Ladies and gentlemen, good morning and welcome to the Sterling and Wilson Renewable Energy Ltd. Q3 FY25 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 of the 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 remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero on your touch-tone intercom. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Thomas Mathew, Interim Chief Financial Officer. Thank you, and over to you, sir.
Yeah, good morning, everyone, and welcome to our Q3 FY25 earnings call. It gives me great pleasure today to introduce our new Global CEO, Mr. Chandra Kishore Thakur, or CKT as the team fondly calls him. Mr. Thakur has been with Sterling and Wilson for over seven years and is an industry veteran who has held leadership roles within NTPC, LANCO, and Punj Lloyd previously. At SWREL, he was previously the CEO of Asia, Africa, Europe, and Latin America, and a key architect of the India scale-up. We also have with us today SGA, who are our IR partners. We will start today's call with the key operational highlights for the quarter and industry outlook by Mr. Thakur, followed by the financial highlights, post which we will open the floor for Q&A. Thank you, and over to you, CKT.
Thanks, Sandeep. A warm welcome to all the participants on this call. Let me begin with a quick update on our business operations and outlook. Beginning with our order book, we have continued to build on the strong ordering momentum in the domestic market and won two new orders in the third quarter amounting to INR 1,465 crores. We won a 400 MW DC project in Rajasthan from Aditya Birla Renewables, who have worked with us in the past. We hope to be able to partner with them in their ambitious Pan-India projects in the future as well. We also received a second letter of award from GIPCL for a 625 MW DC BOS project in Gujarat. We are very excited to be working with them again and provide us an opportunity to showcase our capabilities in the Khavda region, which is becoming a key market for us.
With the two order wins announced this quarter, our total order inflows for the nine-month period have touched INR 5,679 crores. Of this, the domestic market has contributed INR 4,525 crores, comprising 11 new projects. Looking at the ordering momentum and bid pipeline, we remain confident of achieving our INR 8,000 crore order inflow target, excluding Nigeria and our project. Our unexecuted order value now stands at over INR 10,167 crore and continues to provide good P&L visibility for the forthcoming quarters. Over 80% of this order book comprises domestic Indian projects, while the international order book comprises primarily two projects, each in Europe and South Africa.
In terms of execution, while we continue to scale up our execution capabilities, as is evident in the sequential pickup in revenues and the projects continue to progress on track, we have also, in a few cases, realigned project timelines as per customer requirements, which is likely to result in execution spillover by one to two quarters in a few projects. We have been making progress on some of the execution constraints we have faced in the past quarters, including reducing frozen non-fund-based limits and achieving higher open credit terms with the key suppliers. We believe these factors will help us to progress on a sustainable execution growth in the forthcoming quarters. We are continuing to see a very strong bid pipeline in place for India, with over 21 GW of projects likely to be awarded in the next six to nine months.
Our pipeline primarily captures projects which have a strong likelihood of coming to fruition in terms of an award. It is also important to bear in mind that in just concluded third quarters, we have witnessed fairly heavy project tendering activities, especially by the large PSU like NTPC and, of course, GIPCL, where we turned out to be a successful bidder as well. Thus, the solar EPC bid pipeline is continuously evolving with new projects getting added. As pointed out in earlier calls by Amit, apart from typically a strong PSU pipeline, we are also seeing a strong pipeline of private IPP projects coming to the fore. In nine months of financial year 2025, of the 11 domestic projects we won, nine projects came from the private sectors. Our existing private customers have exciting growth plans, and we are confident of growing our order book with them.
Simultaneously, a large set of PSU bids are also likely to get finalized between now and June 2025, growing our addressable market. We continue to judiciously evaluate projects in India and overseas and are mindful of having to remain patient in order to target profitable orders. Our international business development team is also targeting a few select geographies like Europe and MENA regions for a few select projects which are more strategic in nature and which we shall choose to pursue once our terms are agreeable to our developer. Moving to the Nigeria project, we are still awaiting final order signing and closure. Also, as has been mentioned in earlier calls, post-order signing, we expect the project to take six to nine months to achieve financial closure.
We would like to reiterate that the lumpiness in order inflow is to be expected with EPC companies like ours, and timelines for achieving project closure could vary depending on a host of factors, including finalization of contractual terms, financial closure, etc. Our O&M portfolio outlook remains strong, and our portfolio stands at 8.8 GW as of December 2024. Our large stream of EPC projects, which are nearing completion in the next few quarters, will also feed a good pipeline of new projects for O&M, which should aid a meaningful pickup in revenues in these segments from the second half of FY26. Moving to industry outlook, India continues to be our single largest focus market and one where we have also historically done very well and delivered.
