Ladies and gentlemen, good day and welcome 20 to the Suzlon Energy Limited Q3 FY23 post-results call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please dial an operator by pressing star then zero on your touch tone phones. Please note that this conference is being recorded. During this call, the company management may make certain statements which reflect their outlook for 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.
I now hand the conference over to Mr. Ansuman Deb from ICICI Securities. Thank you. Over to you, sir.
Thank you. Good day, everyone. On behalf of ICICI Securities, I welcome you all to the Q3 FY23 post results conference call of Suzlon Energy Limited. Today, we are pleased to host the management of the company led by Mr. Ashwani Kumar, Group CEO, and Mr. Himanshu Mody, Group CFO. We will begin the call with the opening remarks from the management, followed by the Q&A session. I would now like to hand over the call to Mr. Kumar and Mr. Mody for their opening remarks. Thank you, over to you, sir.
Thank you, Ansuman. Greetings to everyone, and thank you for joining us for our Q3 earnings call. I hope you had an opportunity to review our results and investor presentation. I'll share with you an overview of the industry and will walk you through our Q3 FY 2023 and 9 months FY 2023 performance. We will take your questions. As we all know, the Government of India is committed to its 2030 target of 500 GW of non-fossil fuel-based capacity. The target for wind out of this is 100 GW. With current installed capacity of 42 GW, it's clearly that over the next seven to eight years we need installation of more than 10 GW per year. There was a crucial announcement last quarter by the Government of India of inviting bids for 8 GW p er year annually from 2023 to 2030.
This is, of course, will be in addition to the private sector initiatives in the commercial and industrial sector that we are seeing a good tailwinds with. Government has also taken out policies related to ISTS waivers for green plants, discontinuation of e-reverse bidding, and all of these will boost the Indian power sector as we go forward. There are two important parts of this 8 GW per annum announcement by the government. One, it will ensure participation of all the eight windy states in the development. Earlier, as was expected, what used to happen was only where the wind is best, those states would be crowded in development cycle. Now, the government has clearly outlined that not more than 2 GW per year will be installed in any one state.
It's clearly the development of wind will be now across all the eight windy states, which starts from Rajasthan in the north region to Tamil Nadu in the south. In addition to this, there's a tough repowering policy also Government has come out, which shows a potential of 25.4 GW. Being the oldest player in the industries, we definitely have our plus point when it comes to repowering opportunities in India. On the business and performance front, Q3 has been a stable quarter for us in line with our plan. In terms of going forward, we had a major milestones within the company too when we installed the first machine of our S144 3.x MW at Tamil Nadu. 144 actually means the rotor diameter.
144 m is the rotor diameter of blades of this turbine. Our early performance report that we are getting from the first machine is very, very encouraging. In terms of our priority, because we cannot control the tariffs in which various bidders bid their things, our priority is only to pursue quality orders with higher value and better margins. For us it's not only about the top line, but also about the bottom line going forward. We continue to, of course, build our order book. We continue to execute order book as we go forward. In addition to the manufacturing, our OMS business continues to perform as well it's always been. We have over 16 GW of capacity around the world, out of which 13.8 GW are in India.
With good support from the government, including the higher allocation in union budget, strong sector outlook, and with consistent strengthening of our fundamentals, we think the company is now equipped to leverage tailwinds of the sector from the position of strength, and that is demonstrated by our consistently improving performance. I would like to invite Himanshu now, our CFO, to take you through our financial performance.
Thank you, Ashwani, very good evening to you, ladies and gentlemen. I hope you've had a chance to browse through our investor deck, which has been uploaded on our website. I would be using slide numbers 18 to 22 of our investor presentation that's on the website, as a reference point for discussion during this presentation. Q3 of FY 2023 has seen us registered consistent improvement on all our key parameters. Our balance sheet is stronger as a result of significant debt reduction post the rights issue. It will be further strengthened with the receipt of INR 600 crores of balance call money on the rights, which is still pending for us to be called. We are pleased to report that the consolidated net worth of the company has turned positive after a period of nine long years.
Our consolidated Q3 FY 2023 PAT before exceptional items is INR 78 crores for the quarter. This is the highest PAT in over five years that the company has been able to achieve solely based on the operational parameters. This is against a Q3 FY 2022 PAT of INR 37 crores for the corresponding quarter last year, registering an increase of more than 100%. We did a delivery volume in the 9-month FY 2023 of 482 MW, with a revenue of INR 4,257 crores as against nine months in the previous financial year, where we did a delivery of 471 MW with a revenue of INR 4,078 crores respectively. We continue to maintain a tight control on our costs, as is reflected in our profit margins.
