Ladies and gentlemen, good day, and welcome to the Sterling and Wilson Renewable Energy Limited Q2 FY 2025 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 risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Thomas Mathew, Head Investor Relations, for his opening remark. Thank you, and over to you, sir.
Hey, good morning, everyone. Welcome to our Q2 FY 2025 Earnings Call. Along with me, I have Mr. Amit Jain, our Global CEO, and SGA, Investor Relations Advisor. We will start the call with the key operational highlights for the quarter and industry outlook by Mr. Amit, followed by the financial highlights, post which we will open the floor for Q&A. Thank you, and over to you, Amit.
Thanks, Sandeep, and a warm welcome to all the participants on this call. I would like to begin with a quick update on our business operations and outlook. We have continued to build on the strong ordering momentum of Q1 by announcing an additional INR 2,044 crore worth of new orders in Q2. Our total new order inflow this fiscal have touched INR 4,214 crore thus far, and are happy to report that we remain on track to meet our full year order inflow guidance of INR 8,000 crore. Our unexecuted order value now stand at over INR 10,500 crore, and it is the highest in the company's history. While Q1 ordering activity saw a mix of international and domestic orders, all our orders in Q2 were from domestic market.
One of our key order wins this quarter was the LOI for 2 x 250 MW AC standalone BESS plant at Rajasthan by JSW. This project to date is India's largest battery energy storage project, and one of the very few projects of gigawatt-hour scale in a single location globally, which shall be executed by 2025. This project win is a significant development, as over the last 12-18 months, there have been multiple tenders and bids of projects for either standalone storage or hybrid, that is renewable plus storage in India, making it a very important step for us as a company. This win depicts our in-house capabilities and knowledge for energy storage system engineering and execution, and places us with a large advantage in the fast-growing solar and storage market.
Additionally, the company has also been awarded a LOI for a 20 MW floating solar project at Vijayanagar from JSW, which marks the third such floating solar project the company is currently executing in the country. We achieved a key breakthrough with Brookfield, one of the leading global renewable private IPPs in the country, through the balance of system order for a 633 MW DC project in Rajasthan, India. Scope of work includes engineering, design, testing and commissioning the PV plant, along with supply and works for a 220 kV switchyard. Repeat orders are a testimony of a good EPC contractor, and we are happy to have bagged repeat orders from NG and NPR for their PV projects in Gujarat and Maharashtra, respectively.
The latest order, which we received yesterday, was a turnkey project by NTPC for a 200 MW AC, obviously 300 MW DC project in Rajasthan. With this order, we continue to strengthen our relationship with one of the biggest renewable developers in the country. In terms of execution, we anticipate a very strong pickup in execution in the second half, as we had indicated in the previous conference call. We have all building blocks in place to meet our revenue guidance of INR 8,000 crore for the year. We have significantly strengthened our engineering, execution, and support team in India to achieve significant ramp-up in execution in H2. The recent INR 500 crore loan, sanctioned by IREDA and the credit rating upgrade received last night, moving us to investment grade, will go a long way in helping us achieve our revenue guidance.
Our unexecuted order book currently stands at INR 10,559 crore, with approximately 78% constituting domestic orders, while our international unexecuted portfolio pertains to two projects in Europe and two projects in South Africa. We are continuing to see a very strong bid pipeline in place for India, with over 23 GW of projects likely to be awarded in next 6-12 months. Apart from the typically strong PSU pipeline, we are also seeing a strong pipeline of private IPP projects coming to fore. In H1, 11 out of 12 projects that we have won have come from private sector. Our existing private customers have exciting growth plans, and we are confident of growing the order book with them in H2.
Simultaneously, a majority of the PSU bids will get finalized in Q3 and Q4, which will lead to a much larger addressable market for us in H2 as compared to H1. We continue to judiciously evaluate projects in India and overseas, and are mindful of having to remain patient in order to target profitable orders. Moving to Nigeria projects, we are still awaiting final order signing, which we are expecting to happen soon. Also, as I have mentioned in earlier calls, post-order signing, we expect project to take six months to achieve financial closure. We would like to reiterate that lumpiness in order inflow is to be expected with EPC company like ours, and timelines for achieving project closure could vary depending on a host of factors, including finalization of contractual terms, financial closure, et cetera.
Our O&M portfolio outlook remains strong and portfolio stands at 7.8 GW as of September 2024. The benefit of a larger portfolio is expected to bear fruit in the coming quarters, as our EPC pipeline will continue to feed a large portfolio of ongoing O&M projects over the next 12- 18 months. Now, moving to industry outlook. India has been our single largest focus market for the past three years, and we have been constantly endeavoring to grab a larger pie of the market. We are continuously recalibrating our strategy as market evolves. From only four pure play BOS, we have also taken up few turnkey projects strategically and looking to tap into new opportunities like BESS. With a strong balance sheet, we remain well positioned to tap into strong industry growth in both domestic and international markets.
With this, I will ask Sandeep to take you through consolidated financial highlights. Thank you very much.