Apart from the bid pipeline, we have already indicated which we believe is likely to get awarded over the next two to three quarters. The domestic EPC market continues to grow and remain very buoyant as we head into FY26. It should therefore be no surprise if financial year 2026 turns out to be a stronger year than financial year 2025 in terms of EPC awarding. Another potential growth area for us is the anticipated pickup in BESS projects across the country. There have been multiple BESS developer bids which have already been awarded and given our head start of working on the largest BESS project awarded in the country till date. We remain confident to make further inroads in these segments. With a fast-growing market and a strong balance sheet, we believe we are well positioned to tap the growth.
With this, I will ask Sandeep to take you through the consolidated financial highlights. Thank you very much.
Yeah, thank you, CKT. Moving to the financials, the company achieved its second-highest quarterly revenue ever since listing, and the highest quarterly revenue post-COVID in Q3 FY25. Revenue grew 215% year-on-year and 78% sequentially to INR 1,837 crore, primarily aided by higher execution in the domestic EPC projects and the new international EPC projects. On the margins front, our consolidated reported gross margin was approximately 9.4% in Q3, and for the nine-month period, it has now been averaging around 10%. If we look at it segment-wise, domestic EPC gross margins were at 9.7% in this quarter, and this is compared to about 9.1% last quarter and has begun trending towards our target range of approximately 10% for the domestic segment.
In the international EPC gross margins in the third quarter, it was impacted by a one-time cost which we incurred to achieve final punch point costs and thereby achieve financial closure in a legacy project. Excluding this cost impact, gross margins in the ongoing international EPC projects are around 11%. O&M gross margins during the quarter were at 25% and more indicative of the steady-state margins that we've been alluding to in this segment. Our operational EBITDA, which is operating revenues less our recurring overheads, amounted to about INR 90 crore this quarter and has picked up significantly compared to approximately INR 23 crore in the second quarter and INR 21 crore in the first quarter. With recurring overheads remaining steady and the benefit of operational leverage kicking in, we believe that as execution pace picks up on the EBITDA side, there should be further gains.
Reported Q3 EBITDA came in at INR 73 crore at a 4% margin and is about 43% higher on a sequential basis. Q3 profit before tax of INR 41 crore has grown about 105% sequentially, more than doubled. Our reported PAT was INR 17 crore, which is, while very significantly higher both year-on-year and Q-o-Q terms, remains impacted by a non-cash deferred tax asset charge, which was roughly INR 18 crore in this quarter, and this has been the case, if you recall, since Q4 FY24 due to the stall on profitability. The remaining deferred tax assets on books as of today are approximately INR 33 crore. As CKT alluded to in his opening remarks, we continue to make positive strides in our execution scale-up and hope to rapidly build further on the current base we have achieved in this quarter.
Now, coming to the balance sheet, our net debt has decreased by approximately INR 150 crore this quarter, as we received about INR 109 crore indemnity proceeds from SP Group and Khurshed in November 2024, which was in turn used to pay down some term debt. Positive cash flows from operations also pushed up the quarter-end cash balance. We continue to make progress on easing up limits on the non-fund-based side. However, the progress has been slower than what we had hoped for. On the positive side, our request to suppliers for open credit has been fairly encouraging. To reiterate our plan for Q4 and beyond, our scale-up is being realigned with domestic customer requirements, which has led to some push-out in execution. We are targeting about INR 2,300 crore to INR 2,500 crore in top line for the fourth quarter.
With this, we can now open the floor for questions and answers.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Subhash from Value Investments. Please go ahead.
Hello, are you able to hear me?
Yes.
Yes, Subhash . Yeah.
Yeah. Congratulations for the great set of numbers, especially on quarter-on-quarter basis. As you had guided that Q3 is going to be a significantly better quarter than Q2, I think you have showed the results, but you said Q4 would be the best quarter of the year. And also, throughout the year, I think everybody was more curious about the revenue guidance that you had given from the beginning. Even after Q2, you said that you are very confident of achieving INR 8,000 crore revenue. There was no doubt in that.
So now, when I see the nine-month revenue, it is INR 3,800 crores. But I think the last point in which you mentioned INR 2,500 - 3,000 crore is the fourth quarter revenue projection. So if you do only INR 3,000 crore, then you will not be able to achieve the INR 8,000 crore revenue guidance, right? Am I right?
