Q1 21/22

Aug 17, 2021

Ladies and gentlemen, good day, and welcome to Sterling and Wilson Solar Limited Q1 FY 'twenty two Earnings Conference Call. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Jain, Head of Investor Relations from Sterling and Wilson Solar Limited. Thank you and over to you, Mr. Chen. Welcome you all to Q1 FY 'twenty two earnings call. Along with me, I have Mr. Amit Jain, Global CEO Mr. Bahadur Dastoor, CFO and Strategic Growth Advisors, our Investor Relations Advisors. We will start the call with an update on the solar power industry and operational highlights for the quarter by Amit, followed by financial highlights by Wahadur, post which we will open the floor for Q and A. Thank you and over to you Amit. Thanks, Vishal, And warm welcome to all the participants on this call. I would like to give a quick update on solar power industry and state of the art business operation. The global solar industry has been adversely affected in last 9 months due to an unprecedented Increase in price of modules, commodity prices and freight costs that have pushed the prices up for projects. In last month or so, the modular commodity prices have been stable, but we continue to see an upswing in the freight prices. The freight charges have been on continuous uptrend fueled by various regions including the shortage of containers, The congestion at ports and closure of ports in different countries because of the COVID related reasons. This increase in freight cost has severely impacted the transport cost of solar modules and other home materials forward. The shipping rates have increased from 5 to 7 times over the last 9 months and this has been a significant cost Just to give an example how it has impacted, we were creating that before the last quarter of FY 2021, the fees rose from China to Chile around $2,000 for reported containers, it has now increased to 13 $1500 in July, which is approximately 6 to 7 times cost increase. Given the situation, many solar developers have delayed the finalization of orders. Consequently, the order finalization in the international markets for FY 2022 has seen a large tailgate and have been postponed to H2 FY 2022. We expect Around 80% of the orders for FY 2022 to be finalized in H2 FY 2022. Our pipeline continues to remain robust and we About 15 gigawatt of orders as compared to 13 gigawatts that we finalized in FY 2021 to be finalized this year. We expect to maintain strike rate of 14% to 15% for this year in line with our past performance. Our unexecuted order book as of 14th August 2021 stands at INR8,731 crores which is executable over a period of next 12 to 15 months. This includes order amounting to INR 2,030 crores, which may now be unviable for developers considering increased module and commodity costs for which we are in discussion with our customers. On the growth market and opportunity over medium term, we continue to see a lot of traction in key markets, especially U. S, Australia and Europe. Currently, we have limited presence in the 2 markets that is North America and Europe and we will be targeting to increase our market share in these markets. As for IHS Markit, the overall market is expected to see a growth of 15% over next 3 to 5 years. Our global presence provides us a lot of flexibility in selecting projects globally. Most of our clients are looking at significant capacity And we continue to remain confident of the opportunities going ahead. Our O and M portfolio As of date, it is 8.7 gigawatts and 40% of these are 3rd party EPC contracts. We expect O and M portfolio to grow by 40% during the year to 11.5 to 12 gigawatt by end of FY 2022. We are focusing on increasing international O and M portfolio by pursuing projects where EPC has been done by 3rd party. We expect O and M margins to remain robust at 35% during the year. With an aim to expand our renewable offering, We have decided to pursue EPC business for hybrid energy, power plant, battery energy storage and waste to energy subject to shareholder approval. Hybrid Energy market is expected to grow at 8% CAGR3.7 billion dollars by 2020 5, whereas battery energy storage system and energy storage system is expected to grow 2 times in next 4 years to $12,000,000,000 annually. Australia and USA where we have already have sizable cousins are the large market in battery energy storage systems and we continue to see the trend of even the standalone and all the projects being coupled by Both battery energy storage systems. As well as battery prices are coming down, we are seeing a lot of traction for customers to combine pollution in terms of solar Plus that hybrid energy share to increase. We will be quickly be able to ramp up our battery storage business by adding a team of battery expert Where as sales execution and design and engineering teams will be common for the businesses, we see a lot of opportunity to grow this business as most of the clients for as the large ITP players with whom we have strong relationships. With ever increasing generation of municipal waste Globally and requirement of government to stop reduced land sales, the market for converting waste to energy continues to grow. Waste to energy market is expected to grow annually by US5.25 billion dollars over next 6 to 7 years With addition of 70 new plants annually, UK and Europe constitute more than 40% of the global market, which will be our key focus market in initial years. With carbon emission reduction becoming a global consensus, there are enormous opportunities in these earning fields of hybrid energy power plants, Energy Storage Solution and Biomass Phase 2 Energy. We can leverage our existing relationship with clients, further exploit our technical expertise and