Thank you, Amit. We are very happy to report a third consecutive quarter of positive EBITDA, PBT and PAT at a consolidated level in this quarter. Our operating revenue for Q2 FY 2025 was 1,131 crore. Revenue grew 36% year-on-year and 13% sequentially. Our top line for the quarter was largely driven by our domestic EPC execution. On the margins front, our consolidated reported gross margin was approximately 10% in this quarter. However, it is important to note that while our domestic margins was lower at 9%, approximately 10% of this domestic revenue that was booked in this quarter was cost equal to revenue in some projects, which were yet to achieve the POCM threshold. If you adjust for the same, the blended gross margin for the domestic turns out to roughly about 10.5%.
As stated in the previous conference calls, we believe that our domestic gross margins will hover in the 10% range in this fiscal year. Our O&M gross margin at 28% was higher than average due to lower expenditure that was incurred in Q2. However, we anticipate these margins to normalize due to post-monsoon maintenance that is likely in the second half of this year. Recurring O&M margins are trending towards more steady state margins of approximately 25% that we have guided to previously. On the overheads front, we do believe bulk of the optimizations we had planned have been incorporated, and current levels are likely to sustain. Reported Q2 EBITDA was INR 51 crore at a nearly 5% EBITDA margin in this quarter.
Our PAT of INR 9 crore, while significantly higher, both on a year-on-year and sequential basis, continues to remain impacted by a non-cash deferred tax asset charge in this quarter, as was in the case, both in Q4 FY 2024 and Q1 FY 2025, due to the standalone profitability. We are very excited to report a key development that has happened overnight, which is our upgrade in the credit rating. Our long-term ratings have been upgraded one notch to investment grade, or triple B- , from double B+ by Acuité Ratings yesterday. This is a positive development, which is expected to give a favorable push to our execution plans in the forthcoming quarters, as Amit had alluded to earlier.
Our order book continues to grow rapidly, and we have achieved one of the highest unexecuted order value in the company history at INR 10,549 crore, and this provides a higher revenue run rate visibility for forthcoming quarters. With anticipated easing of the liquidity challenges, we still hope to be able to meet our annual revenue guidance, which, as we had guided in the last quarter conference call, implies a strong execution pace pick up in the second half of this fiscal year. We plan to achieve this execution scale-up through the new 500 crore loan facility that we had availed from IREDA, fresh sanctions and restoration of non-fund based limits with the credit rating upgrade that happened overnight, and also through negotiation for open credit with large key vendors.
Now, coming to the balance sheet, our gross borrowings have increased this quarter due to the new INR 500 crore loan facility that we had availed from IREDA. Our non-fund based limits were constrained in Q2, as we had to pay some of our vendors in shorter cycles to ease up limits. With our long-term rating back to investment grade, we are confident of obtaining fresh non-fund limits to scale up execution, as I had earlier alluded to. Total net debt stands at roughly INR 326 crore as of September 2024. On the indemnity proceeds, there are approximately INR 109 crore, which is being built, and it is largely expected to take care of debt repayments due in the second half of this fiscal year.
The company continues to remain cash out on approximately INR 800 crore of indemnity-backed legacy projects, which we believe will crystallize fully over the course of the next 24-36 months. With this, we can now open the floor to question and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Puneet from HSBC. Please go ahead.
Yeah, thank you so much, and congratulations on good order wins. Can you talk a bit about what really do you mean by the LOIs that you won on the BESS project? Are these firm orders, and what should be the quantum and scope of these?
Yeah. All the orders announced by us are firm orders. Either we have signed the contracts or firm LOA has been received. So all the orders are in place, and the order which you are referring to is 2 x 200 MW AC, 1,000 MW hour or 1 GWh plant in Rajasthan by JSW.
Right. And would you be?
It's a balance of system plant and batteries to be supplied by the client for this project.
Okay, okay, but you also mentioned that there is some turnkey project that you're now beginning to take as a part of your changing strategy.
Yeah.
Can you also talk about?
Turnkey projects, because as you have seen in some past quarters also, that some of the projects we have taken with which include the supply of modules. So that's what we mean by the turnkey projects. Some of the projects which are coming, being floated by public sector units are including modules. And yesterday, the one LOA we have received, it is also including the supply of modules. And that's what we mean by that we are now accepting turnkey projects also as a change in strategy. So we are selectively taking the projects both on supply, including module supply as well.
Right. And can you also talk a bit about what is the competitive intensity in this space at this point in time?
So as market is growing significantly, there is, l ike, market is exploding completely. And as market is growing, more new players are also entering into the market. So competitive intensity is going up, but we have been very careful in picking up the orders. So, as you have, we have alluded in our speech that H2 alone, the domestic market size is 23 GW. So market is growing, number of players is growing, competitive intensity is going up, but there is enough space in the market so that we can take the orders within our defined risk metrics and our expected margins level.
Understood. And can you also define the size for the first half of the year? What was the market size? For example, 2023 is what you claimed for second half. What was the first half, and what was your market share there?
So market size was roughly close to our addressable market, where we chose to not bid for some of the projects. Wherever we bid, our success rate was approximately 46%, and the complete market share of the addressable market was 27%, the orders which we have won. You can say roughly 16,000 -17,000 crore was the addressable market size.
In the first half alone?
Yeah. Yeah.
Okay, perfect. Thank you so much, and all the best.
Thank you. The next question is from the line of Rohit from Aditya Birla Sun Life. Please go ahead.
