Ladies and gentlemen, good day, and welcome to the Q2 FY24 earnings conference call of Suzlon Energy Limited, 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 company's 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 participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwini Sharma from ICICI Securities. Thank you, and over to you, sir.
Good evening, everyone. On behalf of ICICI Securities, we welcome you to the Q2 FY24 earnings call of Suzlon Energy Limited. Today we have with us the top management of the company being represented by Mr. J.P. Chalasani, Group CEO, and Mr. Himanshu Mody, Group CFO. I now hand over the call to the management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Ashwini. J.P. Chalasani here. Good evening, and thank you for joining us on Q2 FY 2024 earnings call. I hope you had an opportunity to review our results and investor presentation. I will first start sharing with you an overview of the industry, and then we'll walk you through our Q2 performance. We will then take your questions. With good policy initiatives from the government, the wind energy sector has got much needed impetus. There are policies to center effective in driving India's green transition, like the concrete guidelines and policies of RPO obligations under Energy Conservation Act. With specific RPO for wind turbines commission post 1 April ,2024, and the policy on policy and implementation of pooling tariff mechanism, which will have been going a significant way of accelerating the wind growth.
The 2030 GOI target of 500 GW of non-fossil fuel-based capacity includes a healthy mix of wind and solar capacity. The idea is to have both solar and wind coexist and not compete with each other. This helps in diversity of generation sources and is also healthy from the perspective of grid health. The fact that wind is available during the late evening and night, when the power demand in India peaks, helps balance the power generation profile and also supports the grid. Initiatives like discontinuation of reverse bidding for wind will help in growth of wind sector. The good part is that under the new bidding, the wind capacity will come up in all eight windy states, significantly opening up the availability of land and the right infrastructure.
The procedure for determination of uniform RE tariff is also announced, which as I mentioned earlier, recently, which will help in reducing the average cost of procurement of power to filling of tariff. The leading renewable energy states of the country, like Gujarat, Maharashtra, Rajasthan, and Telangana, have also introduced the proactive value policies to further their state energy transition plans. They expect even others, other windy states to follow the same. We have an order book of 1,613 MW as of 30 September 2023. This is a well-diversified and healthy order book. In addition to this, we also have a very strong order pipeline, and recently we announced an order from Juniper of 50.4 MW. Our priority going forward is to pursue quality orders with higher value and better margins.
The process for listing for three MW supply has been completed from our side, and we expect this to be listed as early as next week. We have started the commercial supply for three MW turbines. We also installed the first prototype of this turbine, 160 meters, actually the second proto actually, but first one with 160 meters of height in the lab, which will further reduce our LCOE. Our focus for H2 remains executing and building our order book. Our wind business continues to do well with 14.3 GW capacity in India. The growth of wind sector will also help SE Forge as a major revenue contributor supplier of wind companies. With strong fundamentals and solar and sectoral tailwind, Suzlon is now well equipped to leverage the market opportunity arising from the energy transition.
With this, now I will ask Himanshu to take you through the financial performance before we open up for questions. Thank you.
Thank you, J.P., sir, and good evening to you. I will be using slide numbers 18-24 of our investor presentation as a reference point during this discussion. Our presentation has been uploaded on the website and also sent to the stock exchanges. For the Q2 FY 2024, we've done deliveries of 132 MW, a total of 267 MW in the first half of this financial year. The company has also posted a very consistent and robust performance across all business segments that improved KPIs in the H1 of FY 2024 on a year-on-year basis. Q2 FY 2024 has seen us register consistent improvement in all our key parameters.
More importantly, our balance sheet has now can become even more stronger, and the fundamentals are strengthening due to the bottom as a result of a strong bottom line. We're pleased to report that the company has ended 30 September 2023 , with a strong consolidated net worth of INR 3,409 crore. Post the QIP, there is no residual debt in the company, except a nominal debt of INR 1,520 crore in one of the subsidiaries of the company, which is SE Forge. This leaves the company with a net debt of about close to INR 600 crore, meaning a gross cash balance of about INR 720 crore of the new company.
The company has been able to turn around this balance sheet significantly from March 2020, at which point our debt was overall INR 13,000 crore to a net debt of INR 600 crore today. Pursuant to the debt reduction, net cash, sorry. Pursuant to debt reduction, we have achieved a substantial reduction of 61% in our finance cost in Q2 FY24 of INR 36 crore, vis-à-vis Q2 FY23 of INR 92 crore. The full benefits of debt reduction in terms of finance costs will be visible from the next quarter, which is Q3 FY24, as the QIP issue and debt concluded in August, through which we were able to reduce our debt. Our consolidated PAT before exceptional items from Q2 stood at INR 136 crore and for H1 stood at INR 230 crore.
This is, of course, against Q2 FY 2023 PAT of INR 53 crore. So the economy and the industry is on a very strong footing, and the sectoral tailwinds that we're facing are fairly strong, which puts us to now with a very strong balance sheet and performance parameters to, well capture the market opportunity. With that, I'd like to conclude my presentation, and we can open the floor for any Q&A that the callers may have. Thank you.
Thank you so much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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 is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead.
Thank you, sir. Thanks for the opportunity and congrats on a good set of numbers. In H1, we have executed somewhere around 270 MW, and we have to- but still we are below the H1 FY 2023 levels. Are we in a good position to give a guidance, as per what our execution will be in FY 2024?