As commodity prices and supply chain issues stabilize, the positive impact of the same will be more and more apparent in the coming quarters in our profit and loss statement. With continuous focus on de-leveraging of our balance sheet, we have achieved substantial reduction in our net finance cost, which for the Q3 FY 2023 stands at INR 80 crores vis-a-vis INR 181 crores for the same quarter last year, which is a reduction of INR 101 crores, which is more than 56%. For the nine-month FY 2023, our interest cost stands at INR 321 crores vis-a-vis interest cost of INR 540 crores for the same period last year, which is a reduction of more than 41% in the finance costs.
There is a marked improvement in our financial parameters like net debt to EBITDA stands at 2.6x on a trailing 12-month basis for December 2022, whereas our net interest coverage ratio is at 1.9 times for this year, which are very healthy parameters. I am happy with the way we are progressing on all our initiatives to further strengthen the fundamentals of our company on the P&L and balance sheet side both, whilst keeping a very, very strong focus on the bottom line. On the overall economy, of course, as you know, inflation is under control and the economy is showing great resilience going forward. As Ashwani mentioned, with great sectoral tailwinds, this will augur well with the sector and encourage investor sentiment over the next several years.
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 very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 Shubham Shukla from Voyager Capital. Please go ahead.
Yeah. Hi. Good evening, everyone. My question is, like, around the order book. It's in gigawatts and megawatts. Can I get a, like, monetary value of it? Like, how much is it going to be?
As of now, we do not declare the order book in monetary terms, because there is, of course, a turbine order book, which is, which one can safely guess by multiplying the megawatt by whatever is cost per megawatt that is installed from our revenue. There is equivalent amount of order book, if I want to call it an order book, is in our services business, where we have these contracts going forward which will remain with us over next many years. Because of the two different aspects of the business, we tend to not describe the order book in monetary terms. In terms of megawatts, I can say it's already there on slide. Just let me just see the slide here.
Okay.
On the slide 10, it is 782 MW. Yeah. That's only, as you said, manufacturing order book.
Okay. About the debt, as we have seen the significant decrease in our debt levels and that also we have seen finance cost. Like, do you see any more reduction or, like, could net debt to be, like, in couple of years?
You know, whilst our scheduled repayments on the debt continue, Shubham, there is, as I mentioned, there is about another INR 300 crores from subsequent tranches on the rights, that has clearly been identified from the end use of the rights issue towards repayment of that debt. In addition to the repayments that are scheduled, another INR 300 odd crores will go towards debt reduction. To that extent, it will be a expeditious reduction of the debt, yeah, also in the coming few quarters.
Okay. This is in talk, like, coming quarters. Do we see in, like, let's say condition like in, like, in maybe like two or three years down the line or like any plans of to have it?
A bit too early for me to give you such a forward-looking guidance. Yes, we are maintaining the financial discipline of ensuring that the leverage keeps reducing on a significant basis. Hope to see us very soon where the balance sheet would be debt free, net debt free.
Okay. Thank you so much.
Thank you. The next question from the line of Sumit Kishore from Axis Capital. Please go ahead.
Hi. Good afternoon. My first question is, in your third quarter and nine months revenue, what is the proportion of the maintenance services income, and what is the income?
We'll give that to you, Sumit. You want just for the O&M for the Q3, or you're talking for the nine months period?
Both.
Of course, it is a part of the segmental revenue, that we have given on a. I'll just give you the numbers. It is a total of, for the December-ended quarter, it is INR 476 crores in revenue, and for the nine-month period is INR 1,386 crores.
Okay. Could you also give us a level of margins, this business would be making at EBITDA level?
At the EBITDA level, this business would be roughly about, in the vicinity of 44%-45%.
Okay. I'm assuming PBE, I mean, there isn't, this actually there isn't flow down to PBE.
That's right. I mean, on a standalone basis. Of course, on a console basis, you'll have to adjust it for the interest outflow that we have towards the debt on the balance sheet.
Fair enough. My second question is, you know, developments around India inviting late eager work, wind projects really is very good. What is the traction that we are seeing after this announcement? Is there any visibility on when which state is going to start?
From what we hear from the market is that there have been, after the announcement, there have been a series of meetings between the ministry and the nodal agency, which is SECI. I think so we should expect the first big announcement as part of this in the coming few weeks, if not maybe couple of months.
Okay.
Actually, this is the first time, this has been our industry request from the government that please announce policies till 2030, because you have a target of 2030. This is the first policy which they have announced which will last till 2030.
