Ladies and gentlemen, good day and welcome to Suzlon Energy Limited Q2 FY 2023 conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there'll 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Mody. Thank you and over to you.
Good morning, friends. On behalf of ICICI Securities, I would like to welcome you all for the Q2 FY2023 conference call of Suzlon Energy Limited. From the management we have with us Mr. Ashwani Kumar, CEO, Mr. Himanshu Mody, CFO. We will begin with the opening remarks and a brief presentation by the management, followed by a Q&A session. Over to you, Mr. Kumar and Mr. Mody. Thank you.
Thank you, Rahul. Good morning, good afternoon, ladies and gentlemen. This is Himanshu Mody, CFO of the company. During this call, we may make certain statements which reflect our outlook for the future or which could be construed as forward-looking statements. These statements are based on management's current expectations and are associated with uncertainties and risks and are fully detailed in our 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. With that, I'll just like to hand over to my colleague, Mr. Ashwani Kumar, to make a brief presentation about the industry and the company.
Good morning, everyone. Renewable energy has been the focus of the government for last few years, and it's been a great success by government policies and the players within the industry. The five-point agenda the government has put for all of us is a target of 500 GW of renewable energy by 2030, reduction in carbons, net zero target of 2070, and in the energy mix, making it 50% by 2030. Having set those targets and actually committed it openly to the world, the opportunities which come out for the wind sector is that there is a specific now target for wind, which is 140 GW.
Not only that, I think so in the subsequent circulars and the policies the government has put, they have actually put a specific wind RPO, which is the wind renewable purchase obligations, going forward. MNRE is also working towards sorting out other issues like repowering potential, like doing away with e-reverse auction. If you see, the focus has shifted over the last 12 months, though it was not publicly announced by anybody. Over the last 12 months, the pure solar bids of SECI, which used to be the, you know, the base of SECI bids have not come out. Government has realized that the future is hybrid, round the clock and peak power.
All the bids that have come out over the last 12 months from SECI, from Government of India for purchase of renewable energy are wind or hybrid or RTC, which all of these three give enough opportunity for all the wind players to set up capacity. In addition to that, Government of India announced Green Energy Open Access Rules a few months back. What that does is that it allows the interstate transmission of green power from one state to another. One of the, I would say, one of the highlights or one of the features of wind energy is, whether we like it or not, that it is only in eight states in India. The other states were not getting advantage of wind energy, except for the utilities who could buy it through SECI bids.
Now, with this opening up of green access and the rules coming out, most of the industrial customers across India can take advantage of wind energy and purchase wind energy no matter where the projects are installed. Given this favorable market scenario and opportunities, let me talk about what Suzlon's strengths are. Suzlon, as many of you are aware, is over 25-year-old company. It has been a market leader in the wind energy capacity. We have now close to 19,500 MW of installed wind energy capacity. We are not only active in India, we have presence in 17 countries. We have around 5,500 people, and our market share in India on a cumulative basis is 33%, which means 1/3 of turbines in India are Suzlon turbines.
Why have we achieved this strength is very simple. One, we are end-to-end service provider. We have a technology leadership. The technology leadership comes not only because of the competence of our technology team, but also because we are focused Indian company. Unlike some of our competition, who make turbine for the entire world and therefore different wind regimes, our turbines are designed for Indian wind conditions. As some of you are aware, the wind conditions differ from country to country and from various geographies. Our technical design is designed for Indian conditions and therefore, in terms of efficiencies and outputs, Indian Suzlon wind turbines have the technology leadership. In addition to that, we also have very, very strong customer relationships.
If you see almost all, in fact, of customers that have put wind projects over the last 25 years have been our customers and have been our repeat customers. These includes global utilities like Enel and Sembcorp. They include the newer set up platform like ReNew. They include the domestic players like Adani. They include other corporates like Aditya Birla, Bajaj, ONGC, Shree Cement, Torrent, and of course, the Indian utilities like Tata Power, Torrent Power, and others. This set of customers who have been our customers and have given us repeat order gives us the confidence that we have a good relationship with them. In addition to that, we have a very, very strong service base. Over 13,000 MW of wind turbines in India are operated by us.
This makes us, if you take us as an operator, almost in the top five, maybe third, biggest operator in India after NTPC and one more. What that does is that our relationship with the grid, our understanding of the grid, our understanding of the requirement of Indian power systems is much beyond everybody else, which also gives us a very important insights into our customers, because most of these customers of 13,500 MW are all existing customers who have future plans. It also gives us knowledge about what have been the wind records all over India in all the good wind sites over the last 20-25 years.