So, Subhash , that is correct. I think what we are, if you sum up the numbers that we have given, you would get to about INR 6,000- 6,500 crore range, which is what is the number that we believe can be achieved. And this is, like I said, primarily a function of two factors. One, which is not in our control, which is essentially the customer's requirements, the realignment in the plans as per the customer requirements. And the second, obviously, the ones which are not under our control are on the basis of non-fund-based limits and the increased open credit that we have been getting, managing to get from the suppliers. Those have been progressing fairly well, and that is why we stand today.
Okay. So then 8,000 crore revenue is not achievable this year, right?
Yeah. That number, if you add up what we've indicated, will indicate to, like I said, INR 6 crore-INR 6,500 crore.
Okay. Yeah, INR 6,000-6,500 crore is also fairly a good number for the year. But I mean, since the rate was more accessible than INR 8,000 crore, this would be a disappointment. But my main question is about your first point. You mentioned that due to the customer realignment, could you elaborate more on that? I mean, you said that after Q2, in the investor call, you said there was no problem in execution, and you are very confident of achieving INR 8,000 crore. So what is it about the customer realignment as per the rate? Could you elaborate on this point?
Yeah. Hi, Subhash . This is CKT. When you say customer realignment, means some of the projects on the because of some difficulties on the land acquisitions and the evacuation capabilities getting ready, matching with the project requirement. Customers had pushed out the work for this, and therefore we have necessarily realigned the complete working strategy and all.
Okay. So my last question is about the Reliance BESS pilot project that you are doing. You said that you would be able to complete it by end of this financial year. So is that timeline still good, or do you need more time to execute it? And also, if you could give an update on the Nigerian project, more details on it, that would be helpful.
No, so I think we are absolutely on track with respect to execution of Reliance pilot projects. I'm happy to say that the first set of the projects is already commissioned. Another set of projects is getting commissioned in a day or two, and the rest of the projects are absolutely on time as planned in this financial year, which will be completing the balance remaining portion of the project.
Subhash , on Nigeria, procedurally, things are moving in a positive way. Now, we just have to wait it out till the actual order gets announced.
Okay. Thank you.
Thank you. Ladies and gentlemen, please restrict yourself to one question and one follow-up question per participant. We take the next question from the line of Puneet from HSBC. Please go ahead.
Yeah. Thank you so much. My first question is on potential Reliance business. Do you have any indications of them scaling up? And are you keeping some sort of bandwidth separate for that, which is still driving recurring overhead, or do you think that recurring overhead itself will start falling from next year onwards?
Puneet, most of the information from Reliance is in the public domain, the kind of plan they have and all. Closely, if you follow, so now there seems to be some traction on some of the projects. We are well poised, and we are in discussion with them, and hopefully, something would be materializing soon.
What indication does it have on the recurring overheads? I think that is what I'm trying to understand.
So also, I mean, if the revenues are increasing, obviously, we have to add some teams for them, so depending upon the business scale-up and all. But that would be impacting onto the reduction of overhead only, right? So if the revenue goes up, the overhead, obviously, in the overall business number will come down. That would be a positive sign.
So Puneet, there are two aspects to this. One is on the fixed overheads part, which is already part of the recurring overheads, right?
Yeah.
There we have already indicated in the past that up to a certain revenue run rate, which would probably be significantly higher than, let's say, our current quarterly run rate, right? I think till such time, say about 10,000-12,000 crore or plus around thereabouts, our recurring overheads are currently not going to increase to that level of a run rate in all likelihood, right? And a fair amount of optimization that we have done in the past has helped us bring the recurring overhead to where it is right now. And probably from here on, I think as a guidance, probably to increase at the rate of inflation is probably the best guess, given that most of the optimization that we have done has already been largely completed.
Understood. That's very clear. The second question is on the profitability and terms of PSU versus private orders. Is there a difference? We expect better margins, lower margins from private clients versus PSU clients, and how are the terms different there?
So while SECI orders are most competitive, sometimes you have seen some of the orders getting closed. We have witnessed lower margin, of course. But the IPPs, I mean, the orders are mostly closed on the merit of the EPC company. And our order books in the last few quarters are mostly from the IPP. So we are very selective also to decide the order bookings patterns. Wherever it doesn't match to our requirement of the profitabilities, obviously, then sometimes we decide to walk away.
Great. That's all from my side. I'll come back with some follow-up questions. Thank you so much.
Thank you. Ladies and gentlemen, a reminder. Please restrict yourself to one question and one follow-up question per participant. The next question comes from the line of Kunal Shah from DAM Capital. Please go ahead.
Yeah. Hi. Now, just dissecting this point on the revenue slippage with respect to the guidance so what quantum of that slippage can we assign to projects running slow from a developer's side and what percentage due to our banking limit constraints so just to understand how we can build up F26 basically. Thanks.