Right. Right. How exactly is the tariff going to be discovered for the winning bidders? Which is
it will still be a bidding process, but it will be one time big single stage bids rather than... Usually what used to happen was that everybody used to submit bids. Suppose I had quoted INR 3 and all. After everybody's bids were received, they would start doing what is called a reverse auction and give you a chance to improve your bids. Now, what was sometime happening was that a lot of people would reduce their bids just for the competition sake or, whatever in their own judgment. Many of the projects did not happen because the bid got awarded at unviable tariffs. Basically, everybody welcomed the idea that everybody does their own calculation, submits a bid on which they believe that, wind power can be supplied, and the lowest person actually gets awarded the contract.
The details of this, how this whole scheme will work are, as I said, is being worked out by the ministry and the nodal agency, which is SECI for Government of India. They will come out soon with their prospects.
Sure. This would be classified under central auctions in your backlog. It's SECI.
Yes, yes, definitely. These are all section, central auctions. Yes.
Yes.
They will pool the power from multiple states and then sell it to the distribution company.
Got it. What is the additional promise that you have in, you know, state auctions in captive retail cases? On your forward basis.
The states, some of the states have been active in their auctions, mainly Maharashtra, Gujarat, and Madhya Pradesh, and Rajasthan. In addition, the corporate market, if you ask me the latest circular, which everybody was waiting from CERC, got released only on seventh of February. We see now a big push into the corporate market, which used to be only within state to interstate transmission. The Government's journey on the interstate transmission for the corporate markets is now clear. Up to June 25, there is no transmission charges.
There have been a lot of inquiries by the corporates from with us and with other equipment suppliers on setting up wind and solar and hybrid projects for supplying to their manufacturing works or their steel plants or their aluminum plants, which are not in the wind districts.
Okay. Okay. Just I'm assuming that, in terms of CapEx, because you have
Yes, I don't think so there will be any major significant CapEx in the next two years.
What is the additional cash, you think could be received, you know, on the rights side?
Another INR 600 crores, is what's pending.
This will come over what time frame?
That's something, we are just, you know, in the midst of our budgeting process for, next financial year. Whilst I may not be able to give you a precise answer, but, you know, as part of the budgeting process, we'll factor that in and, I'm sure the Board will decide on the same soon.
Excellent. Thank you, and I wish you all the best.
Thank you. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Mohit Kumar from DAM Capital. Please go ahead.
Hi. Good afternoon, sir. Congratulations on a good turnaround. My first question is, sir, the fact, of course, we are looking at the central auction, which is going to happen maybe in the next three months down the line. Are there backlog from the bids which were closed in the fiscal which are available for us to, you know, to tie up? Is there, can you quantify the quantum which is still not tied up as of now?
If you ask me, and that again is the best of our information, there's no published data on that.
Yeah. Absolutely.
From checking eight, nine, 10, 11, 12, the 13 is just concluded. There would be, I would say, more than 3 GW of bids which are not tied up with any equipment supplier. How much of these bids will actually go ahead and how much will get tied up with us and other equipment suppliers, I don't want to guess. Clearly, with our turnaround, we are a party which most people will have their discussions with.
Okay, understood. We are in discussion with most of them, and there could be some wins, right? Right.
I'm saying whether they do the project or not on those tariffs is their call. I can't take that risk.
There's a fair chance that the 3 GW, if they do the project, there is a, there's a potential for us out there.
Yes.
Is that the right fair assumption?
Yes.
How much is the international megawatt in O&M services? The margins in the international O&M services, is it significantly different from the domestic?
In the international O&M, we have about 1 GW approximately under the mix of comprehensive maintenance and what we call a Technical Services Agreement. You know, which is why, yes, you are right, that the margins would be lower in the international because, you know, in India, we also enjoy the benefit of being a scaled up operation. The margin, it is little more than a break-even operation. I would say single-digit % margins at the operating level in international O&M.
Understood. Third is on the hybrid opportunity. That's a very large opportunity. Are you doing something to figure out how to get that business, that side of business? I don't think we have got any hybrid, you know, wind IPP out of us as of now.
Let me just define it. The hybrid projects have a wind element and a solar element, there is an integration of the two.
Yes.
Many of our already orders that we have, talked about and we have received are the wind portion of the hybrid projects.
Understood.
What if you talk about our order book that we disclosed? Yeah. Let's say I'll just give one example of the order we disclosed last quarter. I mean, in this quarter which was there. On SECI Bidar, you know, most of that 146 MW are part of hybrid projects. Since we don't do solar EPC ourselves, we do the wind portion of hybrid projects, and then we help the customer in integration the two sources and connection to the grid.
Understood. Thank you. Best wishes. Thank you.
Thank you.
Question is from the line of Dhaval Doshi from Pinpoint Asset Management Company. Please go ahead.
Hello, sir. Couple of questions. First, if you can update us on the status of the non-core asset sales that are being planned. Probably I'll continue to get everyone through this.