maximize The inherent benefits of Bhagavath Hagan spoke with this model, thereby becoming a diversified mobile company into a rapidly growing With this, I will ask Mr. Mahador, our CFO, to take you through the consolidated financial highlights. Thank you very much. Thank you, Amit, and good morning, friends. I will take you through the consolidated financials for the quarter ended June 30, 2021. Before we run through the financials, I would like to reiterate that being an EPC company, the revenue, order inflow and gross margins could be lumpy Due to geographical mix and stage of execution of the project in any particular quarter and hence comparison on corresponding previous period will not be a true reflection and performance for a quarter may not be representative of the full year. Before commenting on our financial performance, I would like to update you on the recent event of resignation of our statutory auditors. Pursuant to the COVID-nineteen situation and its impact on the operations of the company, There has been a sharp focus to reduce overheads across the organization. From time to time, we have been in discussion with ESR and Co LLP are statutory auditors for a substantial reduction in audit fee. However, as we couldn't reach a common ground, BSR and Co LLP resigned as our statutory auditor. We would like to thank BSR and Co for all the cooperation they have extended to us during the various audits to date. On the recommendation of the Audit Committee, we have appointed Mrs. Kalyaniwala and Vistri LLP as the statutory auditors of the company to fill the casual vacancy caused by the aforesaid resignation from August 15, 2021, till the ensuing 4th AGM and to further appoint them for a period of 5 years subject to approval of the shareholders of the company at the ensuing AGM. Revenue for Q1 FY22 grew by 12% to INR1195 crores as project execution was impacted in Q1 last year due to COVID. Region wise revenue breakup for EPC is as follows: Australia contributed about 64.3 percent Americas contributed 25.3 percent followed by India, which contributed 8.7% and the balance contribution by MENA region and Africa. Our O and M revenue stood at INR61 crores in Q1 FY 2022 and constituted 5.1% of revenue in Q1 FY 2022. O and M margins in Q1 FY 2022 have been 35%. Due to the impact caused by the increase in module and commodity prices, Adjusted gross margins in Q1 FY 'twenty two continue to remain suppressed for ongoing projects and stood at 2.3%. The orders booked in the current year have come at our historic margins of 10% to 11%. The recurring overheads on absolute terms remain at the same level in the corresponding previous quarter despite The previous quarter having lower salary and travel costs due to COVID-nineteen, our recurring overhead as a percentage of revenue reduced from 7.5% in Q1 FY 2021 to 6.9% in Q1 FY22. EBITDA losses for Q1 FY 2022 stood at INR 93 crores due to lower gross margins and accelerated mark to market on cancellation of forward cover contracts. Accelerated MDM represents loss of INR49 crores on account of cancellation and rebooking of our contracts on expiry related to ongoing projects. It resulted in accelerated accounting of losses, which has been explained in detail in Note 11 of the Q1 results. The same has been flushed out from effective portion of cash flow hedge of other comprehensive income, resulting in negligible impact on shareholder funds. Now coming to the balance sheet. I would again like to reiterate that as the amended articles of association, the company cannot give loans to promoters or their affiliates post listing. The external term debt outstanding as as on August 14, 2021 is INR64 crores. Decrease in borrowings is on account of repayment of ICDs and cash flow from operations. Since listing, we have repaid a total of INR2147 crores through internal accruals and money received from group companies on collection of inter corporate deposits. The repayment schedule of term debt in Q2 FY 2022 and Q3 FY22 involves payment of INR24 crores 40 crores, respectively. We have a cash cash equivalent of approximately INR336 crores and a net worth of INR651 crores as on June 30, 2021. As of June, we had a negative working capital of INR 571 crores as compared to negative working capital of INR 530 crores as at March 2021. Negative working capital is driven by a combination of higher collection, efficient management of working capital and advance from There do exist, however, delay in payment to certain vendors. Of the receivables due for more than 1 year, Exclude INR445 crores as on June 30, 2021, they comprise of related party receivables of INR136 crores, which include receivable of INR102 crores against which the company has received unconditional assurance of proceeds from sale of plant. We have been able to collect settled old receivables of INR18 crores during the year to date and are confident of recovering most of the balance overdue. The total inter corporate deposits repaid till date from 1st April was INR172 crores. As at 14th August 2021, ICD stood at INR741 crores, including interest accrued. On the cash flow front, during the quarter, we had a negative operating cash flow from operations due to payment towards MDM losses on cancellation and rebooking of forward contracts as explained above. Cash flow from investing activity was positive in Q1 FY 2022 due to receipt against ICTs and interest thereon. Here, I would also like to add that in accordance with the Sterling and Wilson Solar Limited Employee Stock Option Plan, The Nomination and Remuneration Committee at its meeting held on August 14, 2021, has approved the grant of L13 Ls-twelve thirteen Out of a total of L16,000 3,600 employee stock options, which were