Thank you. Thank you for this opportunity. So my first question is more to do with the non-fund based limits. Earlier, I was under the impression that your non-fund based limits is quite low, probably that will restrict your execution in the second half. But now, as things are improving, as you said in your opening remarks, and you seem to be confident about achieving the guidance or retaining the guidance, earlier guidance, I would like to understand what exactly has changed in those aspects, especially on the non-fund based limits. What position we are at, and what does this rating upgrade imply? If you could throw more color on it.
Sure. So Rohit, the one thing that you have to understand is we've already been doing with the current limits, about INR 1,000 crore run rate on top line, right? Over and above this, we have now got a fund-based facility for INR 500 crore from IREDA, which came in pretty much at the end of September. So that also gives us now further ammunition. Now, obviously, with the credit rating upgrade, we believe that some of the limits that were earlier frozen, and also for fresh limits, now that we move to investment grade, we will see a significant interest from banks, and you know, we should be able to execute at the run rate that is required to meet the execution guidance that we've given for the rest of the year.
So that will be a gradual pickup, but, you know, we anticipate that things will begin to move very quickly. And the loan that we had also taken in place was a backup plan in case, you know, the rating upgrade, which happened overnight, got delayed, like, you know, it has in the past. So that is what has effectively changed. And, you know, we will also be relying on open credit to facilitate faster execution. And those are essentially the three things that will work for us going forward to be able to execute at a much higher pace than what we are doing currently.
So I really appreciate this remarks, but just to, you know, help me understand in the calculation. As in, if I use INR 10 billion non-fund based limits, plus this INR 5 billion from IREDA, that is, I get limits of, I mean, total funds, this exposure is INR 15 billion, which I churn it four times a year, INR 60 billion is the COGS and INR 66 billion is the revenue. Is that working? Maybe with this credit rating upgrade and maybe some limits that gets unfrozen, eventually it could move to that run rate of INR 80 billion. That's the way it works like?
Over and above this, there will also be open credit growth, like I alluded to. So that will also come in to the picture, and this hundred, this 1,000 crore that you're talking about, those numbers also will move up with the credit rating upgrade that has happened.
Got it.
So on top of that, I would like to add that some of our key suppliers, key component, including the module supplier, tracker supplier, and some of the most reputed cable suppliers in the countries, are looking at our improving balance sheet and the order book, have agreed to offer us very good, attractive open credit terms, which will help us significantly ramping-up the revenues in next two quarters.
Got it, sir. Thank you. Thank you. My second question is more to do with this credit rating upgrade only because we earlier also have had this credit rating upgrade. But the moment this consortium of bankers come on to the table, discuss and get things approved for you, what could be the timeline that is from this upgrade to that limits being unfrozen? What is that timeframe?
So, Rohit, I mean, see, we have already been talking to banks. You know, the process has been an ongoing one, right? But, anywhere in the next 30-45 days, I think we should be having most of the incremental facilities that we are talking about in place. And you know, like I mentioned, this is not a, you know, it happened yesterday or last night, and then therefore, we are now going to start initiating. There's already been continuous dialogue with the banks. They are aware of, you know, the developments that are happening, the requirements that we need in terms of non-fund based limits, et cetera.
You know, we found that most of our bankers have been extremely supportive of our case as well. So, we should start seeing things beginning to pick up very soon on that front.
Got it. And my final question will be, this Nigeria order is a big order. Would it entail any of your parting of this non-fund based limits to that particular order? Because it's a big order, and they may also release some guarantees, I mean, advances to you, and you may possibly require to submit some furnish some guarantees.
No, no, not necessarily. They will be separate facilities, because this will be done by a U.S. subsidiary, as you may be aware.
Okay, got it. Thanks a lot.
Thank you. The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. So, Amit and Sandeep, I wanted to understand if you could lay out the execution pipeline, to whatever extent is possible, because effectively till now, we were constrained with limits which are now opened up. Order book was always good and enhancing, which has further got better. So could you please outline and nuance the exact execution details that you are going to entail over the next six months?
As we have guided, that revenues for this year were going to be INR 8,000 crore. We have already achieved more than INR 2,000 crore in first two quarters, and the revenue guidance for the H2 remains INR 6,000 crore. We'll execute the projects to achieve the guided revenue. Now, all the credit facilities and the rating upgrade has taken place, which will help us to achieve the desired revenue rate, which is required to meet the revenue guidance. Already the execution teams and engineering teams are in place completely to handle this volume of the projects. This, the INR 6,000 crore, is the quantum which we'll be achieving in next two quarters.
Okay, Amit, could you nuance that with, you know, where are clients in that journey? Where are we? Has the procurement orders been placed? Which are the key strategies?
Most of the clients, as of now, are either in Gujarat or Rajasthan, and there are four international projects. Two of them are going in Spain, and two of them in South Africa. All the international projects are also moved ahead, except the one which we got recently, for which we got LNTP a couple of weeks back. All the three projects are taking off. The orders and engineering has been finalized, and the goods have been, like, we have started the shipping equipment to the sites. In India, the four gigawatt of portfolio we are executing in Khavda. All the projects are in advanced stage, and we are expecting or we are targeting to commission all the projects in Khavda before the next monsoon.
The other projects for most of the private IPP players are in Rajasthan, which most of the, quite a bit of portfolio is targeted to be commissioned before March, so that's how we plan to execute our entire portfolio and achieve the turnover of, or revenue of INR 8,000 crore, before the financial year, and we have over INR 2,000 crores of open credit from the large vendors, in addition to the credit facility and the rating upgrade, which has happened, so all this put together will help us in achieving the revenue guidance.
