more suppliers and then ask a budgetary quote, saying that, "We have a site, what would be the budgetary quote?" But not finalize firm up the order.
Mm-hmm.
So they'll take some sort of a cue from the market test, and then go ahead and do it.
Okay. Got it. Got it. Understood.
So because most of the people today are, you know, doing multiple projects, they're doing in the sector, so therefore, experience for them is much different today.
All right. Sure. And the second question was on the contribution margins. So, probably a bit early, we have started delivering the, new turbines, but do we still stick to our guidance? I think the numbers are relatively better than what we were guiding. So but do we still stick to the guidance of, I think, 90 lakhs per megawatt? Is that, does that remain or, do we see an upside to that number based on the run rates that we are achieving and based on the actual deliveries now?
So, you know, we're maintaining that, you know, our average selling price is, you know, close to about six crores per megawatt. It, of course, differs quarter to quarter. And based on our margins, you know, which we've said is, you know, mid to late teens, you know, whether that's ninety lakhs or close to a crore would be the contribution margin. So, you know, we'd sort of end up doing, of course, 20% margins on a ASP of about six crores, you know, that's about 1.2 crores.
Yeah.
But, you know, there may be a payoff where, you know, we may be a little shy of INR 6 crores, but we would have improved margins. So therefore, I don't want to comment on INR 90 lakhs or INR 1 crore, whatever that number is, but that's where we are.
Okay. So we, ideally, we should look at on a percentage basis. Is that the right way to do, think of it, or should it be absolute in the way it works?
You should look at it as a percentage basis of our, you know, overall revenue.
Okay. Okay. And say, for example, if I look at the revenues right now, for the quarter, if I just do a division by the deliveries, it's about INR 5.5 crores. I understand it will not, never be the, installations and deliveries will never be exact, but, assuming the installations are also done all through, I mean, equally, what the realization number would have been? I'm just trying to understand. You mentioned the contribution margin would have been 20%, but what the realization would have been?
No, so as I said, 20% was just math that I walked you through. I'm not saying that it would have been 20%.
Around that.
Around, yeah.
Yeah.
Yeah, around that. So, and in terms of calculations, of course, if you see our average selling price over the quarters, it's been a little shy of INR 6 crore. So anywhere between INR 5.8 crore-INR 6 crore is been the average, which is what is about INR 5, close to INR 5.5 crore in Q1 this year. So of course, had the commissioning happen to a larger extent, you know, for the 160 short form, we would have got close to the INR 5.8 crore-INR 6 crore average.
Got it. Got it. And this last question is, what are the install deliveries that we have done cumulatively? What are the installation spending for our deliveries, for our ... I mean, one, you mentioned that system has a lot of this gap, but how much is this for us?
Our turbines, including whatever the latest deliveries, what we have done, that would be somewhere anywhere close to about 800 megawatts, is what is pending for commission.
So about, yeah, close to seven hundred megawatts. So 7 20 MW , to be precise, is what is pending, uncommissioned, cumulative out of all the deliveries.
Including the deliveries this quarter.
Yeah.
Yeah. So 700 MW , which have been delivered to the site, but pending for just the grid connection and then related-
No, no, no, no, no, no, no. We didn't say that.
... 700 is delivered. Some of them is still, these 270 which have gone, many of them may not even been erected. So there, there are different stages.
Oh, okay. Okay.
What we talked about was only the 230 MW out of this, which we erected and pre-commissioned all the things. Only 70 MW has been done. So in the 770, 160 MW s what you can actually count as the turbines, which are ready for commissioning, but could not be commissioned because of the constraints.
Got it. Makes sense. Got it. Thanks. Thanks so much for your time.
Thank you. The next question is from the line of Vivek Sureka, individual investor. Please go ahead.
Hi. Thanks for this opportunity. I'm audible?
Hi, yeah. Please go ahead.
Yeah. So sir, just one question, on the OMS side, are there any plans to list this separately and capitalize on the current scenario?
No, there are no such plans.
Okay. Thank you.
Thank you. The next question is from the line of Yash, Stallion Asset. Please go ahead, sir.
Hi, sir. Thanks for the opportunity. So my question is that I think you've made 8% EBIT margins on your WTG segment this quarter. Do you think that you have scope for improving the margins further or this is a sustainable level?
So, difficult one to say, but yes, I mean, you know, we are seeing that the economies of scale and the volume play is playing out. So, you know, whatever historical margins that we've seen, you know, thin margins that we've seen, is hopefully a thing of the past. So, you know, our sense is that, you know, the EBIT margins, close to this region should be able to play out over the next few quarters.