approved by the shareholders, 2 eligible employees Exercisable into not more than L13.13 equity shares of a face value of INR1 each fully paid at an exercise price of INR238 per share. With this, we can now open the floor to questions and answers. Thank you very much. We will now begin the question and answer session. While asking a question. Ladies and gentlemen, we will wait for a moment while the questions you have The first question is from the line of Mr. Vivek Gupta, an individual investor. Please go ahead. Yes. Hi. Hello. Good morning. Thanks for the opportunity for asking the question. Sir, being an individual investor, I have been invested in Sterling and Wilson on account of Considering it is a global EPC player. But the numbers which are coming quarter after quarter is not giving me any confidence. And on top of it, I've been seeing that management is attributing these losses to COVID. But I have seen that there are companies which are performing and we should not just attribute this to COVID. And on top of it like post listing, we have been seeing that that diversion of funds was there and we have been Like committed for ICDs repayment, what is pushing management to settle these ICDs at the last leg of the committed date? Because investors are being invested, I'm losing my confidence in Sterling and Wilson totally. How you are going to assure me that Sterling and Wilson is on the right path of development and how you can reassure that confidence? Thank you. I will address your question. I believe there were 3 parts to it. The first part, which you said is we should not attribute everything to COVID. Vasu Gupta, COVID is a reality. It has been there from the last 18 months. We have faced the impact. We were one of the first companies to mention that COVID is going to impact us in March 'twenty, and it did. COVID has impacted all organizations during this year. And there has been a substantial increase in module and commodity prices. This is also a reality. This is something that has affected the solar entities all across the world and Sterling and amongst other businesses And Sterling and Wilson Solar has been no exception. So we have attributed where it needed to be attributed. Coming to the question of the ICD repayment, as we have mentioned, there has been a lot of ICD repayment in the previous financial year as well as almost INR172 crores of ICD repayment from the start of this financial year. The figure is now down to INR740 crores. In the last Board meeting, the promoters have given confidence to the Board of meeting their objectives of taking off All the ICDs, ID appointed date of September 30th, and we are hopeful and confident that they will do the same. That is all the information that I have, which is based on the confidence given by the promoters to the Board. So, it means like we can be rest assured that these ICT payments won't be delayed further. Like I've seen that you have attributed some INR 50 crores or INR 805 crores of securities in case this ICDs as a part of this ICT's repayment. But the only thing is like, see this ICT is a big overhang on Sterling and Wilson. The IPO price which came was somewhere around 770,790 and post listing it has eroded shareholders wealth To a great extent. And till date, being the investor, I don't know about others, but I am not at all comfortable in booking losses. And on top of it, being a part of S. B. Sterling and Wilson shareholder. So At least it's a request, sincere request from my side that management or promoters, they should be transparent enough to make this trust regain the trust of investors, it would be good. Thank you. Shubhrant, thank you for your confidence. And as I said, The promoters have given this assurance to the Board and that's what we are transparently projecting to you. I once again thank you for remaining invested and thank you for the confidence. Thank you. Thank you. The next question is from the line of Ankit Gupta from Alchemy Capital. Please go ahead. Hi, sir. Good morning. Sure. What's the status of our negotiation with our Chinese vendors regarding solar modules Pricing, like the last call you discussed something about the rest we are negotiating with them. Are there any progress on that front? Yes. So as we discussed on our last call that going forward whatever new orders We are going to negotiate with our Chinese module suppliers. We are going to ask for higher amount of time guarantees. So it is on the same line. So whatever new orders we are going to take and if it is not passed through to the customers, In that case, we are going to seek higher amount of bank guarantee as compared to what we are taking earlier to safeguard against all the risks Arising from the model uncertainty in the market. Okay. And sir, like Can I be seeing this solar market prices to again mean revert in our view? What's causing is it because of the chip shortage or I think it has increased to now $25 plus peak or levels. What do you think can be the peak? No, actually past 1 month or so what we have been seeing that trend That module prices are stabilizing. And what are the market reports that we are hearing that lot of capacity addition is happening in China, both on for the module manufacturing as well as upstream raw materials of polysilicon and glass. So that is the of course that is happening and we hope that it continues to be stable, but it's very difficult to give like how it is going to pan out in next I mean quarters, but certainly last 1 month or so we have seen prices getting stabilized. Got it, got it. And then you Talked about that out of INR8,700 crores of order book around INR2,000 crores of order book might be unviable. What was that number? I have missed that