I think it's our guidance always remain the same, is that the H1 to H2 is always a different market for us and the wind sector as a whole. Normally, it's expected that it will generate close to double of what is in H1. Even if you look at as a country, we did about 1.5 GW in the H1, and then now we're all talking about doing about 4.5-5 GW. Obviously, that it is double 3 GW in H2. That's when we reach 4.5 GW in India. Normally, that's the thumb rule. I'm not giving the guidance, but this is what normally what has been used.
Okay. In Q2, we reported an EBIT loss from the WTG segment. So, what any specific reason for?
Sorry, can you come again? Which segment?
The WTG segment re-reported EBIT loss in Q2 of around INR 7 crore.
So it is in the segmental reporting is largely, of course, due to the depreciation, all of it sits in the WTG segment. And as you know, O&M business and CCA would be live on the depreciation now. So it's largely as a result of the depreciation, most of the INR 50 crores, which will be WTG segment.
But in the last quarter, we had made a profit, so, I was from that point of view, I was asking. Last quarter was around INR 5 crore.
Yeah, if you look at the last quarter, it is, you know, the WTG segment would have been in the ballpark. Within this quarter is about INR 30 crore. Q1 last time in the FY 2024, it would have been about INR 35 crore. So there's not marked a difference. So the similar volumes, EBITDA number is broadly the same for the WTG segment.
Okay. And sir, any views on the offshore tender that is expected in Q4? How are we placed to participate in this opportunity?
Let's see, offshore, there is, as you know, that they showed intention to come up with a tender that's in which came in. As you know, that they're talking about three models of bidding. One is the, they say that they will build about 500 MW in Tamil Nadu, 500 in Gujarat based on VGF. Then the model B, they're talking about is that they will ask for the big rights for the area based on the bidding, and then they will be given X amount of time to go out and develop, but without any offtake guarantee. So, and the third model is that you can go and develop your own, seabed, and then they will do a bidding, and you have a right of first refusal, almost like a Swiss balance.
Right now they are talking about the model B, when it comes to seabed. We are getting prepared ourselves.
... the form for participation. See, as you know, that whenever the bidding comes, we don't participate ourselves directly.
Mm-hmm.
We actually have a pre-bid tie-up with somebody who will actually participate.
Right.
The same work we will do, but because we are not the bidders for this, but we will, we will be working with people who are bidding for the project, for an equipment supply in the project, which we are working on.
Okay, sure. Thank you. I will get back in the queue. Thank you.
Thank you so much. The next question is from the line of VA from Niveshaay Investment Advisors. Please go ahead.
Thank you for the opportunity, sir. I just wanted to get the clarity on the industry, the usual industry perspective, which we have. That is a 30-70 distribution between H1 and H2. So I just wanted to ask, are you in line with the performance in that particular metric?
This again leads to sort of the, what you call, the guidance, but as I said sometime back, you know, H1 and H2 is usually between 1/3 and 2/3 versus 60/40 or 70/30, whatever number is taken, which is in the time and obviously we are part of the sector and our performance also would be in the line.
Also, for the 3-MW turbine, are the realizations per MW or the EBITDA margins per MW slightly higher than the 2-MW series, or how are we placed there?
We don't give a model-wise guidance on what's happening, because it's, it's a, of overall portfolio what we've done. We... Because it, it, we don't fix that way. It depends upon who is the customer and whatever the contract we take, which is the equipment supply or is it a clean supply or composite or the EPC. There are number of other factors to report. It's not specific to saying that this is a model, this is what will take.
So the realization, like, I'm talking just about the supply and realization per MW remains the same or how is it different from the 2 MW series?
Yeah, utilization it will remain the same.
Okay. And, one more thing. Yeah, sorry.
For the time being, because as we keep moving ahead, the cost load happens and things will be different. But initially, yes, we can get to see.
Sure. On the EPC, non-EPC side, what we, in our order book, we currently have 47%-53% kind of a mix. What was the number before, and how are we looking to go ahead in the future?
See, this is also a sector issue. What's happening in the sector, if you look at it, is that the EPC players are completely vanished in the scene, except us. Okay?
Mm.
The largest people who talk about, they just only supply the components, not even the full supply. So there are supplies getting supplied, but the corresponding capacity to build the BOP to the basic to the commissioning is lacking today in the country. In our view, that as we also look at in future, we see a significant risk of supply lying on the ground or not getting commissioned. So because of this, the also the people earlier who worked with us and based on equipment supply, are coming back to us and asking for EPC role. So that's why we are seeing now the 33%, 37% what you see is an increase compared to what it was a year.
Earlier when I say is that last year, don't take it as a 17 and before that time it used to be almost full EPC. Now the more and more players are coming back and asking us to provide an EPC services. So we expect that, that segment to keep growing as we get more and more orders.
Correct. Understood.
As a consumer sector as a whole, we, because today we have more suppliers and less number of people who can do a, you know, bridge the gap between the supply to commission.
Correct. Thanks a lot for the answers. All the best for the future.
Thank you.
Thank you so much. Participants who wish to ask questions may please press star one at this time. The next question is from the line of Raj Rishi from DCP India. Please go ahead.
Yeah, hi. Can you hear me?
Yeah, we can. Please go ahead.
I just want to find out what is the possibility of Suzlon maintaining its market share in a much bigger market? Like whatever market share you have presently, because others are also going to take part, right? And supposedly a lot of countries have overcapacity also. So can you throw some light on this?