It's not only a small wind mast data that we talk about which most can measure, but also a track record over last 20 years. In terms of our manufacturing base, we have our plants in Daman. We have our, which is our main nacelle plant. In addition to that, we have blade plants in different geographies, minimizing the need of transport. We have tower plants both in the west, where the maximum wind is. Our capacities, including our subsidiaries capacities to produce, is over 3,000 MW. We are well geared without much CapEx to take advantage of the opportunity that India offers in the wind turbines. In terms of our product, we have been consistently developing our product.
Our current largest selling product is S120, which is 120-meter rotor and 2.1 MW output. We are commercializing our next product, which is a 3.3 to 3.15 MW, 144-meter diameter, and 160-meter height product. In terms of order book, our order book as on 30th September was 759.2 MW, and subsequently we have announced through the stock exchange another 193 MW of orders. We have a very strong order pipeline existing as well as under discussions going forward.
Given this background of the company and the macroeconomic scenarios of renewable industry, I now hand it over to Himanshu to take us through the financial journey over the past few quarters as well as the current scenario.
Thank you, Ashwini. Again, good morning, good afternoon, ladies and gentlemen. I would be using slide number 17 of our investor presentation, which has been uploaded on our website, as the reference point for my discussion during this presentation. As you can see, you know, this is what we like to title a transformation over the last 30 months, since March 2020 till September 2022. This is of course, this transformation has been a very well laid out plan and thought process of our late Founder Chairman, Shri Tulsi Tanti. If you can see the numbers on the volume side, in March 2020, FY 2020 rather, we did a 59 MW of revenue recognition on the manufacturing side.
Which in FY 2022 has grown to 808 MW in terms of the manufacturing. H1 of FY 2023 has been higher than H1 of FY 2022. The FY 2022 momentum that we had got is fairly on track for this financial year as well. In terms of the revenue numbers, a similar story, approximately INR 2,933 crore consolidated revenue in FY 2020 has grown to more than 2.5x to about INR 6,520 crore in FY 2022. We are trending along very well in the first half of FY 2023 as well, with a growth of about 15%-20% over FY 2022 H1.
On the EBITDA side, what used to be a negative EBITDA company in FY 2020 and a significantly negative EBITDA company of -INR 423 crores, we have been able to deliver a positive EBITDA of INR 828 crores in FY 2022. In this year, first half of this year is also trending along the similar lines of the previous year.
On the debt side, which has been the large transformation story, for the company, the company has been through a few cycles of restructuring with its lenders, due to the large debt pile-up that had accumulated in FY 2019, FY 2020. That has now significantly been reduced, you know, from INR 13,000 crore to INR 2,700 crore in H1 of FY 2023. Of course, after the successful rights issuance, which was a post-30th September 2022 event, another close to INR 600 crore of debt has been reduced as of 4th November, and the debt post-rights issue stands at INR 2,139 crore. This of course brings down the interest costs or the finance costs also significantly down for the company.
I'm happy to report that, after a period of five years, Q2 of this financial year, FY 2023, is the first quarter wherein the company has been able to report a positive PAT on a purely operational basis. We are well on our way to capitalize further on this transformation. As Ashwani said, the industry outlook looks fairly bright. From a financial prudence perspective, the balance sheet, P&L and the management are all geared up to participate in the growth story year on. 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. We will now begin the question answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have the first question on the line of Chetan Shah from Jeet Capital. Please go ahead.
Hello. Yeah, hi. Good morning, sir, and thank you for taking my question. Just two quick questions. One, if I go back to our slide where you have mentioned about our installed capacity, could you actually tell us in terms of the operational capacity, how much exactly is this? I believe, pardon my ignorance if it is wrong information, that some portion of our capacity, because we have not utilized for last three, four years, it needs to do some kind of a tweaking to make it fully operational. If that is true, then what is the kind of money required to do so? That's my first question.
Second, in terms of the order book mix, which you showed in the slide number 12, there are three part of the order. If you can give us some flavor of the working capital requirement, both in terms of bank guarantee and also the operational working capital, how does that work as of now? These are the two basic questions I had, sir.
Yeah, thank you. Let me try to answer the first one, and then I'll, then Himanshu can answer the working capital part. All of our capacity that we have, installed, most of it, is operational. Many of them have done 20 years operational life. What we are doing with those customers is offering them a solution by which we enhance their life by another five years. Most of our customers have agreed to it, and some of them which have not agreed, we have handed it over to them. Those are more than 20-year-old turbines. Some of these will be used for repowering, as the Government of India has announced repowering policy.
In terms of your other questions, which I thought is more on manufacturing capabilities, I think so.
Yes.