number. So that number is around INR 2,000 crores where we see that it may not be viable for developers, but we continue into the negotiations, which we expect. So that we say it may not be viable, but the discussions are ongoing with the customer and we will get more clarity And how it pans out in the next coming quarters? And that's it. As for the remaining RMB6,000 odd crores of order book, our gross margin could be Negative or there would be like 2%, 3%, what can be a approximate number for the remaining Order book? Yes. So I will request Bahadur to give you guidance on that. So the gross margins obviously would be suppressed And they would not be the historical gross margins that we have. But I would just like to add that the gross margins which we have seen in this particular quarter Yes. Also bear the effect of projects which were in the negative and for which all the losses were taken in March 2021. So however, in the current quarter, you do have revenue and cost equal to revenue because all the losses have to be front ended. And this has suppressed in percentage terms the margin. So if we were to remove out the impact of such Zero level, 0 margin jobs which are ongoing. Margins actually would have been slightly higher than 5% in this quarter. Going forward, we do believe that the margins will be much higher than 5% by the end of the year. Okay. That's Good to know. And last question from my answer, why is the other expenses also continue to be higher? Is it because of the trade cost? Because what's the key So when you're looking at other expenses, it does not include freight Because all costs which are attributable to the project go up before the gross margin. What you are seeing as overheads, which is about INR 80 crores, is comparable with the INR 80 crores last year where also the salary costs as well as travelling was much lower due to the higher impact of COVID. In spite of that, it has been maintained, though the management is looking at reducing cost overheads all across the board, And that is what we are working on to bring it down much lower than what it was in the previous year, the number being INR324 crores in the previous year. Okay. So we are aspiring for that number for the full year, full FY 2022? To come down much below that. That number they gave you was FY 2021. We are trying to bring it down as much as possible, which is why efforts are ongoing across the board. Okay. And sir, just what you talked about new businesses for energy storage and hybrid. Just on our credibility front, Bharat, how are we hiring our team for that and how can our costs We're increasing for those kinds of projects. It was possibly front ended, I believe, right? We have to build upon any project. We must have some capability in our team. How are we doing that? So let me start off with this and then Mr. Amit can add. Yes. This pipeline that we are looking at for this kind of projects are between 800,000,000 to about 1,000,000,000. So, at that point in time, you would require to build up your business development team and there would be costs incurred for that. Now if there are if that is the kind of pipeline that we are looking at, we would be seeing some kind of overheads in the range of about INR25 crores to INR30 crores, Which is normal to build up a Yes. This size. That is, of course, assuming that there are no orders which come in. The group has evaluated its capabilities in doing this. There are certain pre qualifications which would require the involvement of partners, Which will be taken up appropriately from time to time. If Amit has anything which he would like to add, he may go ahead. And I would like to add that our geographical presence across the globe and existing teams and existing clients will help us in leveraging And overhead, despite adding a new business with the BMO and we will be achieving a lot of synergies, which will give us lot of cost advantages even in the new lines of businesses by keeping overheads low. And just one more point that I would like to add is that this line of business As long term orders, so it is not like solar orders which get executed between 12 to 15 months. These take anywhere between 24 to 36 months. So we will also be having not only order book visibility, long term order book visibility, also revenue visibility. Okay, okay. I got it. Thank you, sir. Thank you so much. Thank you. Next question is from the line of Mr. Kunal Kolodia from Anova Capital. Please go ahead. Yes. Hi, sir. Good morning. Good morning. Sir, I have two questions, if I may. So first one is like given the commodity impact, Would you consider bidding for EPC contracts excluding the module procurement for shorter duration contracts as well? Yes, so that's what we are considering that we are like in our existing 2 big markets U. S. And India already we are bidding for projects without modules and even in the geographies we are bidding with modules, we are Now adopting a strategy of passing the risk on to the customers. So that is very much on board. So we are considering both the options, We're bidding without modules and where we are bidding with modules passing on the cost risk to the customers. It is also important to further add that unlike in India where X modules, your price of BOS is much lower, It's almost 2, 2.5 times that in the international market. So it is not that if we were to bid X modules or modules as a complete pass through, There will be a very heavy shrinkage in revenue because the 2 BOS markets are not comparable, the India and the international. Okay. That's helpful. Then secondly, sir, what is our current status of project execution or you may say operating Efficiency in Australia in the height of COVID-nineteen