Sure, and I just wanted to sort of confirm this again so you're targeting five to five point five gigawatt order book this year. Is that what I heard, right? Sorry, I was just joined late in the call.
We said that country, as a country, we will be adding 5 GW-5.5 GW of wind capacity this year, as a country.
Okay. Okay. And you'll maintain your market share of over 30%, or is there a scope to increase that further?
If I say that, I'll be giving the guidance anyway. Let's hope so.
Okay. Okay. Thank you.
Thank you so much, Mr. Yash. The next question is from the line of Neha Menon, NVS Brokerage Private Limited. Please go ahead, ma'am.
Good evening, sir. Congratulations on your performance.
Thank you.
Just wanted to get some... Hello?
Yeah. Please go ahead.
Yeah, just wanted to get some clarity again on. So regardless of the order book that we have each year, what is our annual installation target or you may say, average installation capacity?
It's not an installation capacity, which will vary on various factors outside of this. What we talk about is that, what is our manufacturing capacity, which is what is our supply capacity?
Okay.
This is what we mentioned. Currently, we can supply anywhere between 3.5 to 4 gigawatts.
Okay. Okay.
And which is, which would expand further.
Okay. Okay, sir. Yeah. Thank you.
Thank you.
Thank you, Ms. Manpuria. The next question is from the line of Prateek Giri, Shubh Labh Research. Please go ahead, sir.
Hi. Am I audible?
Yeah. Yeah. Please go ahead.
Thank you. So, congratulations on good set of numbers. I have one small query. Recently, we read about NITI Aayog, you know, trying to indigenize the wind energy equipment which is there. So, I was just trying to understand, currently, in the entire bill of material, how much of that BOM is actually import dependent?
For us, it's not applicable, because we are much above the numbers what they're talking about. Our import, our domestic component is much, much higher than what they're talking about. So this, this is basically meant for other players. That's a non-issue for Suzlon.
Understood, sir. Very helpful. Thank you, sir. That's it from my side.
Thank you, Mr. Giri. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Preet Nagersheth, Wealth Finvisor. Please go ahead, sir.
Yes. Hi, so the question, sir, I wanted to better understand is that you were saying that there are huge C&I pipeline, and you mentioned something between 15 GW to 20 GW of that pipeline. So can you tell me what is the driving factor this for which is leading to such a demand?
So the 15 GW-20 GW , what I mentioned was the bid invited by the government agency.
Okay.
So that is what the number is that I talked about. So, obviously, if you look at on the wind capacity side, we currently are at 46 GW. So the requirement to meet on the least cost option and demand projections for 2030, and the least cost option is wind has to reach 100 GW. So there is a 54 GW of capacity addition has to happen in the six years period. So therefore, to meet is what government is actually planning everything. Because if you want to meet by 2030, that much of it, most of it should be awarded, let's say, that is FY 2023. So FY 2028, we need to that complete all the awards. I think, our expectation is that awards will be completed even much before that.
So, but then, depending upon the execution, like last time we mentioned, it's not 100. Our expectation is we will see somewhere 90GW-95 GW definitely by 2030.
Okay. So, sir, but the C&I component is also very strong. So what is driving the C&I?
C&I component, the C&I component is, the simple reason C&I is raising is that most of these large industries want to move away from fossil fuel, if they already have a fossil fuel captive capacity, or they are right now driving the grid into a captive capacity. People are switching over from fossil to renewables because one is a tariff arbitrage compared to the fossil, because we know that any one of them, if they have a coal-based capacity, that coal is very expensive for captive plant. They need to buy the coal in the auction. They don't get-
Right.
The linkage. So therefore, arbitrage is one, and number two is that if you need to export your product outside of India, so this is now becoming more and more restricted, so that means product has to be green. So mainly the tariff arbitrage, but otherwise also, you know, their own targets for carbon footprint. That's where. In fact, if you see that, not just here, everywhere it's happening. Even if you look at US, the largest capacities to sign today are by people at Google, Meta, and, you know, Amazon, and type of people. So gigawatts and gigawatts of capacities are PPAs are signing there to buy. So it's a global phenomenon, that everybody is working on this. And the tariff arbitrage is really helping.
Thank you. And sir, how do you see the impact of pumped storage or hydrogen projects or battery-enabled storage solutions? How does that help out for wind products, if you can share with me?
See, the pumped storage, it's nothing to do with the hydrogen. Hydrogen can also help, but also what we are now moving is that from individual solar and wind, so we move to the hybrid, and from the hybrid, now we are moving to round the clock, what is called the firm and dispatchable renewable energy. That means, instead of the intermittent power supply, the renewable energy, if you want to compete and replace fossil fuel, should also be able to generate on demand the way the fossil fuel generates.
Okay.