Yeah, this, first of all, this overcapacity is sort of a myth. Okay? So what's the actual capacity? What is the manufacturing capacity? What is the assembling capacity is completely different. So I'm not getting into the details of that. As far as the market share for us is concerned, we define a different way. What is the market share? We say that if our, my capability, our capability to deliver is X, whatever is the market, we should be in a position to deliver X. Take an example that the I can deliver 2 GW. So when you remember, I'm giving you an example, I can deliver 2 GW. So the market is 5 GW, you know, and my market share is different. And if the market is 7 GW, my market share is different.
Instead of looking at the market share, what we are concentrating is on what is our capability, and enhance our capability to deliver, and irrespective of whatever the market can be complete, and then deliver to our full capacity. I think that's how we deal with as in the market share.
Okay.
Because if I do 2 GW, if the market does only 4 GW, then it takes a 50% market share. But then if the market does 8 GW, then it becomes a 20% market share... but I'm still going to get over, okay? So therefore, I think, market share varies from the point of view of the capacity overall, but we should be able to deliver to our full capacity. We should get orders and then we deliver that. That is what is more important for us.
Okay. And one of the global majors was Siemens Gamesa having some issues. So is that expected to benefit Suzlon because one competitor being slightly out of the picture or something?
I see, I don't think that today's in the market, there is enough play for everybody to do that. As I said sometime back, if I have a capacity, whatever is there today, we can actually get the orders. I don't see in the next, at least for the next 2 to 3 years, guaranteed for 2 years, maybe 2025, 2026, and also again, before 2027. Whatever the capacity can go and get the orders, competition is not an issue. But what is important for us is to learn from what the issues they are facing and see that, you know, learn from them and then doesn't get repeated for us. That's what is more important than looking at, somebody, if there are problems, so they take advantage today.
That's not the way we're looking at it. We're looking from the angle of what happened there and how do we ensure that it doesn't happen to us.
Okay. Okay. Okay, thanks a lot.
Thank you so much. The next question is from the line of CA Kanwaljeet Singh from Balaji Investments. Please go ahead.
Good evening, and congratulations on a good set of numbers. I have two questions. First, whether Suzlon is exploring any opportunity in solar power sector also, as we are dealing with only wind power. Second, what will be the future run rate of the orders? Will the current run rate continue, or we will be going into a higher trajectory?
Come again, the second question, whether the present run rate continues or? Sorry.
Or we will go into a higher trajectory of orders.
Okay. On the solar, obviously, our strength is in wind because we manufacture wind turbines. In solar, we don't manufacture anything. Having said that, we will, if there's a need be, we will get into solar where it is a hybrid project. Somebody wants us to take the responsibility for the entire project, we don't mind doing that, but otherwise we'll stick to our center field. But not really, you know, solar specific projects we will not take up. Okay? Unless if somebody says that, you know, if you're doing wind, we also want you to do solar as part of hybrid, then we will look at that opportunity. Not otherwise. On the, on the... Sorry?
So, if are you currently bidding for such hybrid projects as such?
No, we are not bidders. As I said some time back, we are never bidders, either in wind or in the solar.
Okay.
The bidders are IPPs or other people, and we only supply to those those bidders who are successful in the bidding. Some of them have a pre-bid tie-up, some of them come after winning the bidder. But we are never a bidder in any of the projects. We did once, long, long back in solar and which we sold off all those projects. That's once upon a time, like in, in around 2015, 2016 type time. Otherwise, we don't bid. We are not bidders. And as far as the order book is concerned, it's growing, it's robust, and we expect the orders would keep growing.
I don't want to put a number to what rate we grow, but as I said in my opening comments, we are looking at the orders which are quality orders and the quality counterparties, where we think the project would go ahead, not to take an order then project gets stuck, and then we get the deficient in the market. That's our criteria, but there are enough, there is enough potential in the market. Interest wise, for Suzlon turbines, there is, I can only tell you that there's a huge interest in terms of taking orders in Suzlon, yeah.
Okay. Sir, another question. We usually see and you get large orders. So what value we should be assigning to an order of a 3, a 3-MW turbine? A ballpark number.
Our average realization is, you know, we take INR 6 crore per MW. So whether it's a 3 MW turbine or 3 MW turbine-
Thank you.
Yeah, and we should continue with the same economics or unit economics.
Thank you. Thank you very much.
At the scope of equipment supply.
Okay. Okay.
Thank you. The next question is from the line of Jeevan from Seagull. Please go ahead.
Hi, good evening. I'm Jeevan from Mumbai. First of all, I would like to congratulate your team for the excellent comeback for the last 3-4 years, and we have made the company as a debt-free company. Only I have one question is, it's not a question, just from a lay investor's underlying market in this, being your share, like, face value, it is having INR 2. For a very long time, it was looking at like a penny stock in the market. So it was around INR 4-INR 10. So now you have come back about INR 30, and is there any possibility to make it as a INR 10 trade of share and the system, you can boost up the market value of the stock?
So we take that suggestion into consideration. I mean, there is right now no
... active plans to reverse split the stock. Obviously, we will have to see what are the overall implications from the legal tax companies like NCLT, various law enforcement agencies perspective. So while there is no current thought, but, you know, we will of course consider the idea at the appropriate time.
Yeah. Thank you very much, sir.
Thank you so much. The next question is from the line of Rahul Kothari from Grit Equities. Please go ahead.
Hi, sir. I have a question. This is with regards to understanding our preference towards taking an order, whether it's more towards the SECI projects or towards WTG equipment supply. With regards to the estimate that we understood that 10 GW of orders are expected from EPCs, how are we looking to build into it or supply our products and services to that segment?