Yeah, Dhaval. Hi. There were two assets that we've identified. As we mentioned in the last quarter. One of the two assets, I think we should be able to conclude fairly soon in the foreseeable future. You know, once we conclude on that, then we will take stock of how and when to progress with the divestment of these in non-core asset. I think in the very near future, we should be able to report concrete progress on the divestment of the first asset.
That sounds encouraging. I'm presuming, this financial year we'll have one and the next we'll have the other.
The financial year has about six weeks to go, so you know, let's see.
Sure. Okay. Second question was with regards to the working capital. When do you think things will be in a position to ease out our overall limits with the banks or ease out the working capital situation and post which we can start bidding aggressively for projects? Right now we are constrained by working capital in terms of the bidding. When do you expect this situation to ease out?
Dhaval, we are in a very advanced dialogue with about four to five financial institutions, and I'm really happy with the significant progress that we've made with each one of them. You know, we have an early sanction on a small working capital limit on board as well. I would not be able to disclose the amount or the name of the institution as yet, but it's encouraging signs, and I think, you know, by the exit of this quarter or early Q1 of next financial year, we should have made significant progress for us to deliver on our next year's business plan.
Is it safe to assume that we could see material jump in our orders position only once this sanctions from all the banks that you mentioned is done? Till that time the order book growth will be, should be constrained.
Not exactly because I think so our order book, as we have disclosed this quarter, we are going for quality orders and orders that will happen. Our order book growth will continue to be robust as and when people start awarding and finalizing their OEM suppliers. In terms of working capital as Himanshu said, we are already on our way and working capital are not restricting our order book as of now.
Good. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Prashant Kothari from Pictet Asset Management. Please go ahead.
Thank you. Actually, I just want to confirm. A bit confused.
Oh, sorry to interrupt sir. The line for you is not very clear. Could you please speak a little louder?
overall as part of this
Excuse me, Mr. Kothari. The line for you is not very clear. Mr. Kothari? Ladies and gentlemen, the current participant in the queue has dropped from the queue. We will proceed to the next participant. We will take a question from the line of Abhijit Anand from Emkay Gl obal. Please go ahead.
Yeah. I want to understand the competitive landscape. Who are the top five players? Because we understand some of the earlier players who used to be in the last cycle, do not, do much of the domestic side. Have we seen some new players, Chinese player or something of that sort? If you can give perspective on that side.
I think so the three largest players in the market today, according to my personal opinion, is Siemens Gamesa, Suzlon and Envision. The other two international players are not that much focused on Indian market. The remaining are quite a small capacity and they may not have the best of products for larger orders. These three, I would say are the people who will gather the maximum market share in India this year and next year.
In terms of capacity, how would that be among these players?
I think each one of us will have enough manufacturing capacity to satisfy the market.
Okay. Envision, if you can just elaborate, how long have they been in the Indian market?
Envision came in with the product I think it's a couple of years back. Only those turbines have been installed.
Uh.
It's newer product. Product is got some orders which are under delivery. Again, all of this is, I would say to the best of my knowledge. Those will be installed going forward.
Thanks. That's it.
Thank you. The next question is from the line of Prashant Kothari from Pictet. Please go ahead.
Hi, I'm sorry, my line dropped. I'm not sure if you go continue the question. The question was how much is the O&M fleet today? Because you said 16 GW overall internationally, and you also said 1 GW in international. I was confused.
Sorry, Prashant. Your line is very bad. We couldn't really hear your question. I heard something about 1 GW in international, that's about it.
All right. Is it better now?
Much better.
The question was on the O&M fleet, how much is it really? I heard 16 GW overall, and I also heard 26 GW and 1 GW in international. It's not adding up for me.
Yes. A part of the OMS fleet, the balance would be under, it's either under warranty period or it may see a fleet that is churned out beyond its lifecycle period.
I see. Okay. You're only taking the revenues from, 2.8.
That's right.
Okay.
No, sorry. 13.8 + 1. If you go to Slide 14. The Indian installed base is 13.8 GW, +1 overseas.
Yeah.
Plus some in TSA and spares supply.
Okay. Understood. What is our market share in the kind of orders placed in this year? Do you have some ballpark number to give us?
It's very difficult to get the data, so we don't keep it. We usually go by the Government of India numbers on the commissions we are buying at the end of the year. That's the only, I would say, reasonable number to follow. There is no, there's no database or public information on how much order book people have got. More importantly, even after they've got it, whether they are proceeding with these orders or not. That's why we do not try to follow. We know which are the customers we are dealing with. Once we lose a customer also, we know usually, okay, this has been lost to this and this supplier. I don't think so I'll have a market share numbers, which is any, you know, in any seriousness I can claim to be right.