Yeah. We have manufacturing capacity, which will not require CapEx or lot of CapEx for even our next series of turbines. Our 3,150 MW of capacity, which is based on 2.1 MW model, will require very little CapEx to increase this capacity. Presently, we are fully geared up in terms of preparedness, both in terms of our suppliers, our designing, our prototyping of our 3 MW turbines without any CapEx requirement. On order book, working capital, Himanshu can toss you that.
Sure. Thank you.
Himanshu, I just want one clarification. This new turbine of 3+ MW, is there any timeline in terms of our first prototype will come and how the order flow will happen over there? Apologies to cut you in between.
As I said, the way any new turbine is launched is we start taking smaller orders first rather than a large order from a utility. The smaller orders has already flown in terms of those are part of the order book that we have disclosed. The prototype, as I said, will be installed in next couple of months.
The results of that would be, as I said, commercialization in terms of we are already offering it for sale, and in the next calendar year, they'll be up and running, the 3.x MW turbine.
On the working capital for our ability to be able to deliver this order book, it's after the, you know, significant debt reduction as I presented a few minutes back, we are very well-placed. We have been in active discussions with a few bankers to provide the working capital facility, and we made significant progress and certain in-principle sanctions also have been received for the same.
Additionally, our existing lenders also, you know, they have a project-specific funding policy, under which they are permitted to provide working capital support for projects such as manufacturing activities such as ourselves. We are very well-placed to be able to deliver these orders in a timely manner from a working capital perspective.
All right. Thank you so much, sir, and wish you both all the best for our future. Thanks for taking my question.
Thank you.
Thank you. We have the next question on the line of Yash Agarwal from JM Financial. Please go ahead.
Yeah, hi. Good morning, sir. My first question is on the order execution. Last year, second half, I think we did about 520-530 MW. Sitting at, you know, nearly 1,000 MW order book at the moment. What is your assessment on what sort of growth could we see in the second half in terms of order execution?
Yeah. I think you are right on both the numbers in terms of we have a very healthy order book. Last year we did 450-500 or plus MW over the second quarter. This year also our execution team is confident that they will be able to deliver good results in the next two quarters. I didn't want to put a number on it, but I think overall, since we have performed better in first half since last year, we expect a healthy performance in the next two quarters also.
Okay. Okay, my second question is, you know, again, on the WTG and the EPC side, which is a standalone entity. I think, you know, the first half also the EBITDA margin on the business is hardly 2%-3%. At the moment, whatever we are earning EBITDA, as for my assessment is from the O&M subsidiary. What is the target, you know, to take it to the EBITDA margin on the execution business? That is the WTG and the EPC part of it.
I think so given our last few quarters, given the commodity prices variation, EBITDA margins for most OEMs worldwide have taken a hit. For in our own case, it was also limited by the volumes that we could do. As you could understand that if you are close to break-even volume, the EBITDA will be low. As the volumes increase, your EBITDA margins goes up because all your fixed cost is covered by the break-even volume. We expect this EBITDA margin to grow in the forthcoming quarters going forward.
Is there any break-even EBITDA number beyond which, you know, our margin, or, sorry, a volume number beyond which our margin is, you know, in higher single digits?
Guys are all financial analysts. You can calculate that given our numbers so far over the past quarter.
You know, I had a few, again, bookkeeping questions. In the annual report, there's this subsidiary called Suzlon Gujarat Wind Park Limited, which is actually leaking INR 300 crore for you. What exactly are the operations done in this and is this expected to continue, the sort of losses that we are seeing there?
That the interest is due to certain intercompany transactions, Yash. Obviously going forward, you know, due to implementation of certain merger schemes, you'll see a much more streamlined balance sheet on a consolidated and a standalone of SGWPL, as well.
Okay.
Of course, at a consolidated level it has no impact due to it being intercompany.
Okay. Got it. The interest cost for the last quarter.
Yash, with due respect, I think, you know, if you have any questions, please write to us offline. To be fair to others in the queue, I request all callers to limit their questions to two or three, please, so that we do justice to all the other question callers. Yash, we can take your other follow-up questions offline, please.
Sure. Thank you.
Thank you so much.
Thank you. We have the next question on the line of Gautam C. Jain from GCJ Financial Advisors. Please go ahead.
Good morning, sir.
Morning.
Yeah, my question pertains to your wind turbine revenue that is highly inconsistent quarter-on-quarter. You said in your presentation that current wind capacity of India is 40 GW. It go to 140 in next eight, nine years. What order book we are looking at every years from now to next six, seven years?
What has happened, as I described in the macroeconomic scenario, is that there were pre-2017, it was only state-wise wind capacity addition based on the tariffs given by each of the states. That changed from 2018, 2019. A bidding wind regime came. Initially, as was expected, because solar was very low volume, most of the bids were solar bids. That has changed over the last one year, where the solar, pure solar bids have stopped and hybrid and wind bids have come. We expect hybrid and wind bids capacity in terms of opportunity could be close to 3,000-4,000 MW every year. In addition to that, what has also happened recently is many of the industries, including the PSUs, have started putting up wind power projects because of the interstate transmission that has been allowed.