See, equipment supply and EPC, we always tend to balance. Because in EPC, at the end of the day, we need to look at what is our project execution capability, how much can we deliver projects in terms of the land to the connectivity, which including the erection system. Whereas equipment supply is that we know that they have a definite capacity we can supply. So we always look at saying that how much we should take equipment supply, how much EPC, and also EPC depends upon which state it is, where we think the acquisition of land is easier versus cumbersome process.
So we keep evaluating the factors, saying that, okay, if we reach certain level of EPC, then we think that, you know, for this year, we significantly, you know, enlarge our, the project delivery capacity through this, then we will release there and around the equipment supply. So both will be there, mix wise. So, it depends upon which state, which project, and what capacities and when. And as far as the 10 GW is concerned, then obviously, as I explained sometime that we don't bid, but we support the bidders for those projects. If someone wants to have a pre-bid tie-up, like India also we saw pre-bid tie-up.
Or post winning the bid, they come to us saying that we want to bid and we want to work with you for developing a project, then we work with them. So more bids, more bids get awarded, so that much is the universe which is increasing for us, for, for the operator.
So just one more on the planning on the understanding front. With regards to, because then the wind farm is generally a land, a land marked with regards to the wind speed and all, and identification is done. So as a Suzlon, considering the large order coming in place in future, so execution would be a challenge. So do we have some or do we explore the land acquisitions pre earlier, or we depend on the customer to secure the lands and everything?
See, for us, our, when we talk about we can do EPC, our strength is basically the wind data. Because we have the largest number of masts and then the largest wind data available to us. So therefore, we clearly know in each state, when I say that almost 8 Indian states, which site is, what are the generation yields. That's the knowledge what we bring in. So we can potentially, when somebody wants to offer EPC, we say that this is the site with the wind data, we will develop for you, because we may or may not have a land at that point of time. Then we work with them and enter into a contract, and we acquire along with them.
Moving ahead, the pillar of we used to do earlier, but in between we stopped because of various things, but we don't acquire a land bank. But in case we are certain we are a very good site and which can get into a contract, let's say, in the next 8-12 months, not locking up the packages, then we would also look at investing in the land. But provided we are absolutely sure that, you know, we can convert that into a contract in a short period of time. But not creating a land bank which are available for the next 5 years or 8 years, no.
Okay, that's it from my side. Thank you.
Thank you. The next question is from the line of VA from Nivesha Investment Advisors. Please go ahead.
Thank you for taking my questions once again. I just had this doubt that if we are not bidding directly and we are working with IPPs in the offshore projects, then how are we actually taking it forward? Because as I understand, we don't have capacity of, you know, which are required for offshore turbines. So I just wanted to get clarity on that.
You know, the offshore turbine is not required today because wherever, whenever even somebody is winning the bid today, the wind turbine would be required, let's say, 3-4 years down the line. Okay? Offshore is completely different ballgame. It's going to take a long time to come in. While we do have another technology under development, various turbines. So in case we are going ahead with offshore, not one offshore, but we think that offshore in India is going to pick up, then obviously we'll activate and we get the first wind turbine out for the first project to come in. So therefore, the partners, when they talk to us, they look at our time cycle versus the project time cycle, and that's how they go out and bid based on our turbine.
We don't need a turbine today for offshore.
Okay, thank you a lot, sir.
Thank you so much. The next question is from the line of Sriram Rajan, who is an individual investor. Please go ahead.
Hey, thank you. I suppose I'm audible. Yeah. Congratulations on great numbers, and just two questions. I was reading that Adani has already got a 5-MW turbine and panels in MNRE. Now, would that pose a competition, given that they can generate more power with less land?
It is not the question of more generation with the less land. It's at the end of the day, for anybody, you know, that you are in industry, you would know that what matters is the cost per kilowatt hour.
Right.
Okay. Which model gives you the lowest cost per kWh. For the larger turbines in India today, the cost per kWh is higher. Okay? So in the current sites, it all depends upon the wind, the current wind availability, the sites what are available. Today, the 2-MW, 3-MW would give you a lower cost per kWh than a 5-MW turbine. So therefore, in our opinion, that is not a constraint at all. So what we need to look at is that, you know, will if blade that comes into the market, our products can give better cost per kWh than that. And we do feel that our 3-MW and 2-MW can give lower cost per kWh compared to a 5-MW turbine in the current sites.
Current sites. Okay, okay, thank you. That's, that's great. I, I didn't know this. Okay, thank you. The other question was, let's assume we transition over a period of time from 2-3 MW completely. What would be the amount of GW of turbines we can supply in a year? Basically, the capacity that we have.
See, our manufacturing capacity is anywhere between 3-4 GW. Because let's see what the capacity need is? Mostly our nacelle capacity is for 4 MW, you know. Tower is obvious, there are three components, nacelle, tower, and your blade. The tower we do ourselves, but you can outsource. So therefore, there is no capacity constraint in terms of tower, as long as in advance you book the fabrication capacity. So therefore, your capacity depends upon the blade manufacturing. For the blade manufacturing, number of molds what you put in your plant. So we assume that the capacity we'll be able to sell is X, and then we put the molds.
But we see that if say 26, we can sell more, then we typically go out and put the molds in, in some of our existing plants and increase our capacity. So capacity won't be a constraint if there are going to be orders. Orders on a consistent basis, not that, you know, we do one year peak and then subsequently it comes down. If you look at the 2-3 years, this is going to be the capacity, then obviously, the manufacturing capacity would be ramped up quickly to the blade capacity and then to meet that. Hello, Mr. Rajan, do you have any more questions?