In that specific information then, what is our market share in the last year?
42%.
42%. 42%, yeah.
Okay. Specifically, better than our installed market share, which is quite encouraging.
Yeah.
Okay. The other question was, I mean, looking at your EBITDA in the O&M business, it seems that the manufacturing business is not yet making any EBITDA margins. I thought that our breakeven is around 600 MW per year. Was I seeing wrong or has that been changed in the going forward business?
No. We have, you know, for this nine-month period, the WTG manufacturing business has yielded an operating profit. Of course, so has the O&M business. That continues to be encouraging. You know, on the WTG side also, we have a modest EBITDA for this nine-month period.
You have contribution margins of 30%, that's kind of for the WTG business or for overall business?
No. For the OMS business we have margins which are in the 40%+ region. The WTG of course, you know, we have a certain breakeven threshold, which, you know, results into a single-digit operating margin currently. As and when we grow in the volumes, that adds to the WTG manufacturing margin.
Right. Thanks. The WTG contribution margin would be around how much?
For the current nine-month period, it will be about 16%.
Okay. Okay. Understood. Do you think that will change materially going forward or there is not much index in the margin because of competition or whatever?
It should be similar, as we go forward as well.
Okay. Thank you. There's obviously this issue about a large conglomerate also in the green space, who is bringing a bit of financial stress possibly. I just want to understand your exposure to them and that could also be risk in terms of order cancellations or maybe stretch in terms of working capital.
I think I will refrain myself to talk about I would say other companies on this call. Just to tell you that any such events, if they had a material impact on our current operations or going forward, we would disclose it to everyone.
Okay. Great. May we talk differently? I mean, how much is our concentration really?
I think so our customer base is pretty well diversified. In current order book.
Okay.
There's no customer concentration at all, actually, if you ask me, in the current order book.
Mm-hmm. All right. Okay.
Thank you. Ladies and gentlemen, we request you to restrict yourselves to two questions per participant. Next question is from the line of Rohit Bahirwani from Vijit Global Securities Private Limited. Please go ahead.
Thanks for the opportunity. As we all know, government will annually invite bids for 8 GW wind projects during 2023-2030. How much the company is expecting from this, and from when we can expect the orders to start coming?
I think in terms of timeline, I think so it's a very positive and announcement by the government in two aspects. One, it has given a clear roadmap for the next seven years up to 8 GW per year. Number two, by reducing the step of e-Reverse Auction, the timeline for conducting the bid itself has been reduced. We are now awaiting the next steps from the ministry and this nodal agency, which is SECI. Both of them should come out, as I said previously, in the next few weeks, in the terms of processes. And as and when the bids get awarded, usually there are two processes in this. One is before submitting the bid, lot of people speak to us and they become our potential customers, and they bid on the basis of our discussions with them.
Two, post winning the bid, of course, they want to place the orders because they have only 24 months usually to set up the projects. We would expect as and when this gets the full traction, which is going to happen over the next few months, our everybody's order book and the whole wind sector will improve substantially.
In this wind segment only, if you see the annual capacity, the company has a substantial part, and if I'm not wrong, 33% of the total national capacity is with the company. How much from this total 8 GW plan of the government company is expecting?
Instead of giving futuristic numbers, let me just tell you that currently, out of the 41,000 MW in India, we have installed 14 GW. That is more than 33% of each installation which has happened in India in the past. The similar has been our market share in the recent quarters. I would not give any future guidance of what is the order book expectation, but I would say our performance has been healthy so far.
Okay. Okay. What is the average time between receiving of orders and commissioning of the project? If you can give some information on that.
In SECI bid type of order, it is usually, I would say the supply will happen around 15 months, and the final commissioning happens within 24 months, 18-24 months of the order. Because not all turbines are installed on a particular day, they do it one by one. In terms of the smaller orders from corporate customers and people who use it for their own purposes, the supply is usually in 3-6 months' time and the installation in 9-12 months' time.
Thank you.
The next question is from the line of Faisal Hawa from H.G. Hawa & Co. Please go ahead.
This has been like a tumultuous, you know, 10, 11 years that we have spent prior to last year. What are the two key lessons that, you know, we have, you know, imbibed from these 10 years and, you know, which, hopefully we will not, you know, repeat again, you know, those mistakes?
I think so, I mean, not only from this, from my previous experience also, the simple I think so it is always good to find, follow the policy of financial prudence and plan according to how the market is going to behave. Of course, keeping to, also, you know, in terms of, transparently and, you know, and focusing on the corporate governance, do your business. I think so that financial discipline is something that, as you can see in the results, have been brought about by reducing not only our financial costs, but our operating costs, over the last many quarters. That's something I think so which is good for any industry and any company.