If you see our order book, there is a significant portion of captive retail PSUs of almost 285 MW. This number used to be very, very low if you take even two, three years back. We would expect this market segment also to be a very large market segment going forward. Government, in fact, is announcing both for energy consumers, which is, you know, the large scale things, having their RPO obligation, including a specific wind obligations. Two, government is also saying that many of the existing coal generators by name has to also generate renewable energy going forward. Having said both of these, we expect this market size to grow. We are still awaiting the things, but we are under active discussion with many of the industrial customers in India for these orders.
The 140 GW government target is, I would say, government has put a lot of money into it. The wind sector in terms of production capacity, in terms of the site and execution capability, is capable of delivering that. It will happen, I would say, not in a big chunk starting immediately, but it'll have a steady growth over the next two, three, four years for us to reach our target.
Okay. What is our acceptable capacity every year or per year?
Yeah, presently, given 2.1 MW turbine, we can make around 3,000 MW we can supply. This will increase as we increase the turbine size. Because as you know, the capacities in terms of the nacelle, the big unit, so we produce, let us say 50-60 units per month. That can go up the moment the megawatt size is increased, this capacity will increase automatically.
Okay. My second question pertains to your AMC business, which is quite stagnant for many years. How do you see that business shaping up in future?
The AMC business is stagnant in terms of the increase in megawatts, which is reflective since the parent company did not supply many turbines. There was not much surprise, turbines added in the AMC business. Now that the turbine supplies last year were 800+ MW, this year continues to be a good performance and going forward much more, that automatically adds to the growth of the AMC business. One of the things that we do because we are end-to-end service provider is that when we supply the turbine, we ensure that the AMC business remains with us. Automatically as our turbine sales grow, our AMC growth is also there.
However, if you take actually the five-year scenario in pure AMC business, while the top line might not have changed much, the efficiencies and our work on it ensure that the EBITDA has gone up substantially over the last few years on the AMC side.
Yeah, that's true. Thank you so much.
Thank you. We have the next question on the line of Piyush Thakkar from Autus. Please go ahead.
Good morning, sir.
Morning.
Yeah. First of all, I congratulate for a very good result this quarter with common profit actually. My question is, what is the reasonable amount of debt you feel if you sit in the balance sheet, can be serviced without any challenge, number one. How and when we can target to achieve that, actually. My second question is, when we are. Hello?
Yes, go on, Piyush. Go on, Piyush. We can hear you.
My second question is, when we are thinking to free our pledge shares, actually, this is 100% right now.
Sorry, what was the second question, can you repeat? Okay. Let me answer the first question, Piyush. I had got that. Essentially, if you see our consolidated debt as I presented to you earlier, is close to about INR 2,139 crores after the rights issue. If you look at the consolidated EBITDA, you know, if you even analyze the EBITDA and you look at the FY 2022 last year, we are sort of close to about a little over 2x debt to EBITDA in terms of ratio. I think, you know, these debt levels is something that we can more than comfortably service through the free cash flow that is available with the company.
Having said that, you know, of course, we are working on further optimization plans to see how we can further bring the debt down. The rights issue was, of course, the first step in that right direction. To answer your second question, the pledge of the shares of the promoters, a lion's share of that pledge has been done to the lenders of the company, which is REC and IREDA, for the facilities that have been borrowed by the company. It is the lion's share of the pledges for the INR 2,200 crores of borrowing that the company has.
Correct. Okay. Thank you all, sir.
Thank you.
Thank you. We have the next question on the line of Aman Sonthalia from Mugi Constructions Private Limited. Please go ahead.
Sir, what are the non-core assets which can be monetized?
Aman, there are, you know, two non-core assets which we have identified for monetization. One is of course the real estate, which sits on the standalone books of the company, which is our corporate office in Pune. That's a 11-acre campus. Of course, due to COVID and all of these reasons over the last two or three years, commercial real estate has been slow, but that is an asset which has been identified for monetization. The other, of course, is, you know, we've been talking about is SE Forge, which is a 100% subsidiary of the company. That is something that we may look. Of course, the timing of monetization of these assets, we'll have to be tactical about, but those are essentially non-core to the business.
SE Forge can say it's a backward integration for the company's manufacturing facilities. We will keep our eye on the ball to see and capture the right timing for monetization of these assets.
One more question that we are expecting that the market of wind power will be increased from 40,000 MW to 140,000 MW by 2030. How realistic is the target, sir?