That's very helpful. Thanks for that answer, Amit. Amit, could you also just, sort of, nuance the fact that, out of the 6,000 crores of orders that you are likely to do, if it is possible, could you nuance that how much is likely to come from the private sector? Because that has a certainty of a deadline. Because let's say, for any reason, Khavda and PSU could be delayed, or is there scope for delay because, you know, say, evacuation sites are not ready or any such event because of which the revenue could spill over even further. So I'm trying to really understand that how tight is that 6,000.
So I will, like, give you exact clarification on that. Either be private or like, as far as the PSU projects are concerned, even evacuation doesn't impact revenue guidance. All the projects in Khavda are in advanced stage. The modules were to be supplied by NTPC. NTPC has now finalized all the orders and supplying modules to us. So on Khavda, either by NTPC or GIPCL, I don't see any concern there as far as the revenue part is concerned. So we'll be supplying our total part and completing the construction of the project. We are more than 95%-97% of the revenue line. So on all the PSU projects, we'll be achieving revenue, and I don't see any delay anywhere. And similarly, on the private part also, we are not foreseen any delay.
So as far as the delay, either on account of evacuation or supply of materials, there is no concern at all on that front, and we are very confident of achieving those revenues. So we have carefully gone through all the project status, what can be constrained, and after considering all those factors only, we have given this guidance.
Okay, I take that. Sandeep, my next question is, could you clarify the adjustment that you made, you know, where you stated that on an adjusted basis, the gross margins would be 10.5%. Could you explain that, again, please?
Yeah. So, Aegis, if you had noticed our total revenue for this particular quarter in the domestic segment, right, EPC segment was INR 900-odd crore, to which about 90 crore of revenue was cost equal to revenue, because they had not reached the threshold. Because those projects, we are yet to recognize margin on those because they have not reached the threshold. So till they reach the revenue recognition threshold, we do it on a cost equals revenue basis. So in forthcoming quarters, you will see the margins on those projects come in and effectively, your overall gross margins on the domestic segment normalize.
Got it. Thanks for that clarification. You know, lastly, could you just tell me, if it is possible to disclose, that how much of the non-fund based limits have actually got released, and, you know, the credit rating upgrade which just came through?
No, no. So the credit rating upgrade has just happened last night, you know, Acuité. So give us some time. I mean, I think we'll be able to probably in the next quarter give you a better clarity on what are the incremental limits that we have got in place. Like we had mentioned earlier, you know, we have total limits of roughly about INR 4,000 crore that we have, you know, we have total limits of around INR 6,000 crore, of roughly of INR 4,000, which was utilized. And, and, you know, we are working towards essentially freeing up further limits and also working on new limits. Almost in fact, you know, we're looking to double our existing LC limits that are available currently at this point.
Noted. Sandeep, the credit rating, you know, disclosure which you put out said that the total, you know, quantum was INR 7,350 crores, and you mentioned INR 6,000 crores. So could you explain me the difference?
So this includes allocated limits for the new banks.
Okay, so what you're saying is you are operating with about 4,000 crores of limits. Six thousand is just, I mean, 2,000 incrementally is just a release once the upgrade happened, and plus newer limits that you had, you are trying to get?
Correct.
Okay, okay. And how quickly do you foresee, you know, the limit enhancements by banks? Is it, you know, again, going to probably take a month, month and a half?
So see, some of the proposals have already received in-principle approval. So, you know, like I had indicated, we should, in the next, you know, month or so, be able to start utilizing some of them. We already have some additional limits in place for our international projects as well, so they are already in play. As we go along this particular quarter, I think, you know, by the end of this quarter, we will be able to give you a much better clarity on, you know, where we stand on the fresh limits that we have availed.
Perfect. Sandeep, and just lastly, could you share that, you know, given that there were the constraints on limits, was that limiting our ability to participate for incremental order book?
No, that was never a constraint for us, because we were able to provide all the bank guarantees which are required for public sector units. So that was never a constraint with us. So we are participated in the bids, which we chose, fits our target pipeline.
Got it. All the best to the team for an execution right now.
Thank you.
Thank you. Thank you. The next question is from the line of Deepak Purswani from Swan Investments. Please go ahead.
Yeah, good morning, sir, and thanks for the opportunity. Sir, just wanted to get the sense, if you can throw some light, in terms of the progress on the Reliance and how the things have been crystallized so far on that order front?
As I discussed in my last earnings call, we are working on a pilot project for Reliance, in which they are testing multiple technologies and multiple combinations, and we expect to complete that project in this quarter. A bigger rollout will take place after that. Reliance, as it's in public domain, is planning a huge rollout, and it is expected to roll out either in the last quarter or in next quarter. As and when it gets finalized, we'll let you know, and teams are in discussion on the rollout for that particular big project.
Okay. And secondly, sir, given the fact that there has been a, in terms of the sector as a whole, there has been a sharp revival and there has been a huge opportunities opening up. Just wanted to understand from the employees' retention program at our end, I mean, how we are seeing it at the current juncture, because that is something which we are seeing across the sector, that is a challenge which is faced by all the companies. What are our initiative to retain the talent?