You'll always have some events which will be unexpected, but as long as you have a robust discipline and, you know, transparency in governance, you will come through.
Thank you. Fortunately, Mr. Tulsi T anti was like a very legendary entrepreneur, and he is going to be missed like anything by Suzlon. How has the organization now, you know, restructured and, you know, what were the key roles that he was playing? Who is fulfilling those roles? What is also Mr. Girish Tanti's, you know, contribution now to the company? If you could just, you know, elaborate on where the, you know, give a bit list of how we have actually, you know, proceeded.
I think so, it's always been the strength of Suzlon, in terms of even when Tulsi Tanti was around, and we do miss him, of course, on every day, is that it always had a good professional senior management team, which was backed by the rich experience of board and of our founder. This time, for the first time, we are disclosing this in public domain. You know, if you see the slide 16 of our investor presentation. Vinod Tanti, his younger brother, has taken over, who's always been involved in the technology and service leadership of Suzlon, has taken over as Chairman and Managing Director.
Girish Tanti, who had earlier worked in Suzlon and then stepped out, has come back, and he's earlier led various functions like IT, HR, CSR, and also establishing global business and corporate development. That's what his experience is, which is being utilized by the company now. Of course, I, Himanshu, our Chief Technology Officer, Bernard, and Mr. Mangal, who heads our OMS business, are the professional faces who have been well experienced in infrastructure and power space and bring that experience to the company. I think so the transition, though personally, I would say we all personal loss, has been fairly smooth in terms of operations. If I can share one statistics that no one from senior management has put in the papers since that unfortunate episode.
Thank you, sir.
Thank you. The next question is from the line of Prasad M, an individual investor. Please go ahead.
Thank you, sir. Thank you for repeating my question. Can you hear me?
Yes, sir.
Thank you, sir. First of all, thank you for your really honest, way of executing the business. I really appreciate on that, and thanks for your good numbers. My first question is, I am looking at, your statement, and I see there is a lot of potential for the solar as well. Do you have any plans to get into solar energy?
Akit, there is no current plans to get into solar space, but as I said sometime back that for hybrid projects, the integration part of it is.
Integration part is there. Yeah. Yeah. Like you mentioned, yeah, solar, there is no plan. Okay. Because there is a lot of scope regarding to being a big player in wind hybrid solution to solar. Yeah. My second question is that, sir, we have around nearly 800 MW order book value right now. Why are we not executing aggressively the existing order book? Is there any restrictions or limitations in terms of manpower or the technology like that we cannot execute very aggressive like, let's say, you mentioned for big deals recently takes nearly 15 months?
In terms of the execution of our orders, some of these orders are, as I said, being executed as and when the customer needs those turbines. Because many of the customers have their own sites which may not have acquired land or not completed the evacuation. Therefore, they do not want the turbines to be manufactured now and supplied. Some of the order book will get as and when their sites are ready, will be supplied at that time. Of the size that we have, depending on when the customer is ready to receive our turbines, we supply the turbines. Currently, company-wise, whether it is labor, manpower, resources or manufacturing abilities, I do not see any major impediment to fulfill this order book in a timely fashion.
Okay. What is our capacity to execute max in one quarter?
Sir, I think our time is up now. We request you to kindly return to the question queue for other questions.
Let me just answer this, sir. As I said, we do have some of the sites which are getting ready from part of this order book, which will be supplied in next 6 to 9 months time. Yeah.
Okay. Thanks, sir. Thanks for your attention.
Thank you. The next question is from the line of Jasinder Agarwal, an individual investor. Please go ahead.
Hi. Good evening, sir. I have just one question. We have our capacity utilization, which is somewhere in the range of 55%-60%. Can you know, explain in two aspects. One, in terms of management or operations, and the second in terms of the financial obligations that you may, you know, incur if this capacity utilization was to increase dramatically over the next three to five years. Thank you.
As we all are aware that the Indian wind market as an overall market did not do too well over the last few years between 18, 19, 20, 2021 and 2022, 2024. Those four years were not very good for Indian wind market, so our capacity utilization clearly became less. However, going forward, this capacity utilization, as you said, being the pioneer, we have the best of manpower, best of manufacturing facilities, best of OMS operating and management teams, and therefore we expect the capacity utilization as the Indian wind market grows to become higher. This will of course reflect in better performance of the company, both in terms of its revenue as well as other financial parameters.
What I mean to ask is what type of challenges do you see in terms of... Obviously at 25%, the employee or the operational staff strength that you would have is very different from what you will hypothetically be doing at 75%. That is one challenge that I can definitely see. Could you also explain this in terms of, you know, whether you need to upgrade your existing facilities, in terms of...