I expect the government to perform. The government, if you remember, had given a target of 175 GW by 2022. As of 30th September , as of their own performance, it's already achieved 166. Government does plan properly, is our view. We as an industry will keep supporting government's vision and ensure these targets are achieved. In terms of the wind potential of the country, it is definitely much more than 140 GW, if you include all the wind potential of the country. We do not expect either in terms of the availability of sites and the windy sites in India. There is a problem. We do not expect that we as an industry player and along with our friendly competitors are geared up to do it.
The third, which is very important, which people tend to forget, is that the ecosystem of wind projects has been developed over years. Unlike some of the other industries, almost 80%-90% of the components for wind industries are produced in India. In both in terms of our readiness, our self-sufficiency and availability of sites, I think so all of that is there in India. That's all I think so I have to say in terms of now. I being an optimistic, positive person, we would definitely support government to achieve these targets.
Sir, one last question. What is the margin in AMC business?
Margin in AMC business, if you take the EBITDA, et cetera, has been over 40% over the last many quarters and last two years.
Okay, sir. Thanks a lot.
Thank you. We have the next question on the line of Ketan Karani from Ketan Karani Global Research. Please go ahead.
Yeah. Hi, this is Ketan over here. First congratulations for the good result. Certainly we share the pain of demise of Tulsi bhai. Coming to the result, I just want to know the non-core asset, as you said, there are two real estate and SE Forge. Can we just have a ballpark figure of what kind of amount of money we are looking at? That's the first question. The one question was that what are the targets of production for the year 2023, 2024 and 2025? There has to be internal target. What are we looking at if we can be either megawatt or rupees, whatever. Please, if you can just clarify on those sides.
On the first question, why do you want us to go public with our expectations and tell all the prospective bidders on what our targets of achieving those numbers are?
You can be overoptimistic also. You can be overoptimistic and they can come to you at a lower.
If I'm overoptimistic, you will say you did not achieve the target you said. Okay.
No, I just want a ballpark figure. If you are looking at INR 1,000 crore or INR 1,500 crore. Range also it's okay. If you give me a range, we will know what kind of debt reduction we are looking at. That's the only reason I'm asking.
Ketan, I think so it will. Okay, let me answer that. I think that part I can answer. It will take care of significant portion of our debt, current debt today, both these assets combined.
Just tell me also.
Yeah.
I just want to know what will be the production targets for, or maybe the sales targets.
In terms of production target, I think so it would be fair to say that whatever the country installs over the next three years, we will try to achieve our market share of 30%+ in each of those years, et cetera. Our targets, internal targets are pretty strong. As of now, we have decided not to give these guidance in terms of numbers, but I'm sure going forward, we will start sharing this with analysts at suitable time.
That would be very nice. I certainly would like to end with a congratulation for the great turnaround and hoping for the good days back which were there 10, 15 years ago. Thank you.
Thank you, Ketan.
Thank you. We have the next question from the line of Abhinav, an individual investor. Please go ahead.
Thank you, and good morning, everyone. My congratulations as well for a good turnaround in this quarter. I have two questions, probably both of you for, Ashwani. One is, our current manufacturing capacity utilization is around 800 MW per year against the capacity of 3.1 GW per year. Are we looking to continue with the current utilization or looking to increase the utilization and deliver on order book faster? The second question is, with our debt now coming to sustainable levels, what do we think will increase profitability from here on?
On the first question, what we did was, while our capacity capabilities remained over 3 GW, we ensured over the last few years that we cut down on our costs to make sure our break-even point reduces to a much lower level. Having achieved that, we will grow as the market grows in India. So far last year and last to last year and even like last for last two, three years, Indian wind market has not been much, but that has changed given the number of bids that have come out in recent months. We will achieve a much better capacity utilization going forward. In terms of the other question.
Does that answer your question?
Yeah. That's. Thank you, Ashwani. The second question was with our debts coming to sustainable levels, what do you see will increase our profitability going forward?
Hi, this is Himanshu here. In terms of debt, as I said, coming to sustainable levels. Our, as I said, first quarter in Q2 is back positive after many years, and we expect this trend to continue or even further better from here.
I mean, again, you guys are analysts. You can see if you take the same slide 17, our FY 2020 debt of INR 13,000 crore, what is the finance cost of that versus what will be the finance cost of INR 2,139, whatever interest rates you may choose to keep. That is definitely the savings and debt is directly to the shareholders.
Yeah, no, thank you. You know, I meant that, you know, we might not achieve much further savings through debt reduction because it's coming down to optimal levels now, and I think there would be other avenues to now increase profitability. That's what I was trying to understand.