So we always have been, I think, good at retaining our teams. The company is like one of the pioneers in this sector, and we have very strong team. But what we have done is we have developed, for the rollout, multiple divisions. Like, there are separate team to execute, like in India, we have two particular teams, led by two leaders to handle PSU front. We have developed two teams which handle the IPP fronts, led by all senior leaders under leadership of Mr. C.K. Thakur, and we have added one team to handle the Reliance. So we have, in parallel, five execution teams which are handling, and they have been reinforced significantly. So and they are being backed up by one of the strongest engineering teams in the country.
So on that front, we are sufficiently well-staffed, and we can address the growing market completely, and if we feel the need, the teams can be ramped-up. So there are multiple fronts that we are taking care of employees in annual appraisals. There are retention plans like ESOPs. So all possible measures which are there are being taken to retain and motivate the teams.
Okay. And, sir, also, since we have given the clarity for the FY 2025, and we have also seen the improvement in the credit rating and opening above the credit line, which will lead to improvement in the execution for FY 2025. But looking at the sectoral opportunities with tailwinds and execution, how should we look into the FY 2026 at the current juncture for the selling itself?
See, we expect to open this after achieving 8,000 crore of order book this year and achieving the revenue. You can expect that we'll be opening newer also close to 8,000-10,000 crore and similar amount of order booking in that particular order. As on a conservative side, excluding Reliance and Nigeria, we can still grow at 15%-20% CAGR annually on a very, very conservative basis.
Okay. And, sir, just a final question. If you can also give some. Just wanted to seek some clarification on the recent sale of shares by the promoter, especially in the context this year, we do not have the indemnity clause liability from the promoter. So if you can give some clarification on that part, that would be really helpful.
So as you must have read in papers, our most active promoter, Mr. Khurshed Daruvala, has reiterated his position that he's going to continue, and he's a long-term investor in the company, and he's going to be there, and there is no plan of any further shares by him. So for all other promoters, I will not be in a position to comment, but as, because Mr. Daruvala has stated publicly, and this article has been published in all the major newspapers across the country, that he is going to be there, and he's re-affirmed his commitment to be the long-term player in the company.
Okay. Thank you. Thanks a lot, and wish you all the best, sir.
Thank you. Thank you.
Thank you. The next question is from the line of Gautam Gosar from Monarch AIF. Please go ahead.
Hi, sir. Thank you for the opportunity. So my question is basically on execution. So since majority of our order book is domestic, I basically wanted to understand how is the progress going on in the Khavda region as well as in the GIPCL. So, majorly, we've won these orders one or two years back, and these orders are of big size, of around 5,500 + 1,100 crores. So if you could highlight how the execution has been going on, how much is executed, and what is the expectation for the year, it would be really helpful.
Yeah.
Thank you.
As far as the Khavda portfolio is concerned, we are well on track to deliver as per the contractual timelines to the client. There have been slight initial, some delays in the supply of modules. Projects are on track, and as I discussed earlier in the call, that we expect to complete Khavda, majority of the Khavda portfolio in this fiscal year. Before the monsoon, the entire construction of the entire Khavda portfolio will be completed. That's where we stand. In addition to that, the other portfolio, majority of the IPP portfolio, private IPP portfolio, which is in Rajasthan, will also be delivered before March, so that we can achieve a revenue of INR 8,000 crore in this fiscal.
So all the projects, execution plan has been put in place, all the engineering is complete, orders on the suppliers have been placed. So we are well positioned, all the teams have been mobilized to the project sites, so we are very, very well positioned to execute all the projects as per committed timelines and to achieve the revenue of INR 8,000 crore this fiscal.
Okay. And sir, are there any orders in the order book which are yet to start the execution?
Yes, we received one order last night. Yesterday, the one order was received from NTPC.
No, order after that which you've received.
Just LOI has been received. That will be started now, and but as soon as we get the orders, the engineering and ordering on that orders start immediately. There is no order like that. That's what our strength is, that we are very, very nimble on execution. Before even once we feel that we are in the final stages of getting an award, the team start working on the order, and as soon as we get the orders, engineering and procurement action start taking place on immediate basis. There is no other order except which was received yesterday. We are progressing well as per the schedule on all the projects or orders backed by us.
Okay. Thank you, sir. That's it from my side.
Thank you. The next question is from the line of Bhavik Shah from MK Ventures. Please go ahead.
Yeah, hello, sir. Good morning. The first question is on the Nigeria project. Like, are we facing any challenges there? Is there any chance of the Nigeria project not going through, or like, is it just delayed due to the bureaucracy?
No, actually, we are. Like, Nigeria project is on track, and it is definitely coming. So there is no question of cancellation of Nigerian order. Just to give a background, the Sun Africa, our partner, they, on this model, they have already signed two projects in Angola, and last week they have this week they are going to sign one very big order in Serbia. So there were some, like, as you know, there were some particular domestic situation in Nigeria, on their political front, which it got like. We were expecting it to sign it last month, but somehow it has got delayed. But we are expecting it to get concluding very, very soon. The negotiation has been completed with NDPSC, and their new board also has approved the project. So there is no uncertainty about the project.
Project has big support from the U.S. government as a part of their various renewable energy and Power Africa initiative. So there is no uncertainty about the project, and we are expecting it to happen very, very soon.
Got it, sir. Okay, and so this was the final tranche of indemnity, right? No further amount is expected.