Yeah.
-CapEx and all that.
Yeah. Thanks, Mr. Agrawal. I'll clarify that, sir. I think our fixed manpower is fixed, and it can go up even if the volume increase substantially.
Okay.
What we need to add up is what is called the variable manpower.
Okay.
Suppose, I'm just giving an example, we are making extra turbines per month.
Right.
If we have to make two extra turbines per month, with the labor force and the people we need to set that level, that what we call the variable manpower, that will go up.
Okay.
I think so in Indian ecosystem, getting those variables manpower, scaling them is something we have done it in the past, and we are confident of doing it in future.
Okay. Sir, what about monetary cost in terms of, you know, redoing those factories or their you know, their full capacity?
No, as I explained in the previous question, we do not envisage any major CapEx over the next few quarters to do what we plan to do, which is to fulfill our existing order books and execute future order books.
No, not the existing, order book, but let's hypothetically assume if your, capacity utilization...
Yeah, even if the volume were to say, yeah.
You were saying the volume-
even if the volume were to substantially increase
Yeah.
To, let us say, even I'm just giving a number, to, let us say, 2x number, we do not have to do a substantial CapEx.
Perfect. For the next three years, you would say that at least in terms of maintenance CapEx, that requirement is low, is it?
Yes. In terms of new CapEx, the requirement is low.
Okay.
In terms of maintenance CapEx, each manufacturing works will have its own thing which is all funded through normal costs.
Perfect. That is very helpful. Thank you, sir.
Thank you, Mr. Agrawal.
Thank you. The next question is from the line of Pramod Rai, an individual investor. Please go ahead.
Hello.
Yes, sir. You are audible. Please go ahead.
Yeah. My one question would be like, is there any possibility promoter planning to increase the stake in future?
Sir, as management, we would not like to comment on our shareholders' shareholding of our company. So that's where I would leave the answer to.
Okay. Thank you.
Thank you. The next question is from the line of Sanjay Shah from Sarasak Metals Limited. Please go ahead.
Hello. Sir, firstly, many congratulations. We are delighted to see the aggressively healthy, healthier picture of our very own company, Suzlon. My first question would be, we're all aware that this business requires a lot of free cash flow. Is it safe to assume that out of this policy push of 8 GW of wind energy, is it safe to assume that government would also like to distribute it among the suppliers?
No, the government will conduct bids, and depending on the bidders winning the capacity and their preferred manufacturing suppliers, we would expect to see gigawatts to be distributed with the suppliers who are competitive and have the capacity and intention to take part in India's growth story.
Right. Right. Is it possible that in the near term future, we would be able to see a significant portion, the execution of the total megawatts? Like, it's been a while that since we have been noticing that it's been around 150 MW to 170 MW. Is it possible that Suzlon would be executing, like, higher number of megawatts in coming future?
Yeah. We have a good order book, and depending on our customers' requirement, we'll let's all keep our fingers crossed and hope for better execution.
Right. Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Vinay Chaudhary, an individual investor. Please go ahead.
Hi. Congratulations on the great number. My first question is, like, where do we see, with the recent noise from the market on Adani, where do we see the orders from them? Do we see any kind of flowing from them? On the order flow, like, you know, around 800 MW was the distribution of the WTG last year. In Q4, we see Q4 as the major peak in our business. What would be the Q4 and, you know, rough, 24 MW distribution? Thank you.
Sir, as you're aware, we are not providing any future guidance of what is going to be this quarter or next quarter or next year. But as I said, we are disclosing whatever we know, which is the current order book. You are right that last Q4 of last year was an exceptional quarter with very high volumes. Which is always very difficult to replicate.
Okay. Okay. About the orders, any update on the do we are in talking terms with the Adani Group for orders?
We have supplied turbines to Adani in the past, but as I explained to the previous question that currently our order book is well distributed and there is no concentration of orders from any single customer.
Okay. Okay. Just one more thing. Like, with the with respect to the non-core assets, you know, especially the Pune office, so, that is expected to be closed in this financial year. Is it? As my assumption, like, Am I understanding correct?
As we said, we are working on one of the two non-core assets and hope to conclude that soon. Of course, at the right time, the company would make the relevant announcements to the exchanges.
Okay. Thanks.
Thank you. The next question is from the line of Mohan Kumar, an individual investor. Please go ahead. Mr. Mohan Kumar, the line for you has been unmuted. You may go ahead with your question.
Okay. Can you hear me now?
Yes.
Yes, we can hear you.