I agree with you there, Abhinav. In fact, you know, as we also look at you know, furthering or increasing our order book, there would be an increased offtake on our working capital side also, which may add to the overall finance cost. That increase in finance cost would only be linked to the increased volumes that we may generate.
Understood. Thank you.
Your understanding is right, that further optimization in the P&L through interest cost may be minimal.
Understood. Thank you.
Thank you. We have the next question on the line of Chetan Shah from Jeet Capital. Please go ahead.
Hello.
Yes, go ahead.
Yeah. Hi. Just one small question. In your opening remarks you kind of explained us about the government opening up of power intra-state from one corner to another corner. I believe we have some timeline restricted by government up to 2026 or something. Is that true or this is like, can keep renewing? Just wanted to get a sense on that.
There are two portions of it. One is there is something called Green Energy Open Access Rules. Now, these rules basically say that if you put green energy, solar, wind at one corner of India and take it down on the other corner, you are allowed to do so, and Power Grid and others are making rules regarding how to apply, what to do, et cetera, for doing that. That is allowed now. That doesn't have any timeline associated with it. What government is doing in addition to this is for the projects that come till 2025, there is a waiver of 100% waiver of transmission charges to encourage green energy and the green energy user usage by industries all over India. They have given 100% waiver till June 2025, and that waiver will keep reducing every year.
What they are saying is please put your green energy now. Again, theoretically, if there is an aluminum or steel plant in Jharkhand, which was not a windy state. They want to purchase power from a project which is in Gujarat or Tamil Nadu or Karnataka. They can do so now under the new rules. If they set up the capacity before June 25, they do not have to pay any money to Power Grid for transmission charges. It is encouraging them to set it up before a certain timeline. That is what the timeline is about.
Sir, just small clarification. These waivers of charges are perpetual if I put up a capacity before 2025. Is that a right understanding?
Yes. Once you set it up, in most of them, like SECI bids, et cetera, once you sign a contract, then it will remain for the life of that contract. These charges will remain zero.
Okay. Okay. Thank you so much, sir. Thanks for clarification.
Thank you. We have the next question on the line of Sushithal from Samatva Investments. Please go ahead.
Hi, thank you for this opportunity. I just had some couple of bookkeeping questions. I just wanted to understand what is the right now O&M order book which we have existing. This was in previous PPTs.
This is the operator here. Sir, your audio is not very clear. Could you come closer to the mic or off the speaker phone?
Okay. Yeah, thank you. Is it better now?
It's a little better, yes.
Okay. I just wanted some couple of bookkeeping questions. Wanted to understand what is the current O&M gigawatts and turbines which we have right now, and what is the value of the current order book?
We have close to about 12 GW of turbines under our active maintenance. The sort of contract validity of those is over five years for most of these. You know, the average life of these turbines would be close to about 13 years. That's the overview on the O&M business in terms of wind assets under maintenance terms.
Okay. Once we receive any new order, when does the actual O&M kick in? Like, when does the money actually come from this O&M? Like, do you have any, like, grace period before which we start receiving money from the O&M business?
Yeah. During the warranty period, we supply, we operate O&M is free for the customer. We built it in our CapEx sales price initially itself. After two years, for the majority of contract, in some contracts it may vary that term, it will then go into full revenue earnings to our O&M business.
Okay. Got it. Thanks. In general, how do you see the business of O&M in the last three, four years? A lot of individual contractors have actually started taking this business. Do you see, like, Suzlon actually taking over this business from your erstwhile clients? What does the, like, general landscape look like?
Presently, I think so we are proud to have that most of Suzlon's customers continue to remain with us, given our technical expertise and our size of operations. None of the individual operators of O&M are not even 1/10 of the size of us. While they have just come up recently, but I think so we remain the largest O&M provider for wind turbines in terms of in India. Two things because why we are doing that. One is given our experience, our performance in terms of the machine availability, the energy availability to the customer remains better than most things. Second thing is, we are one of the few which provide comprehensive O&M.
What we call, we tell our customers the headache is now shifted from you to us, and that comprehensive O&M service is what we provide to all our customers. Given these two of our O&M strengths, most of the customers remain with us. While some of the new players have come up, which have started doing O&M, I think so those are much smaller compared to what we do.
As an organization, are we strategically looking at entering that space aggressively as well?
In terms of if you're asking if we want to operate turbines of other manufacturers, we have already started doing that at a very small scale. As that business grows, we will continue to look for that business also. We have the technical capability, having been in the wind turbine business for over 25 years, to operate all the turbines that are currently available. As and when we get these opportunities of people wanting to shift their operators, we will look at those opportunities.
Okay. Thank you so much. All the best.