lockdowns? So, In Australia, so far COVID-nineteen lockdowns have not impacted our project execution because the lockdown in the cities and project sites Continue to operate the same manner. However, there have been some delays on account of delay in module supply, But the project's execution remains unimpacted on the account of COVID. Okay, sir. Thank you. Thank you. The next question is from the line of Mr. VP Rajesh from Banyan Capital. Please go ahead. Thanks for the opportunity. My first question is just trying to understand this Price impact that we got hit by. So, and I apologize in advance if some of these questions are repetitive. But just trying to understand how much did you book in the last year, the losses on the current order book? And in the current order book, what I'll start off on that. As you would have seen in our investor presentation for March 'twenty one, the one offs which had an impact on that quarter were about INR374 crores. This included the cost of the bunker going bankrupt due to COVID. This is also the cost escalation due to elongation of time due to such contractor having gone bankrupt. It included the module, Freight and commodity price increases and it also included certain provisions for liquidated damages which the management prudently felt should be made on account of extension of time due to COVID. So the impact that was there was about INR 370 odd crores. Now in the current quarter, we have taken the margins which were there for March 21 And continued that further. There have been no further losses on those projects, except in case of one where a particular module supplier had asked for an increase in price. And that was to a significant extent also agreed to be compensated to us by the customer. That has been mentioned in our investor presentation for this quarter where we have put it as price variations. So other than that, there has been no other major impact in this current quarter. Whatever had to be taken was taken in the last quarter. Margins will continue to remain suppressed because the impact of that will continue over the execution and lifecycle of the project. Right. So, out of that 370 figure last quarter, how much was due Non recurring things like bankruptcy, etcetera, if you remove all that pertaining to price escalation, sales cost and Morning, pricing. What was that portion of INR 70 crores? So I will just respond to that in a minute. The total amount of just a minute, that amount was about INR102 crores for approximately as I remember, It was INR102 crores for the subcontractor going bankrupt, roughly about INR80, INR85 crores on modules and freight And about INR 100 crores, if I remember correctly, on other extension of time due to COVID-nineteen. Okay. So the price impact was I'm sorry, your voice broke. Sorry, the impact of the price escalations and freight was around INR 80, 85 crores. B. Balaji:] The extent it pertained to the last quarter. You have to understand that as the project progresses, so unless there is a loss, Only that loss would be booked front ended. But if there is anything which the profit project remains positive, that Suppressed profit would continue over the lifecycle of the project. Understood. Understood. Okay. So, now coming to this year, Out of this book of INR 6,000 crores, which you think is viable, how much is the price hit You're taking because of which our margins are going to be suppressed? The price hit that had to be taken has already been taken. The margins that are there in the particular quarter in this one, we have said that it is also impacted by No margin coming where the loss has been booked in the previous year. As I mentioned, if that was to be eliminated, the margins would be in the region of 5%. Orders that we have booked in the current quarter have come at our historical margins. So we believe that we should have a much more than 5% margin at the end of the year. We will be in a position to give a correct margin guidance by the time we come to the next quarter call. Okay. And just last one question on this topic. So how should I think about it that out of those 6,000 crores book you have order book, What percentage is where you are not able to pass through these price escalations and therefore that will be on a lower margin trajectory? I understand that because it is not negative, you can't put the losses upfront. But we know that over the next few quarters, You're not going to your margins are going to be subdued. So I'm just trying to get a sense what percentage of the book is in that particular bucket? About 40% to 45%. Okay, understood. On the note just initiated talked about in the presentation, Are you also thinking about getting into 8% range? Your voice is not clear. You will have to repeat your question. I'm sorry. Sorry about that. My question is in the new business initiatives that you have talked about in the presentation. Are you also planning to get into the data centers As well or what's the thinking on that side? No, we will not be getting into data centers. Okay. All right. Thank you. I will get back in the queue if I have more questions. Sure. Thank you. The next question is from the line of Subhadip Mitra from JM Financial Service. Please go ahead. Yes, good morning and thank you for the opportunity. Just wanted to get a sense of how do you see the Indian solar market evolving because we've seen a Lot of entrants and lot of existing utilities who are coming up with big plans. And how do you see the EPC market here evolving in India? I'm sorry if you've already answered this question, I joined the call a little late. No, no. So, thanks for the question. So, we see as you yourself had said that there is lot of plans and lot of announcements