So Kunal, I think the simplest way to look at it would be that we were targeting about INR 6,000 crore over two quarters, right? And effectively, a one-quarter delay or a slippage would essentially imply that you would do about INR 4,000. You would basically do INR 6,000 crore over three quarters.
No, I'm still unable to understand. Initially, we were guiding for INR 8,000 crores, and now we closed roughly, let's say, between INR 6,000- 6,500 crores. What I'm trying to understand is this INR 1,500 crore shortfall versus our initial guidance. How much is due to the developers running slow, and how much due to our own banking limit constraints?
So a large part of this, if you just go by what I was trying to explain to you, would essentially imply that a large part of this would be on account of the customer realignment that has happened.
Right. Okay. Understood. And so now, just based on where we are in terms of the order book and the banking limits, how should FY26 sort of shape up on a conservative basis ex Reliance and ex Nigeria from a revenue perspective?
See, what we have targeting is essentially to look at INR 2,300- 2,500 crore exit run rate of Q4. I think it will be a fairly good indicator of what we could look to do in a steady state.
Okay. And also, just on the CFO appointment, I think last quarter, we were mentioning that we were nearing the finalization of that. Now, by when can we sort of zero in on that as well? Just help there.
Puneet, so we are in the selection process. So the person has been identified, and he is serving the notice period in the previous company, and he will be joining after serving the notice period.
Any timeline here? Sorry.
Let's say two to three months.
Okay. Okay. Yeah. Thanks. That's it from my side. I'll join the Q&A.
Thank you. The next question comes from the line of Rohit Natarajan from Aditya Birla Sun Life Insurance. Please go ahead.
Yeah. Thank you for this opportunity. So my first question was on the non-recurring overheads. We have indicated some 20-odd crore in this quarter. Any color on, as in what exactly is this and how do we, I mean, do we still stick to that 300 crore annual recurring overheads? That number, is that intact?
So, Rohit, if you look at the nine-month period, right? I mean, your total non-recurring overheads would, I think, amount to about INR 8 crore. This is because there was a gain, if you recall, last quarter of about other income, rather, of about INR 12 crore, which was an exceptional other income. So and then if you look at historically the numbers, I think the last two years, they have largely been about INR 8-INR 17 crore for a full year, which is the non-recurring overhead number.
So I would still think that just overall basis, I think those numbers are fairly in line with what has been the case in the past years. And I think overall, if you look at what our recurring overheads are, they have still been about INR 80-odd crore. So and that's where we've been guiding to. That INR 320 crore to INR 330-odd crore number still looks very much the case.
Really appreciate it. My second question has more to do with the interest part. So essentially, we were of the thesis that if we have to do some INR 8,000 crores, INR 7,200 crore is what we support through churning of the non-fund-based limits. Now, what is the interest? I mean, the non-fund-based charges that we pay? I mean, we were in talks earlier to negotiate it downwards, I believe. What exactly will it be once that thing gets turned out to be true? I mean, all the negotiations, if it goes through?
The charges will eventually settle at around 0.50 basis points to 1%, Rohit.
Oh, okay. So that will be at least, I believe, right now. And what is the amount that you pay right now?
No, you're talking about the absolute amount that we pay out?
No, the percentage. That is post-negotiation will be 0.51%, but what is the outgo as in the percentage right now for non-fund-based limits?
The moment we had defaulted, I think then rates had moved to card rate, which was higher, significantly higher, about close to 1.5%-2%. Since then, we've effectively started renegotiating them, and they are moving towards the rate that I earlier just mentioned, which is about 0.5%-1%.
Okay. And what was it until nine months out? Maybe what was in Q3? That may be possibly a good indicator to see how things unfold.
Sorry, can you come again on that?
The Q3Q, what was that charge effectively?
3Q charge was about 1%, yeah.
Okay. Okay. That's it from my side. Thank you.
Thank you. The next question comes from the line of Aejas Lakhani from Unifi Capital Pvt Ltd. Please go ahead.
Yeah. Hi. Congratulations repeatedly and thank you for the elevation. A couple of questions. The first is that, Sandi, could you call out that, out of the INR 7,300 crores of sanctioned limits, what exactly is the limits that is available to the company at present? And when do you expect the additional lines to open up, given that the credit rating has turned investment-grade? In the second quarter, you had alluded to opening up of further limits. Where are we in that process? What has been the reason for the delay? And also, what is the quantum of open credit limits that you are in discussions with from your vendors? Is this a fourth-quarter phenomenon, or is this likely to persist for FY26 as well?