So therefore, in the fossil fuel, what happens is that you, you see your capacity on a 15-minute basis, and you respond to the demand on a 15-minute block basis. So now, the similar thing is what the beginning is happening in fossil, in renewables, where you need wind, you need solar, plus you need the storage. Current options for storage is could be either the battery or the pumped storage, or could be another way. But having said that, this because of, the storage system, because we also need a stable power supply for hydrogen, it also helps the hydrogen sector. But it's more of a pumped storage, as the storage is basically to make renewable into a, you know, not an intermittent power supplier, but supplier on, on demand, 24 by seven.
I see, sir. So you've seen that all these initiatives are basically enablers for the wind sector as well?
Sorry?
Would you say that all these initiatives and technologies are also enabling the demand in the wind sector?
Yeah, yeah. See, if today a load following FDRE bid, okay? So when I say load following is that the, your client, it's a utility company or if it is a C&I company, can give you what is the load profile on a fifteen-minute block basis for eight, seven, six, zero hours in a year, and you're supposed to set up capacity. If your PPA is for two hundred megawatts to supply-
Okay.
So on this basis, your wind capacity potential requirement would be anywhere between 2.1-2.4 times. So that's the extent of wind capacity, what you need, to meet, to make the power on FDRE basis. So if it is, if it is only the peak, not the load following type of FDRE bids, then it would be anywhere between 1.4-1.5 times. So today, what is happening, why wind has to grow, is that every single project, what is being executed or what is being bid out, are a combined project of wind, solar, or wind, solar, and storage. So therefore, the project can only get commissioned provided wind also gets commissioned, because it's an integral part of the project.
Right.
Therefore, today we reach a stage where how much wind capacity is commissioned would decide the total RE capacity getting commissioned. That's why wind is becoming critical. That's the reason you see more and more attention of government towards removing the bottlenecks for wind sector.
Wonderful. Thank you so much, sir, for explaining, and wishing you all the best.
Thank you.
Thank you, sir. The next question is from the line of Deepesh, Deepesh Kashyap from Invesco MF. Please go ahead, sir.
Yeah, hi, team. Thanks for the opportunity. So I'm looking at slide 22. I just want to understand what causes this volatility in the contribution margins. Is it the mix of O&M and WTG?
Yes, Deepesh, so, you know, as the share of business of the WTG goes up in the consolidated pie, the contribution margin on a consolidated basis will of course, you know, keep reducing. Because as you know, the contribution margin in O&M is at almost about, you know, 65%-66%, whereas in WTG for this quarter, it has been about close to 23%. So, in the overall revenue pie, the more the WTG business, the consolidated contribution margin would keep reducing.
...Understood. And the fixed expenses that are below this, right, employee and other expenses, I see that other expenses are constant year- on- year. So how do you expect it, them to grow? Like, will it be fair to take it like 10, 15% increase year- on- year?
Yeah, I think that is, that's a fair estimate. You know, about 10% increase, because, of course, correction in sort of operating costs plus, certain employee costs. In addition to that, you know, we are also incurring certain one-time operating expenses, this year, and, you know, getting our systems and processes, right by engaging various consultants. So that may attract, you know, some small CapEx and one-time, P&L costs as well, which may look a little, the fixed cost may look a little inflated for this year. But I think those are one-time costs for, a long-term benefit of the organization, although they may not move the needle significantly. But your assessment is correct.
About 10%-15% increase on the fixed cost is what you should assume.
Understood. Secondly, sir, your current EPC mix is around 33 odd %. I think, if I remember it correctly. How do you expect it to grow with your order book that is in the pipeline?
Yeah. It's actually growing. We've been at around 23%-24%. Now, it has come to 30%. As our development, land development, what we talked about earlier, in advanced land development, as that keeps increasing so that our EPC percentage should increase.
How should we think about the working capital then? Because I think, the working capital days have been a little stickier. They have not been coming down. As the EPC contribution increases, do you expect it to worsen further, or how do you, how should we think about it, sir?
So yeah, while these two are not directly related, Deepesh, but, you know, working capital is something that we said we are working on constantly. And, you know, you may not see a significant improvement quarter over quarter, as in one or two quarters, but, you know, directionally, we are striving towards improving the working capital mix. As I've always maintained, you know, we don't want to give a target and, you know, as to what the NWC will be and by when, but, rest assured, we're working on optimizing the working capital mix for the company.
Got it, sir. Thank you, and all the best.
Thank you.
Thank you so much, Mr. Kashyap. The next question is from the line of Manoj, individual investor. Please go ahead, sir.
Congratulations for the good set of numbers. You know, I have a couple of questions. One is regarding the exit of Siemens Gamesa. So how it impacts our market share, you know, how much, you know, we can tentatively know it might increase?