Thank you. If you wish to ask a question, press star and one on your touch tone phone. We have the next question from the line of Sudhakar Prabhu from NeteSoft. Please go ahead.
Good morning. I have three questions. My first question is, can you give us some sense on the industry? I mean, what is the total industry capacity, some sense on pricing? Because earlier I believe, to install one megawatt it used to cost around INR 5 crore-INR 6 crore. How has been the pricing over the last three, four years? Some sense on that.
Yeah. The industry's capacity, as I said, the manufacturing capacity, remains in India is over 10-15 GW, all the OEMs put together. The cost of wind turbines have not gone up from the numbers that you talked about, five, six turbines. They are INR 5-6 crore per megawatt. And why is that, is because the efficiency is down by most OEMs. Once you have a larger size turbine, which means only one tower producing instead of 1.5 MW, which used to be the norm, close to 3 MW , the overall cost per megawatt has not increased too much.
Yes, some of the commodity cycle in terms of steel and other pricing did go up in the recent past, but those are starting to look better. The numbers of course, what you are talking about, what I'm talking about, are excluding tax as well as excluding many of the installation costs, which will vary from the various site and other things.
In terms of PLF, previously I think wind used to do around 20, 25% PLF. How has the PLF? I mean, with the new generation turbines coming up, do you see the PLF can go up to 30%-40% range?
Most of our new generation turbines are between 35%-40%, given the sites.
Okay. Secondly, sir, I believe previously Suzlon had all the land available, but I think the grid connectivity was an issue. How does Suzlon fare right now in terms of grid connectivity? With your existing land bank, what kind of, you know, total capacity can Suzlon execute over a period of years?
As I said, one of the Suzlon strength has been we are end-to-end service provider. We have access to land, we have access to connectivity. What has happened over the last few years is that the government on their own is setting up all these power evacuation infrastructure. That will give us us and the industry overall a much better connectivity situation than it has been over the past few years. Why the people come to us, one of them is, again, they don't have to go to a land person separately and evacuation person separately and installation person separately and an O&M person separately and buy only turbine from a manufacturer.
We are the one which do end-to-end service and we continue to have, I would say, the best access to the wind sites in terms of data, land, connectivity, all the things put together than any other player in the country.
You're saying that your existing land bank is already well connected with the grid capacity, is my understanding right?
I think so. There is a whole development cycle in any project. It starts off with setting up of a wind mast. While we know that this is a windy site, what we do in terms of we set up a wind mast first. Suzlon again has been leader in wind masts in India by far. Once the wind mast starts giving data, that gives us and therefore any investor which comes into the wind industry enough data on what the likely generation from that site is going to be. After having the years of wind data, we start acquiring land. The land could be private land, revenue land or any other land that we start acquiring. Each one of them have their own processes.
Once we have a good visibility of the land in that area where the wind has been there, we start applying for connectivity. The connectivity approvals have now been streamlined by Power Grid as well as by state transmission companies. Some of the work they have to do in case they have to upgrade the transmission infrastructure, which might take 12-18 months. What this does is that there is no number as such. The number at the initial level of the windy site looks a very, very high number, but it's a rolling basis pipeline that we keep building. That has been our strength over the last many years. There's a rolling basis pipeline that we keep building.
We keep putting new masts, we keep acquiring new land, we keep acquiring new connectivity and keeping the areas and sites ready for our customers.
Right.
I hope that gives you a better understanding of the process.
Yeah. It's very clear, sir. My last question is, sir, on your rights issue, you have only made a partial recall of the first right, first call, and I believe another INR 600 crore is due. When do you plan to, you know, raise this money, rights issue?
Difficult for us to commit a timeline, but, you know, obviously, as per the prevalent norms, the board can sort of give the shareholders a 14 days notice, to call the subsequent call or calls, at any point in time. We will of course be, you know, as we get into the close to the new financial year in the next few months in FY 2024, we are also getting into our budgeting planning exercises. As part of that, we will, as management discuss this with the board and, decide at the appropriate time.
Thank you, sir. That answers all my question. All the best. Thank you.
Thank you.
Thank you.
Thank you. We have the next question on the line of Ketan Karani from Ketan Karani Global Research. Please go ahead.
Hi. Thanks again. Just wanted to know one more thing. As the government has already planned for 140 GW of power from wind power, and that is one of the highest addition among the renewable alternative power arrangements. We would be at, as you said to earlier questions, over 30% is our thing what we are planning to achieve out of that. That's a huge output which will be generated by Suzlon. There is a possibility that the 140 GW, 30% share will increase by 40%, 42% or maybe 45% also, as you are becoming much more stronger with time. What we are seeing is that the turnaround already started. Will it become a pronounced one?