are happening. So we continue to see the robust uptrend in the solar market, both domestic and international. So in India, this year itself, we see a bit pipeline of more than 6 gigawatts, which is coming in. And internationally, we expect The big pipeline of more than 15 gigawatts will get to be finalized this year. So For the EPK industry, the prospects remain strong and the market will continue to grow at the rate of 15% per annum For next 3 to 4 years. Understood. So within this, let's say, bit pipeline of 6 gigawatt in India, would there be any target market share that you are looking to get or let's say, with the period of the next Maybe 3 to 5 years. What is the target market share, say, within India and international, if you could just throw some light on that? Yes. So, see, our target hit rate usually has been 15% of the targeted pipeline. So we expect in India this year to be going somewhere around 1.5 to 2 gigawatts And depends upon the project closure, which are going to happen in coming year, so we will continue to maintain our market leadership position. Also, if you see, we have if you see our investor presentation, we have won about 6 23 megawatts already in India in the From April onwards. Understood. And I mean, how are these projects typically? Are these also tend to be fixed price contracts or they tend to be more available costs where you can pass on the module risk To the final question. No, no, no. As far as the Indian market is concerned, it is the module risk is on developer. So we are bidding in Indian markets without any module risk. Understood. And in terms of the international market, the 15 gigawatt market size that you talked about, there again you would be targeting about 14, 15 business market share? Yes, that's correct. So our historical strike rate has been 14% to 15% and we maintain that as well in international markets. I understand that. That can be across geographies, but consolidated hit rate would be 14% to 15%. Understood. So would the international contracts then be more of these fixed price contracts? No, as we elaborated on our earlier questions that U. S. Is a market where we bid without modules and in all other markets where we bid EPC with modules, we will pass on the price list on to our customers. Understood. Thank you so much for answering that question. Thank you. The next question is from the line of Priyanka Singh from Atidam Securities. Please go ahead. Good morning, sir. I have a couple of questions. First of all, what is the global market size of the new business verticals that we are targeting? And what would be the Yes. So, we expect the hybrid energy market To be close to $3,500,000,000 to $4,000,000,000 by 2025 and Energy Storage Systems To grow to a next 3 to 4 this year up to $12,000,000,000 So that's a significant market size And more of the clients in this market is our existing clients. And when we come to Waste to energy market, that is going to be in excess of $5,000,000,000 market in next few years. So there we see the market is pretty big And we expect to maintain our historical strike range which we have for our existing business. So that's what we I expect to maintain and margin profile of the industry is 10% to 15% where the markets are currently and we will be also maintaining margins in that particular Okay. And what kind of synergy benefits we expect to get from these new verticals? So there will be significant synergies because we are in the same line of business as far as hybrid and energy storage is The client profiles are same, clients are same and geographies are same and majority of the business is expected to come from Australia, Europe and USA where we have significant presence now. So we'll be there will be just we'll be adding going forward as for the Hybrid and battery storage systems, only the project execution team, so and we will be taking the advantage of our existing BTE engineering Project execution teams in those geographies. So 6 energies are going to be significant in these markets. As far as base 2 energies is concerned, We'll be as we look forward to more order bookings, so we'll be significantly building teams there. And we expect Like order book from these 2 new verticals going forward in the range of in excess of $500,000,000 to $1,000,000,000 in coming years And there will be proportional INR25 to INR30 crores of overheads on this count in coming years from new verticals. Got it. That was helpful. Thank you. Thank you. The next question is from the line of Amit Shah from ACE Securities. Please go ahead. Hello. Sir, I have one question. Sir, can we indicate the expected margin for FY 'twenty two and 'twenty three Based on the current commodity prices and freight cost, do we foresee any further provisions due to Current prices? As we had mentioned, the current year's margins, we will give a better range When we come to the Q2 call, right, we're at about 5% and are expected to grow over this year. As far as FY 'twenty three is concerned, that will also be something we will try and put out as the year goes by. The new orders though, as we have mentioned, comes at our historical margins of between 10% to Okay. So, sir, do we see any further provision? At this stage, we do not see any further provisions that are required. Okay, sir. Thank you. Thank you. The next question is from the line of Faisal Hawa from H. G. Hawa and Company. Please go ahead. To me, this looks like a business which has a very good tailwind because of continuously The world shifting to solar power. First, somehow I feel that our place in it as an EPC player has 1st of all, very low margins. And those low margins probably make us deal with not the very top end of suppliers of solar