No, no, no. Indemnity tranches, I think Sandeep will share more details, but they will materialize from next 24 - 26 months. As and when the sums will get crystallized every year, the promoters will pay as per the crystallized amounts.
Okay, so what is the amount we can expect over the next, say, 12 months, approximately?
I think, I will pass it on to Sandeep to share the exact figure.
Gautam, so right now, what we have indicated is that INR 109 crore has been billed as of September 13, which will be received by thirtieth of November, right? So that is the amount that is going to be received by us in this particular quarter. Now, over and above this, there are you know multiple cases which are essentially in various stages of settlement. Some of them we are trying to look and settle with the client. In those cases, we will be able to you know achieve faster closure, in which case we will either receive the amounts from the client directly or like we have always indicated in the past, the promoters are finally just backstopped it.
You know, if it's not from the client and the settlement happens, then the promoters will come in and backstop. Now, if we take the legal route, however, and go through the arbitration process, those tend to be slightly more time-consuming. That is why we have said that, you know, for full crystallization of the INR 800-odd crore, which are still money that we are currently cashing out in, it could take a period of 24-36 months for full realization of the amounts. It's very difficult to put a number at this point on what will exactly materialize, crystallize in the next 12 months, apart from what has already been billed to the promoters.
Got it. Got it. And so what is the interest rate on the loan we have taken from IREDA?
About 11.6%.
11.6%. And so, last question, so on the. How are our margins on the RIL pilot project? What kind of gross margins do we have there?
Margins are the same as we are like the project of similar nature in the market. Our margin on Reliance also aligned with the margins of similar projects in the open market.
Okay. And so in, say, for FY 2026, do we expect our gross margins to improve from the current levels?
Yes, we do expect to improve because overhead is practically, we have stabilized the overhead and we are continuously working to improve the overhead numbers. But revenues will go up significantly, and rather, I would say not affect even the next quarter onwards, revenues will be ramped-up significantly, and you will see better. Like, the gross margins will remain same, but EBITDA numbers will improve significantly going forward in all the quarters.
Okay, got it.
Gautam, just to add,
Yeah.
I think on the domestic projects, we have already indicated that, we will be targeting the 10%-11% gross margin range. And, and, you know, we have our, O&M projects where we have said that the target steady-state margins are around 25%. So those are numbers that we have already indicated to you. That's where the gross margin number will be. I think, on an EBITDA margin front, since overheads are likely to remain the same, you know, once you have higher revenue, there will be operational leverage that could kick in, and your EBITDA margin therefore may improve significantly. That is what has to be noted as we go ahead.
Yeah, so one question, seven point 8 GW of O&M portfolio, can we round them to what, gigawatt in, say, FY 2026?
So roughly more than eight GW of project under execution. And if we say, like, in FY 2026, majority of them will be commissioned, and in addition to, on top of that, there will be third party orders. So all that will be added to our O&M portfolio.
Okay, sir. Okay, got it. Thank you so much.
Thank you. The next question is from the line of Mayank Chaturvedi from HSBC Mutual Fund. Please go ahead.
Yeah, hi. Thank you. Good morning, sir. So just on this, strategy change, now that we're going for more turnkey projects, though it is largely from PSUs, and I understand that the prices, for the modules in the Indian context are pretty much stabilized post this ALMM rollout that has happened. But how are you thinking about a possible price decline, that might happen with the capacities that are coming up? And how are we protected, in the turnkey orders that we are taking up from these PSUs? Because we have already suffered before, so I'm assuming that we will be taking much consideration.
There is one interesting thing in this, because earlier, the modules for the turnkey projects we are taking, we were procuring in international markets from China. Now we are buying all the modules from tier one Indian suppliers. So the contracts are very, very strong with Indian suppliers, and they are enforceable. Second, our relationship in the market is strong, and we are firming up our orders with the module suppliers immediately, very, very soon after we are receiving our contract. So we are not taking any risks there, so we are back-to-back protected.
So as soon as we get our contract, we are on that basis and those price levels prevailing in the market, based on our on which we have submitted our bids, we are finalizing our orders. So there is no speculation there, and we are not exposed to any risk. And even either the rise or fall in the module prices does not impact our business models, because bids are submitted on prevailing module prices in the market.
Okay. Okay. And this turnkey projects are only restricted to PSUs, or are we also extending that same?
Right now, the market model in India is such that they are coming, being floated by PSUs only. So far, no, IPPs are not coming out with the.. They are not asking for module supply from EPC. But if they come out with that, we can strategically, at that point of time, we can take a call. But as of now, it is restricted to PSUs only.
Okay. Great, sir. And sir, there's the second question on the Nigerian order, since the U.S. entity is involved pretty much in it. So do you expect that the signing of the order could be delayed post the elections of the USA and not go there?
No, there is no possibility of elections. So we have met senior EXIM Bank officials, senior other U.S. officials in this regard. U.S. Congress has committed funds of $120 billion for the EXIM Bank to support renewable energy projects world over. So this kind of credit for the related to energy projects, it is available to U.S. EXIM Bank. The Congress has that support. The projects have been mandated to EXIM Bank, so we don't see any impact on the projects, even post-elections, because it's the amount which have been already being sanctioned by the Congress.
Okay. Okay, great, sir. That's great to hear. Thank you so much.