Hello, am I audible?
Yes.
Yeah. My question is on the EPC front. You mentioned that the company is now expecting more complete EPC orders instead of just turbine supply. What is the main driver for that? And do you also see an improvement in O&M business? As in recent years, we have seen more players going to specialized O&M service providers instead of the turbine suppliers.
The EPC front, I clarified earlier, is that more is coming in because of the demand in the market. It's not that we want to do more EPC, but there is demand in the market. Because as I said sometime back, there is no OEM left in the country other than us, who does EPC, okay? Even the largest, competition in the market, just supply the components, okay? They don't even supply the turbine. They just supply the tower, they just supply the nacelle and even the blade, somebody wants it, they buy directly. But someone else has to bridge the gap between the turbine supply to erection, commissioning, BOP, and everything. We do have a limited capabilities in the country for who can do that sort of a service. So therefore...
Some people went ahead, experimented that, and there were some bad experiences, some good experiences. So people who have a bad experience want to get back into the EPC concept. That's the reason I said that there is more demand for EPC, because we are the only people who provide EP and C services. So we don't give up anti-EPC, we provide EPC services.
I understand.
On the O&M front, on the O&M front, today, every single contract what we sign for the WTG supply, we only sign if there is an O&M contract followed by the supply of turbine. If there is no O&M contract, then we don't sign the supply contract as well. So therefore, that till now that has been our principle. So every WTD we sell, we also have an O&M contract for that. So therefore, our O&M business will continue to grow to the extent we keep selling our WTDs, that magnitude. On the other front, yes, there are some small IPPs which are coming, and there are also some large entities looking at their own, trying to do their own O&M. Our turbine, none of our turbines have gone away till now.
In fact, we recently acquired 18 MW of Siemens Gamesa turbine for operations by us, given to us by O2 Power. In fact, we are getting multi-MW as well. Having said that, we continue to improve our standard of service. More importantly, we continue to develop value-added products, you know, that benefits our customers in terms of improving energy output or improving the reliability and various aspects. That's the reason, that's how we want to retain our customers.
All right. I have just one more question. What do you think could be the likely capacity addition in FY 2024 and FY 2025, overall sector level?
See, we gave our, our estimate earlier. Also, we gave it that we expect anywhere, midpoint to 4.4, 4 minimum and 5 max this year, is what our expectation. And even if you look at the H1 is 1.5, if you do double of that in H2, let's say it's 4.5. So that's what we are guiding. We continue to believe the plan. In FY 2025, in our expectation, it could go up to 6-7 GW.
All right. Thank you so much.
Thank you. The next question is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead.
Thank you, sir. Thanks for the opportunity again. So, what is the quantum of order pipeline that you're looking at between March and March 2024?
March, and we. Right, today, we have more than 1.6 GW of order, and there is a significant order book, obviously, because of the confidentiality with clients and obvious standards. We can't say how much it is, but there's a significant order pipeline which we're negotiating today. And that when we conclude the order, then we come out and then basically announce. So I don't want to give a number to you, but there is a strong order pipeline which we're negotiating today.
Understood. Also, sir, there are around four FDRE bids also open right now. So are we also working with the IPPs to bid for these projects, and what kind of wind proportion can we see in this project?
So it all depends. Sometimes the wind proportion can be significantly higher, which starts with FDRE bids. If I don't have a number right away with me for the current FDRE estimate, but what I remember the overall number is that in the 13 GW of outstanding bids today, which are open, the wind capacity is about 11 GW. In some cases, the wind capacity is more than the bid capacity, because, for example, you know, somebody wants to offer a sort of an RCC power sort of a thing, and some people are saying that instead of getting into hybrid anything, I can actually, let's say, 1 MW of the CPA you have and go out and set up 650 MW of wind.
On an annual basis, you meet the requirement of what is required, the PMS size. So therefore, wind capacity is going up. That's why I said that, I don't have a bid wise, but total overall bids wise, in 13 GW, the more than 11 GW is wind.
Okay. And are we working with IPPs on FDRE bids as well?
Yeah, we work... Yeah, obviously, the bidders remain the same, whichever the type of bid. The universe of bidders, the companies remain the same. Whichever we have a relationship, we keep working on this. Like earlier, we had a pre-bid tie-up with Apraava, we have pre-bid tie-up with Torrent, we have pre-bid tie-up with Sembcorp, we have pre-bid tie-up with Hero. You name it, we have. So sometimes they have pre-bid, and then they go ahead and then, you know, bid and come back to us. So there is no need for pre-bid usage because everybody knows the market, what are the prices and things like that. It was different when initially when the bids came up in the FY 2018, at the initial year of the beginning, then obviously people, everybody had a pre-bid tie-up.
But now it's not necessary. Not even 50% of bidders have a pre-bid tie-up.
Mm-hmm. Okay, sir. And so, final question on Siemens Gamesa. So, are we looking to acquire any of the wind farm projects that we are currently managing, going ahead, which are coming for expiry?
We also... See, we do a multi-make, we are also working in a small way on the multi-make side. We are in the initial stages. We do not have significant capacity. We have more than, little more than, close to about 40 MW. Of that, 150 MW is what we acquired this year. As I said, sometime back, 80 MW of Siemens Gamesa, which Inverter Power has wanted us to develop, do the wind, which we are doing it. Obviously, any offer, such opportunity comes in, we are definitely open to a multi-make, whether it's Siemens Gamesa or any make, we would be open. Today, we operate Enercon, we operate Inox Wind, we operate Siemens Gamesa, which is...