panels, etcetera. And that is why when we deal with the more fragile suppliers, they are not able to fulfill their Commitments on they go bankrupt because we may not have done this. So we are actually Small disaster to another and the promoter is showing his own problems. I mean, looking like one storm It's over and another comes in after 6 months. So can you just comment on it because this is looking more structural than Any kind of management problem? As of Haidul, two points. First of all, we take solar panels only from the Tier 1 solar manufacturers. We do not work with Tier 2 and below solar manufacturers at all. So the ones who have renounced are not the small and the fragile. They are the ones who have the largest capacities in the market. And these out of that, a couple of them are the ones who have witnessed on their contract. It is an industry wide issue. It is not something which is related to Sterling and Wilson Solar alone. Secondly, as far as the customers and developers are concerned, we also deal only with the And therefore, it is not a question of our margins getting affected Because we deal with fragile vendors and customers. Okay. Thank you. The next question is from the line of Dikshit Doshi from Whitestone Financial Advisors. Please go ahead. My first Question is related to this current order book. You mentioned that out of which around 2,000 crore order book is currently not viable. So by when do you see that the negotiation of higher prices will be over and we can start executing that order as well? So, we are in discussion with our customers and I hope by the time we get on the next I mean, Paul, we would have concluded and get some sense of direction where we are with respect to those particular orders. So, discussions are on And we'll get to know in next few weeks where we are with respect to those orders. Okay. Secondly, the remaining order book of 6 1,000 crores approx, that entire will be executed this year? Yes, most of it will executed This year, as we have said, we will be finishing the entire order book in next 12 to 15 months, but majority of it will be executed this year. To that, of course, you would add orders that you have booked in the current year or book and bill as we call it. So a part of that would also get executed in the current year, Which would add to the revenue. Okay. And last question, can you give a guidance of what kind of order inflow you expect for You mentioned that we expect a strong inflow in H2. So in terms of amount, if you can Give a broad range because you did mention in terms of how much gigawatt, but sometimes it varies a lot because In India, the per megawatt order book is much different than per megawatt in Australia. Yes. So as we said that the bid pipeline which we see and which we are likely to see will get concluded is an excess of 15 gigawatts and will maintain our strike range of 14% to 15%. So and they are going to be lumped. So at this point of time, it is difficult to give geography wise break up because this pipeline is spread across geographies and what will be the conversion rate across various geographies. So that we will be able to give you more color to answer the next one quarter where we are with respect to that, but we will maintain our The storage hit rate of 14% to 15% over 1 on a pipeline of like more than 15 gigawatt across the globe. So broadly, Just broadly, I don't hold you, but broadly, a INR 6000 to INR8000 crores of order is a fair range? Let us not put a number. It can, of course, be calculated because like you yourself said, it's different across different geographies. Yes, but it would be we are expecting it to be larger than last year and corresponding order book. Okay, sure. Thanks. Thank you, Soumit. Thank you. The next question is from the line of Shantanu Mandari from MK Ventures. Please go ahead. Yes. Good morning. Sir, I just wanted to get this correct. The new lines of business that we are talking about where we have our existing clients already there, One is this hybrid energy and the other is waste to energy. So can you throw some more light That what exactly would we be doing? And I also heard you saying that Our order book or what we are trying to get is somewhere around $500,000,000 to $1,000,000,000 Is that right? So, first of all, we will be setting up as far as the hydrogen and battery energy storage systems are concerned. So, we are looking at Standalone projects in these markets and the projects which are coupled with our existing solar portfolio. So where we'll be providing these services where our clients are coming up with both solar and storage solution or they want some other additional Power generation sources, renewable power generation sources coupled with solar. So that will be providing to our Existing clients and we see lot of these kind of projects coming up in our existing with our existing clients in existing geographies. As well as with the Order pipeline which we are talking about that will be building up gradually in years to come. So that is the revenue forecast which we have and which will be finalizing after getting our shareholders approval and that will be in years to come. So we will build up gradually what will be the revenue and order book In next 2 to 3 years from the new business segments. All right. And sir, See, let's skip FY 2022 for now with all that has happened and major part of our order book We'll be facing this suppressed margin, but if I'm to Go ahead in FY2023 2024, what should we take on the solar EPC part? What Normalized EBITDA margin, can we consider or will there be a new normal, Ajay? I just wanted to get your sense there. No, no. We do not believe the present is the new normal. We believe that FY2023 