Thank you. The next question is from the line of Karan Sanwal from Niveshaay. Please go ahead.
Yeah, hello. Am I audible?
Yeah, you are. Please.
Yeah, thanks for the opportunity. Just so I have two questions, like, any major reason for increase in other expenses and other income this quarter?
So other, there is one agreement with the SP Group, that we have a particular cross-charge to them, which has been charged in this particular quarter, and that has led to extra income. And I think further clarifications can be given by Sandeep on that.
Yeah. So the one-time non-recurring income that you have seen in the P&L that was uploaded by, in the investor presentation, is the amount that Amit just alluded to.
Okay. And also, if the interest cost, if you could guide how it could shape for the full year? Like, we are obviously ramping-up the, you know, execution. So we've been taking more non-fund-based limit or maybe more working capital limit. So if you could guide what will be the full year interest cost for us?
Okay. So, see, I had already mentioned that, for the INR 500 crore facility that we have availed, the interest cost is 11.6%, right? Now, over and above that, we have roughly about 380 odd crores of 350 odd crores of term loans. Now, part of these will be repaid with the indemnity proceeds that we will be expecting this quarter. So, an amount to the tune of almost INR 109 crore is what that amount will be. And, yeah, so this is what at least fund-based facilities are at, there at the moment. And, you know, and roughly around 10%-11% is what will be the number on the interest cost for that. 11%-12%, sorry. Yeah.
Okay, great. That's it from my side. All the very best.
Thank you. The next question is from the line of Aashish from InvesQ PMS. Please go ahead.
Yes, thank you so much. So just to clarify, there was quite some discussion on this, bank guarantees, limitations that we had. So till now, the reasons why we are stuck at 1,000 crores odd was that we had that much of limits available. Is that the right way to look at it, or there were certain other things also which constrained us from achieving our target for the last two quarters?
No. So see, I mean, execution has been progressing as per plan. You should recall that, you know, Q2 is a seasonally weaker quarter as well because of the monsoons. And just like Amit had earlier mentioned, that bulk of our execution currently happens in Khavda, right? So, you know, we were expecting, and we had also guided in the earlier calls, that that execution will be second half heavy, which is what we are anticipating at the moment. Thankfully, we do have now the ratings upgrade in place as well, which will ease up limits for us going forward and make execution and, you know, elongate credit cycles to some extent as well.
So that is another thing that will happen and, you know, help our execution apart from, you know, the availability of limits, open credit from vendors, et cetera, which we have already worked upon. So, you know, from at the start of the year itself, we had guided that it will be second half heavy, which is the case that is likely to happen with execution. And you know, like Amit said, we are pretty much on track for that.
So, given we've achieved around couple of 1,000 crores on the top line in H1, you're saying that maybe 2,000 crores in Q3 and 4,000 crores in Q4, something like that would happen in the next two quarters, and that's pretty heavy to basically for us to understand. So, you're okay with those kind of numbers being achieved, right?
No, we will not guide you to those numbers. Q3 will be much, much significantly better than Q2, and Q4 will be our best quarter. Beyond that, we'll not, because all the projects will be executed as per their execution plan and the commitments made to the client. So we will not like to delay anything. And, but Q3 will be a strong quarter and Q4 will be our best quarter. Beyond that, I will not like to guide you on particular numbers for any quarter, but the final guidance for the revenue remains intact.
Got it. One more thing on the notes to accounts and auditors remarks, there's an INR 2,800 crore number that is there in some subsidiary. Just some clarity on that would help. What is it regarding, as in, what is it called? This thing, note regarding?
Could you clarify what was the note number, please?
Note number I'll have to check, but there's an amount of 2,800 crores and 2,811 crores in some put in some subsidiary. And there's some remark around that, both in your notes and your emphasis of matter by the auditor. Some clarification would help. So that's what it is, because the number is recent, it is.
No, this would be, I think, in the standalone that you are referring to, right? Not on the consortium.
Yeah.
This is the loan to FZCO, which is a subsidiary in India, INR 100 crore.
Which subsidiary is this?
FZCO.
Sterling Wilson.
Sterling and Wilson International Solar FZCO, which is our UAE entity in UAE.
Okay. So, it's normal business funding from the parent to the subsidiary for carrying on the business, is it?
Correct.
Okay. Okay, fine. Yeah, and sir, anything to put remarks on the CFO exit that happened and the promoters selling and stuff. You have come to clarify on the promoters thing, but what's it regarding with the CFO exit in this quarter?
I think our CFO, Mr. Bahadur Dastoor, has been a very valuable and long-term associate with the company. He has contributed in all the aspects of the functioning, but it's a part of, I think, one's personal aspiration, personal reasons and career growth, I think, which he has taken. He has cited as personal reason for moving ahead in his personal and professional journey. So that would like to say that he has spent quite a long time with the company, and I think as a part of his personal plan, he has chosen to move ahead, and company highly appreciates and value his contribution to the company.
Okay, and the replacement for him right now, are we looking for outsiders, or we have some plans in place for him?
Yes, we are like working on mandate and looking for candidate from outside, though a very strong internal team is in place, but CFO, we are looking from outside, and shortlisting will be completed fairly soon, and CFO will be resuming in coming months.
Okay. Okay, thank you. Thank you.
Thank you. The next question is from the line of Shubham Shete from Jefferies Group. Please go ahead. Mr. Shubham, I would request you to unmute your line and speak, please.