Capacity may be small, but all these people we do it, and that is one of our business models in wind. While we continue to do our own, but we'll also look at opportunities to expand into multi-make.
Okay, sir. Thank you. Thank you a lot, and all the best.
Thank you. The next question is from the line of Neil Ostwal from Bajaj Finserv Asset Management. Please go ahead.
Yeah. Hi, sir, thank you for the opportunity. Can you give some color on the opportunity size of the C&I segment?
So today, if you look at our order book for the 2/3 is C&I. So it's only every day. So 1/3 is actually the Discom capacity. So that's the rate what we're having today. So it is a very important C&I, actually.
Okay, all right. Thank you, sir.
Thank you. The next question is from the line of Pawan Gulati from Investor. Please go ahead.
Hello, sir. Congratulations on the great financial numbers.
... thank you.
Questions on slide 20. So basically, first one, I mentioned the installations in H1, that's 0.5 GW, and for Q1 the number was 0.3 GW. So did we get the numbers in MW for both the quarters? That's one. And the second question is that we have a capacity of greater than 3 GW. Still our installations have been almost the numbers have been lesser than 1 GW in a year. So what are path forward to increase capacity utilization?
So you're talking about supply?
Yes.
So on slide 20, I'm asking a question now. So installation by Suzlon in the first half has been about half a GW, you know, close to about 500 MW. And across the country, about 1.6 GW of installation happened in the first half of this financial year. So approximately, again, you know, if you take the market share dynamics just for the first half, this is installation, we are near about 33%. The other metrics is, you know, for the H1, we've done 267 MW. That's in terms of deliveries. So in the H1, there's been deliveries of 267 MW of turbine, and installations have been 500 MW.
I mean, difficult for us to give you a market share number of the deliveries, because, you know, we are not aware of what the competitors are doing. But, you know, we can report our numbers, but MNRE report to the new wind capacity that has got added. So that's how we come to the 23%.
Also on the commissioning, one, what is at the whole of last year, we did about 524 MW also, but that's what we actually reached with the H1 number.
Okay. That's why my question was that really we have a higher capacities of 3 GW a year, and we have the open orders as well. So basically, what will be our path to higher installations and accordingly,
Yeah. See, yeah, it's obviously we can't give that guidance, but I can say is that order book is one thing and the delivery schedule is different because each project is unique. If there is an equipment supply, they will have their own schedule in terms of when they want the turbine. One is looking at the site readiness, and even there we have an EPC sort of thing where we are responsible for everything. Still, people, some of them have asked for rescheduling the supplies because the evacuation system is getting delayed. So the substation from which they power gets evacuated is getting delayed. So this is now a dynamic situation. So depending upon the need of the project and also where the capacity, the evacuation capacity is happening, the schedule is fixing.
We may have an order and also order may have been put for this year, but the supplier clients can come back and say that my evacuation is not happening or I'm, I'm getting delayed in terms of my land acquisition, so the piece goes on. That's what keep happening and within what we keep working with every client independently from each project. That would-- That's what would decide the, how much we can supply.
Yes, sir.
We can supply, but provided the projects are not ready to take that much capacity, then obviously, you know, what do we do with that? They won't even care. They won't even take the turbine and say.
All right, sir. Thank you.
Thank you. The next question is from the line of Amit Nigam from Invesco Mutual Fund. Please go ahead.
Hi, good evening. I had two questions. When I look at the finance cost line of the P&L, sequentially, would the trajectory be a sharp drop or a more gradual drop? That's one. And second is, when I look at your cash flows, on a consolidated basis for the first 6 months, I see a significant deployment in the working capital lines. So does that give us, some visibility to a better invitation coming up in the second half? Thanks.
So I'm gonna answer both your questions. So on the first one, with regards to interest costs, as I said in my opening comments, certainly you will see a sharp drop in the finance costs in Q3. Up to now, for the six months or the H1, our finance cost has been about close to INR 90 crore, for the first six months. That's largely been because of the debt that we had on the balance sheet, which has got repaid around the end of August. So for the last part of the Q2 also, until the CIRP procedure realized and we paid the members, that interest cost line is figuring in the quarter two. Q3 will see a sharp sharp decline in the interest cost, for sure.
To answer your second question, you know, working capital is obviously an issue in the business. You know, we are working as a company to, you know, further optimize that. And yes, you're right, that if you see the cash flow, there is significant working capital deployment currently as we speak. So and, you know, once we have the 1.6 GW in confirmed orders, so certainly we are very, very focused on executing those orders in the quickest and most profitable manner possible.
Thank you. Therefore, would it be prudent to conclude that 31 March 2024, the balance sheet, especially on the working capital line items, will be much lighter than from where we are today?
... May not be lighter from where we are today. Again, you know, I would like to review working capital always as a percentage of overall sales, not either, you know, trailing or forecasted. Because, you know, whenever we end March 2024, the net working capital has come, that could be representative of the investments that we've made for deliveries to be done in March 2025. So I don't think in absolute INR growth terms, it may be a lighter number, but in percentage terms for the business that the company would deliver going forward, it will certainly be lighter in that proportion.
I can see you saying it'll be more efficient, right?
Yes, certainly.
Thank you, Manjit. Thanks and all.
Thank you. Thank you.
Thank you. The next question is from the line of Deepesh Agarwal from UTI Asset Management Company. Please go ahead.