onwards we should be back To our historical margins of between 10% to 11%. Now when I say historical margins, I'm talking about the gross margin. Of course, as the revenue size increases and overheads are in control, we will have operating leverage Because the overheads would come down percentage points below what it is right now, thereby giving us an increase in the EBITDA. So we are looking at 10% to 11%. And if everything falls into place over it, it's between 3%, 3.5%. That's our target. Sure, sure. Understood. And so one last question, if I may. So For these new lines of hybrid and waste to energy, so what I heard was like Around INR 25 to INR 30 crores would be spent like on as overhead, right? Other than that, any Capital expenditure, we won't have to incur? First of all, this 25, 30 is not going to be a day 1 expenditure. It will be a gradual buildup. Seeing as how orders are there in new markets, business development team, engineering team, etcetera. As Mr. Amit mentioned, there is a significant amount of synergy. What we have given you is what we believe would be an estimate in case no orders come in. Also, what Mr. Amit mentioned was this is something that should be built up Because these are long gestation projects unlike solar, as I mentioned, this can take between 24 to 30 months. It will give us an order view, a long term order view as well as the long term revenue view, which right now has been missing in so far as the standalone solar EPC business is concerned. The next question is from the line of Dinesh Mistry, Goldman Sachs Advisors. Please go ahead. Hi, good morning and thank you for taking my question. I had a couple of questions. The first one is on the receivables piece. So whilst you've touched upon the IslandFS receivable, If you could give us some sense on the time period for recovery of the receivables of INR102 crores from the related party as well as some status update on Argentina? That was question number 1, then I'll just have one, 2 more. That's fine. As we have mentioned in our investor presentation, that the matter as far as Argentina is concerned, it is under arbitration. This is something that will happen in the U. S. In the U. S, generally, arbitration takes about a year, And we are hopeful of getting a response by that time. There have been claims and counter claims by both parties. We believe our claims are extremely strong and we have a legal opinion to substantiate that. So matter will be resolved in that period of time. As far as the related party receivables against the sale of plant is concerned, we believe that the plant is just in the final stages of Michelin, we believe that we should be able to have this somewhere towards the end of this year. Got it. And this is the scale of plant of the This is our estimate at the moment, yes. Got it. And this is sale of plant of the related party itself, right? Yes. The plant that we are making. Understood. So essentially, hopefully by March 'twenty two is when we get recovery of this INR102 crore. That's right. Fair enough. And in your commentary as well as in your presentation, you've touched upon the negative working capital, which is excellent. But you did touch upon some delay in payment to vendors. So was this on a contractual basis Or was this for any other reason? So it was a mix of contractual as well as cash flow issues. Right now, the overdue vendors would be in the region of about INR 200 to INR 250 crores. Even after that, you would see that the working capital would still continue to be negative. Yes. Got it. Got it. But we've paid off these OOD vendors now or do we continue with the cycle? We paid off about INR 50 crores of those vendors In the previous month and we are looking at liquidating them as soon as possible. Interesting. And one more question was on our term loans. So we've brought it down very strongly and we have about INR64 crores, you mentioned INR24 crores in Q2 INR40 crores in Q3. Do you plan to refinance these or just pay them off and be 0 term loans? So it depends on a combination of how soon the promoter inflows come in. Last date of which is September 30th? Yes. Or whether we have operational cash flows to take care of it. In the So which of course there could be ways and means to do a bridge refinance till the time is completely closed. Understood, brother. And sorry, one last question from my end and then I'll Yes, Rob. In the solar module piece, you mentioned that this has resulted in an overall increase in an estimated cost of projects by 21,000,000. So is that the margin hit that we expect to flow through by the end of this year, this $21,000,000 A part of it, a major part of it has already been taken in the previous year. Okay. And the balance is what has suppressed The margin over the existing contracts. Of course, as we said, we have received a substantial amount of variation also from the customer to compensate us Got it. So broadly, can we say about 2 thirds was booked last year and 1 third, isn't it? No, not really. It would be closer to half and half. All right. Got it. Great. Okay. Thank you so much. Thank you very much. Thank you very much. Ladies and gentlemen, that would be the last question for today. I will now hand the conference to Mr. Thomas Jain for closing comments. We would like to again thank everyone for joining this call and for your continued support on this file. We hope we have been able to address all your queries. For any further information, kindly get in touch with Mr. Vishal Jain, our Strategic Growth Advisors, our Investor Relations Advisors. And thank you once again. Have a great day. Bye. Thank you very much. On behalf of Sterling and Wilson Solar Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.