Though it's a forward-looking question, I just want to know from a four to five-year perspective only. There's nothing to know with next quarter. We are on the right path to becoming one of the best companies in the world again. Hopefully we will not commit the same mistakes like what we bought Gamesa and everything, all those nonsense. But I believe that this is a possibility. Just wanted to know your feeling and understanding as you are running the company, what kind of future you visualize for shareholder wealth creation.
Thank you for your kind words, Ketan. The only thing I would say is that there is no better time to be a renewable energy company in India than now. We as management are fully committed to utilize this opportunity for the benefit of all our stakeholders and shareholders. I would say, shareholders' wealth and shareholders' opinions are very dear to us. Thank you very much.
Yeah. Just I would like to conclude by requesting that we let the shareholders also be aware of the planning which we are going to undertake whenever it becomes feasible to talk about it, because I think one of the concern everybody would be having as a shareholder, as a future shareholder is the promoter stake is very low. A lot. If I just take into account Sun Pharma family together, then it's okay. Otherwise, I think in the future, it will be more happier to see the promoter who are creating wealth for all of us create wealth for themselves also. By increasing the stake from 15%-16% to 26% or maybe 30%, I am a person who will be very, very happy if the promoters do that.
That's well noted, Ketan bhai. You know, we will be working on all sorts of strategic initiatives. On part of the management, I can assure you that, you know, there has been a quiet period for Suzlon for the last few years. Now we will engage actively with all our investors and shareholders. We now have an active investor relations team that we've put in place, who will be in touch with you even despite the other outside the quarterly results. Of course, both Ashwani and I remain available to meet with the analyst, shareholders and investors, not only during the quarterly calls, but even during the year at any point in time.
No, no. My best of luck to Suzlon and with the confidence vote from my side and hoping to achieve overachieving what I'm saying, let it be another again a blue chip what it was 15, 20 years ago. All the best to you, all of us, and all the best to all of us and good luck to all of us.
Thank you.
Thank you.
Thank you.
Thank you. We have the next question on the line of Anshuman. Please go ahead.
Thank you, sir, for the opportunity. The first question is, what is the current cost of borrowing? Given that now we have become operationally profitable, it's the bottom line as well. What are the trajectory that you see for the cost of borrowing? What is it exactly?
Anshuman, currently the cost of borrowing is approximately about 10%. You know, of course, this was the deal which was refinancing that was done in May 2022. Subsequent to that, you know, the interest rates, as we all know, have increased. You know, I think, we might also face the brunt of that, in the short to medium term. You know, that's where we are. Of course, this is other than the working capital or the enhanced working capital costs, that also brings certain finance costs into the finance line. Of course, those would be only as a result of any confirmed order book visibility that we have.
Okay. Understood. Sir, do we have any accumulated losses on our books currently? Could you quantify that number?
There are certain accumulated losses, of course, as a result of the, you know, several previous years operations. It's difficult for me to quantify, but I would say that a tax shield is available to the company for anywhere between two to three-year period.
Two to three. Okay. Actually I was trying to understand on that perspective.
Yeah.
Sir, one final question. Sir, given the thrust on offshore wind and repowering policy also, which has recently come up, what is the opportunity size which you foresee over the next six to eight month to one year, which we are also targeting?
The offshore in India is still at a very nascent stage, because even the onshore potential is not being fully utilized in the country. Offshore, I won't say anything will come up in next six months to one year. However, government has given a specific offshore target, which is a 2030 target as part of their 140 GW. In terms of the repowering, there was a huge activity in 1999, 2000, 2001 of setting up wind capacities. Those are all, I would say, completing 20 years. Government has come out, as you may be aware, of draft repowering policy last month. Asked for the views.
Once the draft repowering policies become established, each of the states will start selecting sites for repowering, and that will be a good opportunity for us. As being the largest player in the market, and especially during the time when these projects were set up, we inherently have a better sense of what these repowering of 20-25 GW where and what it is going to be.
Sir, do we have the capacity to install offshore? Do we have that capability? Have we ever done offshore installations?
Suzlon in its previous history used to own companies and our design and technology team did contribute to installation of offshore turbine outside of India. We will use that design and technology expertise as and when the offshore markets opens up in India.
Thank you, sir. That answers my question. Good luck for the future.
Thank you.
Thank you. That was the last question. I would now like to hand it over to the management for closing comments.
No, thank you everyone for the participation and you know, joining the call at little bit of a short notice. As I said, going forward, we will be now starting an active IR program. We have now a dedicated team available, and we will now take the opportunity to speak with all of you on a quarter-on-quarter basis. In the interim, if there are any questions, please reach out to us through the email ID available on our website, and we'll make sure we'll be swift to respond. With that, thank you very much and have a good weekend.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.