Yeah. Good evening, gentlemen. So my third question is, is it fair to say entire order book of 1,613 MW will be executed by March 2025?
Yeah. Right now, the orders what we have is that's your, that's right. The order book, what we have is, for FY 2024 and FY 2025. The order in the pipeline, what we are now negotiating, we are expecting or, or that some which will go into FY 2025 and FY 2026. But for the current order book, what is shown 1.6 MW is for FY 2024 and FY 20... Nothing is below the line.
Okay. So for FY25 incremental orders, anything which we get in next one or two months can possibly go into FY25, right?
Yeah. Yeah. Now, what is now happening is that the orders that are coming in and so, it depends upon the size, okay? If you get 15 MW, or, I mean, you know, type of orders, that will be the FY 2025. But let's say that if you get a large order for 200-300 MW, then it should be for FY 2025 and FY 2026, even if you get in the next two months.
Okay. So basically, if we take the formula which you gave earlier in the call, second half is typically 2x. So assuming you do 500-550 MW in second half, we have 1,100 available for execution in 2025, plus any incremental orders you get, which can be executed in 2025, right?
Yes.
Okay.
I didn't try your numbers are right. I can't, I can't, I can't...
Sir, sir, the other question is, if I look at your order book, almost half of your order book is in Karnataka. So what is the status of the transmission connectivity out there? I guess there were some substations which was to be installed, which are getting delayed out there. Anything which impacts us out there?
Yeah, it does. So, like, from that part of saying impact in the sense that there could be some people, like especially for this year supply, okay? So they can say slightly delayed because substation is getting delayed till the next year. So there are—you're right, there are couple of substations which are delayed, which are expected to come, I think end of this year and in the next year. So there will be some readjustment of delivery schedule. That is what would impact on us. Otherwise, the connectivity and the capacity is not our responsibility, that's the responsibility of the client. So we do not have anything.
Only to the extent that if they know in advance that that's going to get delayed, then obviously they would like to reschedule the supplies, you know, move it by two months, move it by one month, move it by three months. That sort of thing can happen. That will be impact on us.
It's very good-
Another consideration is basically the reason is that till now, as you know, all the bidding was happening on the you know site state-wide market because you can put it anywhere. So everybody would go towards where the higher wind, so that's the only way you can win the bid. So initially all projects came from Gujarat and Tamil Nadu, then obviously Gujarat has some constraints with respect to land, which they removed now. The only other option was the Karnataka. So option was available for MP, Rajasthan, AP, anywhere, but people didn't put up there because there you will get lesser PLF compared to Karnataka. But now with the full tariff concept, those states are getting opened up. The consideration in Karnataka is very, very fair.
Okay. So, if there is a delay in the transmission, it also defers our revenue, right?
Come again.
If there is a delay in transmission line being set up, it also defers our revenue or we get to our revenue is only the final, commissioning that which is left?
No, contractually it doesn't defer, but then, you know, if they are repeat clients, we have a relationship with them, and they know in advance, let's say seven months in advance, it's going to be delayed, they'll come and ask us, saying that, "Can you please reschedule some of the supplies?" So we oblige. If you oblige that, then there could be some difference. Contractually, no. So we have agreed a schedule, and they need to take it up as that day. But then, you know, when you work on a relationship with a repeat client, then obviously you would tend to agree with them for some reasons. It's feasible. It's feasible. It's not necessary that you're not always feasible to reschedule the supply.
Okay.
If you reschedule, agree, initially and reschedule, yes, there will be an impact on the pipeline. But then what will happen is that some other sites could be there, so we will fill up that with a period of time. It's because we are doing multiple contracts, so some cases we can advance because they would may be ready, but earlier we didn't agree to supply that time because they were to supply to this project. So now we can, you know, fix and supply to that project. That's, that's how we plan. When we have multiple contracts.
Lastly, what is the status on the CapEx, which we were doing for the molds, for the 3 MW turbine? Is it ready, and can we start shipping those turbines from Q2, or we have to wait for the Q2 for that?
We already started supplying commercially, and about five or seven turbines got dispatched already. Then, we are now doing commercial products. This will gradually pick up in Q3 and Q4, but significantly, ramp up will happen next year, obviously. But then you will see a reasonable capacity going out in this year, especially in Q4.
The capital plan for molds is on track. So, you know, whatever number of molds we need, we already have 3 molds in operation, on transit, and then the rest will be in play by end of this quarter or early Q4.
Sure. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.
Yeah, thank you so much, sir. Sir, looking at the industry situation in terms of increasing demand, and particularly, and also your positioning in terms of the EPC service that you probably uniquely provide, very few players provide. So is there a possibility or probably some discussions that you're already having, the scope for margins that you earn for your services, plus the working capital cycle that you have in the business of improving versus what we, you know, we're thinking the last three months or six months or last one year? So some point there at least.
See, on the improvement of working capital from the client side, we have done significantly already in the last couple of years. So the change of payment terms, we said, we would like to get payments on a component supply basis and a turbine supply basis. We have done adequate work, but at the same time, there's always a scope for improvement, asking them to move to like this and things like that. So that does exist in terms of the improvement of working capital takes longer.
Okay. And so on margins?
The margins, we gave a guidance on the margins. I think, right now we stick to those margins rather than saying that as a demand. See, for the repeat customers, we don't want to go and say that the demand is higher, it's not a supplier's market, we want to improve our margins significantly. That's not the way to work with the repeat customers. But some customers have seen a segment of the things we might include the margins, but our guidance remains the same as whatever we said earlier, the margin is another one.