Hi. Hi, am I audible?
You are.
Yeah. Hi. So, my first question is on margin. Pardon me if this question has been taken before. So I just want to get a sense, like, what sort of margin profile that we have for domestic versus international EPC, similar for O&M business as well?
Our gross margins for domestic remain between 10%-11%, and similar margin profile is there for international projects.
And what sort of EBIT?
On O&M, straight margin is around 25%.
Okay, on blended, we can expect, like, 11%-12% on the overall?
You can expect 10%-11% gross margins.
Okay, and EBITDA, at EBITDA level, what can we expect?
EBITDA level, I think we are considerably improving our overhead numbers, and EBITDA will depend on that. So we can expect between 7%-8% EBITDA number going forward, because heavy rationalization on overheads are going on, and we'll come back with exact numbers when the heavy revenue quarters will be there in next two quarter. We'll come back with revised estimates on EBITDA numbers from next quarter.
Can we expect this seven to?
Just to clarify.
Yeah.
So we've already indicated that overheads have, you know, most of the rationalizations in overheads have been completed, right? So, you know, like Amit just mentioned, gross margins are 10%-11% in domestic and, similar for the international EPC business. For O&M, it's 25%. Now, overheads, what you have seen in Q1 and Q2, on a blended basis, you know, I think similar numbers are likely to continue, heading in back into the second half. So depending upon, obviously, what your top line is, there will be, like I mentioned earlier as well, that, operational leverage kick in, and therefore, given that your overheads are likely to remain, at a similar level, higher revenues will lead to, higher EBITDA margin as such. Yeah.
So to what level can this be upshifted?
Sorry?
To what level can this margins be pushed to, say, the north of 12%-13%?
No, no. Gross margins, 10%-11%. That is what we have indicated. So obviously, EBITDA will be lower than that, right? Given that you have overheads as well.
Okay. And you would, you see sustainability of this EBITDA margins at the level 7%-8%?
So once we reach a steady state in terms of execution, yes, you can expect, you know, EBITDA margins to stabilize at those levels. So yeah, depending on top line.
Okay. So, just a question, like, why is this, like, a bit lower than what is there for the other peers which are listed? Like, say, if I take an example of Waaree Renewable , they have a bit greater margins on EBITDA.
I would like to clarify something here, because we have our own addressable market, and there are projects which are offered in the market, come with land and ROW acquisition risk. We are not including that in our addressable market, and we are not executing projects, because we see a great risk associated with that. So far, we have not picked up those projects, and they are not part of our order pipeline. Typically, the EPC players which are taking projects with land and another associated ROW risk, they get usually higher margin, but it can lead to substantial losses as well. As a part of risk mitigation practices or our risk metrics, we are not accepting or taking those projects. Our margins are normal EPC margin based on either BOS or turnkey projects, excluding land.
So that's where they are, and we are choosing our projects very selectively. So I think we are operating as best-in-class margins in the industry.
Sure. So, do you have any hybrid project in your portfolio? Solar.
As of now, no, but we are working on standalone BESS projects, but we are working on multiple hybrid projects in India and abroad, foreign markets, international markets, so which will materialize soon. But as of now, we are working on the largest standalone BESS project in India.
And would that give any further expansion to your margins?
That depends with how the market grows, and usually the margin level are still 10%-11% in EPC space, but we'll see how the market evolves. But as of now, the gross margins will remain 10%-11%.
Okay. Just one last question on battery storage business. Like, how is it going and any plans on ramping-up?
So market is growing. We have seen multiple bids in last few quarters, and it is going to ramp-up. As you see on IPP side, also, the SECI and all the NTPC, everybody is coming out with bids for BESS, standalone BESS or hybrid. So we see that market growing considerably, and it will form a good part of our portfolio in coming quarters.
Okay, so, what percentage of revenue can it be in by 2027?
So, in that, on that particular part, I will not be able to give you any specific, number or revenue guidance with particular to that. That depends on how many projects are floated and what is our hit rate for those particular projects. I think as the market evolves next in a quarter or two, we'll be give you a better guidance to, for those particular numbers related to BESS projects.
Okay, and we can expect the similar kind of margins for this business as well?
Yeah, sure. You can expect either similar or better margins for those projects.
Sure. Sure. That's it from me. Thanks.
Thank you. The last question is from the line of Deepak Rao from Qber Asset Advisors. Please go ahead.
Yeah, hi. Just wanted to get some light on this line item related to exchange differences translating the, in the financial statements. That seems to be there at every quarter, and as a percentage of profits and revenue, it is high. So can you throw some light on, what it is? Are you controlling it, or you have any hedging strategies, et cetera, et cetera, et cetera?
No, so these primarily relate to, you know, the projects in the international subsidiaries and effectively the Forex differences that arise, on account of those projects. There isn't necessarily any requirement as such to hedge these, but yeah, the Forex differences translation that you're seeing is essentially on account of the branches and subsidiaries that we have in our international business and the projects that they're executing at.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Amit Jain for closing comments.
I would like to thank everybody for joining the call. For any further information, kindly get in touch with Mr. Sandeep Thomas Mathew, our Strategic Growth Advisors, our investor relations advisors. Thank you once again, and have a great day. Thank you.
On behalf of Sterling and Wilson Renewable Energy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.