Sorry, yeah, so your voice is muffled, Manoj. Very, very difficult to hear you.
Is it better now?
No, we cannot hear you.
Is it still? Yeah, now it's better. So let's try one time. Yeah, so the first question, you know, regarding the exit of Siemens Gamesa in India. Okay. So how much market share, you know, will it increase in case of Suzlon? And the other one is, you know, regarding the offshore business, right? You know, we have a government that announced a viability gap funding regarding that offshore business. So can you throw some light on the offshore development project, you know, how we're going to develop that in the future?
Yes, Siemens Gamesa will not have any impact on our market share because we were never under pressure, because Gamesa never talks about market share. So therefore, I don't think any anything is going to happen because of their exit. As far as the turbine supplies are concerned, okay? I'm not talking about the service business. I'm only talking about the supply piece. As far as the offshore is concerned, yes, there is a thousand megawatt viability gap funding, but this is these projects bidding, and ultimately, actual situation is four to five years away. So therefore, right now, for the immediate future of next four, five years, the offshore is not going to move the needle for Suzlon.
So that's the future, right? I can assume, right?
Yeah. No, the future, it all depends. Like we explained earlier, the offshore in India is different from offshore outside India. In case of India, the generation gap between onshore to offshore is not significantly different compared to what is in Europe and other places. Generation gap not being very high, means scale of not being much different, but the cost being very high. So therefore, cost of generation today, as we see today in the offshore, is very high, so anywhere between INR 7 to INR 8. So therefore, that sort of levels at this stage, I don't think you could actually go and sell the power unless there's a viability gap funding. Viability gap funding can come only for initial set of projects to encourage offshore to happen.
So, offshore to become a significant potential for us as any player is still far away. So while we are prepared, I'm not, we're not saying that we will not get prepared, and we're preparing, because we do have an experience of offshore as part of when REpower was part of us. In fact, they are including our current Chief Technology Officer, everybody is well experienced in offshore. We are prepared for that, but, for a guidance purpose, I don't think it's going to move the needle much in the near future.
Thank you. Thank you, sir. Thank you so much for the information. Thank you.
Thank you, Manoj. The next question is from Sumukh Jamakhandi, which will be the last question for the day. Please go ahead.
Hi, good evening, everyone. Thanks for the opportunity. I've been a long-term investor, retail investor for Suzlon. It's good to see the comeback from Suzlon from pre-COVID era to post-COVID era.
... having said that, on a slightly negative tone, please excuse me if it's a repetitive question. Suzlon has been receiving a lot of penalty from the customs, et cetera. So what has been done in this regard to prevent this from happening? I understand they will be appealed in courts. And just a follow-up on that, has the appointment of the legal firm, Khaitan, been finalized? Thanks a lot.
So hi, let me take both the questions. So far as penalties are concerned, you know, of course, a lot of these relate to the past. You know, so at our end, we are now working internally to make sure that all our systems are optimized, and it's system driven so that there is no room for any human error, and such penalties are at least minimized, if not totally eliminated. So that is the endeavor where we are working on is installing all the relevant software, ERP tools, and sophisticated tools that are available on whether it's GST, indirect, any indirect taxes for that matter.
Having said that, I just want to add is that it is not something that suddenly increased.
Yeah.
What you're seeing is a new regulation where anything happens, you're supposed to inform the stock exchange, so therefore, that's why you're seeing this for every single company. It is not something suddenly we start getting penalties, in any company, for that matter of fact. It's, it's a regulation today. If you get a notice, you need to inform.
Of course, that is one. On the Khaitan, you know, the Khaitan was appointed, and, as we informed the stock exchanges, at the end of our board meeting, the report was presented by Khaitan to our board, and, they have found no non-compliances whatsoever in the company. There are certain suggestions that Khaitan has made for, you know, recommendations, I would say, for improvement and best practices adoption, which the company shall consider for implementation in a phased manner over the next few quarters. The report has been absolutely clear without any red flags or any non-compliances being reported in the report, and the same has been presented to the audit committee on board two days back.
The same has also been disclosed by us to the exchanges.
Thanks a lot. Does that include, grievances from the independent director as well, if I may ask, please?
Just specific to that only.
Ah, okay. Sure. Yeah, that's all from me. Thanks a lot.
Thank you so much. Ladies and gentlemen, I would now like to hand the conference over to the management for the closing comments.
Thanks, everyone, for joining this, and we would continue to keep in touch with you. And even post this conference, if there are any further questions, any further information required, my colleagues from IR are always available, and we are also always available for any specific information you could need. Thank you so much for joining us.
Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.