Sorry. Actually I had gone through that the investment presentation you have said yesterday. I was observed one thing that the order book actually it was reduced compared to that the previous quarter. Correct me if I'm saying wrong. Around some 50 MW it is something it is reduced. Okay? That is the one question. Mainly I wanted to understand that, okay, why the order book has reduced? Like, you know, last time you guys said that, you know, there is a chance of, you know, strong order, you know, book is in pipeline. By considering that was probably this quarter would have been, you know, order book could have been increased. Right, sir? May I know the reasons?
As you're aware that, you know, order book requires both sides to finalize. One is the people who have won the bids, et cetera, they have to finalize their projects and then finalize with us. They have been, depending on what has happened over the quarter, I think so we have done fairly well by keeping our order book almost at the same level. As I said, we are in a, in recent discussions with many players who have won the bids as well as are planning for their corporate capacities. That is something which we'll keep sharing with you as and when we receive a large order or in an, on a quarterly basis.
Sir, another question is like last time also we heard that something strong order book, you know, is in pipeline. It's currently it is, you know, advanced stage. Even this quarter also we have been hearing the same statement. I just wanted to understand that how much time it really takes, you know, when we say advanced discussion to get it materialized, you know, a real order?
Yes. I think it's a fair question Mohan Ji. I think so if we would expect as the Indian wind market grows overall, the order book of Suzlon will look also healthy as in because the Indian wind market has been muted for last many quarters. The order has been being steady rather than in a very growth aspects.
Okay. Another question on the trade receivables, sir. Like last quarter also we are almost the same number and even this quarter also we are at the same number trade receivables. Any clogging things for us to get receivables, sir?
No. There is no red flags there. Of course, the sheer sales in terms of INR crores has increased. I mean, if you look at the receivable it may be similar, but the number of days outstanding is, you know, in that sense reduced. No red flags on any trade receivables.
Okay. Thank you, sir. That's all from my side. Thanks for your effort of taking this call. Thank you, sir.
Thank you, Mohan.
Thank you. The next question is from the line of Sunil Jain from Nirmal Bang. Please go ahead.
Yeah, thanks for the opportunity. My question relate to the recent auction of SECI of in the May of around 1,200 MW and recent 1,600 MW. Ordering for these turbines has already happened or this is still on the way?
As I explained in the previous question, there have been outstanding orders to the best of our knowledge, right? We are talking about SECI 12 and 13, but even in SECI 9, 10, 11 there have been some bidders who have not yet placed orders. Some of the bidders would be in discussions with us, but not all orders from SECI 9, 10, 11, 12 and 13 have closed. Which is what I expected my estimate of the orders which are yet to be awarded is more than 3 GW, 3,000 MW.
Yeah. [audio distortion] , there were some questions, like whether it will happen or not. These 12 and 13 these are in new region. That should definitely happen. Am I right?
I agree. I agree with your assessment and we would expect, some of we are in. The only thing I can share is we are in discussion with some of the winners of SECI Tranche XII and XIII.
My question was like, not like, more related to the timeline. Means somebody wants to they get, they need to prepare and then get. That's why I was asking that.
Let me tell you the timeline. The way timeline works is after e-Reverse Auction is completed, then the people who won the bid get what is called a letter of award. Post which when they accept the letter of award, the SECI goes and ties up with Power Sale to various states. They're saying, "Okay, these are the bids which have come for this tariff. Would you mind purchasing this power?" Some of the discussion might have started before the bid, but the actual signing of what is called the Power Sale Agreement, PSA, happens between SECI and the DISCOMs of the various states post the reverse auction is completed. That process can take two to three months and sometimes may extend to 9 months also.
Once that is signed, they tie up with the Power Purchase Agreement with the winning bidder. Say, okay, we have signed this now. Your beneficiary is, let us say, Chhattisgarh or some state, please come and sign the Power Purchase Agreement. From the date of signing the Power Purchase Agreement, the bidder is given 24 months to execute the project.
Okay.
That is the timeline. He would want to finalize the order close to, I would say... Once he knows that, yes, you know, Power Sale Agreement has been signed by SECI and I can go ahead and I need to do this, that's what he does. Yeah. In SECI 12 and 13, as you rightly said, these have been recent awards. I don't know the exact status of what is the status of SECI signing those PSAs or PPA, All I can say is that they are in advance and discussions with many of the bidders, the final order will only be done once they are sure that they have signed a PPA with SECI.
Okay. You are confident of maintaining your margin, sir?
I'm confident of doing well.
Okay. Great, sir. Sound, sounds exciting. Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
We thank everyone for, on the call for participating, and thanks to ICICI Securities for organizing this call. We look forward to future calls, and our investor relation is available for any queries that you may have on the company or in, or in your shareholdings. Thank you so much.
Thank you. On behalf of ICICI Securities Limited, this concludes this conference. Thank you for joining us. You may now disconnect your lines.