Mm-hmm.
That won't. We wouldn't like to change that guidance.
Right. So the second question is, probably, just to understand, it could be too early, but we are seeing some intensity by Chinese equipment suppliers, you know, increasing. We are hearing about Europe trying to impose some restrictions on Chinese. I'm not sure how, you know, relevant this is for India. And I was looking at some data. The cost for them seems to be very low versus probably globally, even for India, versus India. So can that be a threat to the industry in India and also to you? Or the dynamics are very different in India and has no implication?
Let me answer it from industry perspective rather than looking at Suzlon. I don't want to get into the issue of what happened in Suzlon. Many of these suppliers, I said, come back. Issue is that, you know, they are component suppliers rather than EPC suppliers. Okay? When I say component, not even WTG, they are willing to supply just the nacelle, not even tower, not even the BOP. So, and some people think that that's a best trade and, you know, in the business cost, but ultimately, how much capacity do we have, capability building in the country in terms of bridging the gap between supply versus commissioning is a major issue.
So which is a concern, the government also is having now, and in fact, they started monitoring the number of turbines on the ground, uncommissioned, because which is going up now today in the country. Yes, they do have the advantage of the price, because many of them are actually assembling it here in the manufacturing level. Even whether whatever manufacturing the raw material completely imported from there. Then they do advantage there in terms of subsidies, in terms of power costs, the various things. So their input cost is low. So that's a known fact. But then the manufacturing component in India is much very more of an assembling really happening.
The challenge for them will always be that you mentioned the combining it with towers. That execution challenge will always be a problem.
For the builders, ultimately, possibly why I said that we're getting more demand for EPC-
Mm-hmm.
Is that, you know, how much of this, how many of these clients really can think of partnering with someone else? Because nobody does it alone. You need a partner to build your products. So, do we have really capability built up in the country for doing 7-10 GW, what we're talking about in terms of BOP? Is what is the question one has to ask. Surprise can happen if you can dump the turbines on the ground. But then as a country, what we need is not the turbines dumped on the ground, but turbines commissioned, connected to the grid.
Mm-hmm.
So that as an industry, we're going to face that issue, and which is now slowly is coming on the ground.
Mm-hmm. Got it. So agreed. Thank you so much, and all the best, sir. Thanks.
Thank you. The next question is from the line of Rahul Kothari from Equities. Please go ahead.
Hello. So, just picking up the earlier question forward. So these imported and assembled parts, these kind of orders are also applicable, like, in the PSU tenders also, or it's more towards the C&I, IPP, private IPP domain? That's one thing. Does it... Secondly, just to further understand on the competitive landscape from domestic and international front, so I understand that in wind there are three domains, equipment, supplied, and BOP, and then third is the O&M. So specifically on O&M, for us, for our own supply, we don't see any competition, right? What we are looking for is the already O&M in place, which are where other players products are supplied. So can you just elaborate on the front of the competition?... And, thirdly, thirdly, just one more question to add in.
Thirdly, regarding how do we look at the, weightage of like 2 GW, 2 MW and 3 MW proportion in our revenue book going forward in FY 2025, if you please look into?
Yeah, on the first one, to my knowledge, there's no restriction on in PS because it's basically RLMM listed equipment in what people buy. Unfortunately, in RLMM listing, it talks about either the manufacturer or you assemble, so you still get qualified for RLMM listing. So once you're listed in the RLMM, I'm clear that I don't think there is any restriction for PS to my knowledge. I'm not completely authentic on that, but that's what I feel because they're listed in RLMM, and they're listed there because assembly is also allowed in RLMM. So that's the question number one. And question number two, yes, you're right. There are two chosen ones. One is our own fleet, other one is the multi-make what we acquire from others.
Even in our turbines, I don't think it's a type of process that there is no worry because the people there are IPPs which are there in the market, so they're setting some sort of a the... what you call, unsustainable benchmarks in terms of pricing, in terms of performance parameters what they're guaranteeing, plus some of the large IPPs saying that they can operate. So therefore, there is a pressure on us in our even our wind fleet, to ensure that our service remains high, and then we keep providing value-added service as I mentioned earlier. So that's a recognized fact that we do recognize that even in our own turbine thing, we need to be careful to protect ourselves. We've never been able to do that, and we hope we can need to do that in future.
And, as far as the third question was, you said, international?
Ah, I'm sorry.
You asked so many questions, I forgot your third question.
Our question was about the proportion of revenue business from coming from 2 MW and 3 MW turbine base from 25 onwards. It will be more tilted towards 3 MW now going forward?
See, right now, obviously, when you look at our order book, the significant portion is for 3 MW today than the 2 MW. But having said that, it depends upon which sites. Some sites, you know, 2 MW competes better than 3 MW. So we are agnostic, and I think the most of the people, the clients would be more for the cost or whatever. But as there's a psychological feeling that, you know, a psychological preference for a 3 MW, being a larger turbine, is a matter of principles and things like that. But we expect that effect will be said, we will continue to have both, maybe in the ratio of 2:1 or little different. But that, around that is what we can think that 2 MW and 3 MW in FY 2027.
Oh, okay. Thank you. Thank you. Thanks a lot.
Thank you. The next question is from the line of Sumukh, who's an individual investor. Please go ahead. Mr. Sumukh, your line is unmuted. You can please ask your question.
Yeah, let's go ahead. We can take the next question. Is there any? Otherwise, we can end the call.
Okay. So well, as the current questioner has left the queue, we will take that as our last question. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
Thank you.