No. So two things, Aejas . One is that for the target that we effectively set out to do for the fourth quarter, we really do not need any additional further limits in terms of non-fund-based. I think what we currently have would largely suffice. The second thing is on the supplier's credit itself. I think there has been a fairly large push from our side, and we've actually seen also some of the suppliers respond very positively. One thing that obviously happens with supplier credit is that your payment cycles tend to shorten a bit, which is fine. But yeah, I mean, I think what we have been trying to do is push more towards on the supplier side and make up for the lack of limits as such, which has been the case.
Just so most of the open credit payments now, we have been paying in 40-60 days' time. That's a good signal, basically. That way, we are getting the push. We are able to give the push onto the revenue agenda, so sir.
Out of the INR 7,300 crores of limit, could you just answer what is the actual limits that are available to the company at present?
About 4,500, Aejas.
Okay. I think last quarter, this was closer to INR 3,500. So INR 1,000 crores of additional limits have opened up from the existing bank?
Some of the limits have increased post the investment-grade rating upgrade.
Okay. So are you saying that the limit is no longer 7,300? It's higher?
No, no. The ones that are available for use, Aejas.
Okay. But the total sanctioned limits were about 7,300. Is that number broadly correct?
Yeah. That number is still broadly correct, yeah.
Okay. And out of that, you have INR 4,500 crores that you can draw today?
Correct.
Okay. And does the 7,300 include that IREDA 500, or IREDA 500 is over and above?
No, no. That is over and above.
Over and above. Okay. Fine. The other one is that so what I'm now understanding, given that you've had an additional improvement sequentially in limits, your callout is that it's really the delay from the client side and the realignment from their side because of evacuation pressures that has led to this revenue shortfall. Is that broad understanding correct?
Yeah, Aejas. Your understanding is correct.
Okay. So, sir, then I have two questions on that. One is that the PSU pact, which you were expecting to sort of close out in this year, had a delivery deadline date, right? And if we did not meet that, there were implications that are there in clauses and contracts. So, will there be? Could you just explain that on account of all of this, what will be the impact beyond the revenue shift that will take place from Q2 to Q1? Will there be any additional impact to us?
No, Aejas, because it's basically that we have to align with the customer's requirement. And it's basically the constraints imposed by them. So therefore, together, we decided to push out the work. And contractually, there won't be any impact.
Okay. And sir, secondly, from a fungibility standpoint, see, if money was not a constraint, you had enough C&I orders as well that you could have executed to cover this shortfall, and you could have realigned resources. So could you just expand your thoughts on that?
No, so IPP projects, if you see, we are except few projects where there has been initial land issues, and that has really, I mean, pushed the project progress. Other than that, we are almost on track. Every single project is on track. There's no delay.
Okay. And sir, just one last observation from my side that fiduciaries like ourselves, which are completely reliant on the management to provide us with business outlook, in that light, sir, your guidance, there's a consistent pattern of over-promising and under-delivering on that front. My request is that, sir, if you could introspect into this aspect and help us if you need to in this matter a little more firmly, sir. Thank you.
Sir, thank you, Aejas. We'll definitely take your feedback and work on.
Thank you. Ladies and gentlemen, a reminder. We request you to restrict to two questions per participant. The next question comes from the line of Shiwani from Monarch Networth Capital. Please go ahead.
Hi. Am I audible?
Yes, Shiwani. Please go ahead.
Yeah. Thank you for the opportunity. I wanted to understand about the pending litigation matter, what are the developments, and how confident we are of closing some of the litigation. So some thoughts on that would be helpful.
Shiwani, I'll start off, and maybe VK can add. I think one important development that has very recently happened is the Andhra Pradesh High Court had ruled favorably in a GST case that we've been fighting in the courts, where they have ruled that it is not to be taxed at 18% as the initial order was. We are now planning to effectively contest this across the other states as well. And hopefully, if we get a positive development on this, we should be able to recoup some of the amounts that are currently stuck in that particular GST-related case.
Over and above this, there have been some positive developments in one of our Australian projects as well. And we should hopefully, in the next quarter, have an update for you there on that as well. Anything else, VK, that you can think of?
It's okay, yeah. Yeah. So those have been two, I think, important updates that have happened. And as for the others, things are moving procedurally. And I think we are fairly confident of our position on all the litigations that we are involved in.
For the projects you mentioned about, what is the corresponding amount that you're looking at?
We are about, I think the total amount is, if I recall correctly, about INR 170-odd crores.
Okay.
Yeah.
Okay, and the one with the U.S. arbitration that is pending, no updates on that as of now?
Things are moving procedurally, like I mentioned. Nothing incremental as such to report over here.
Sure. And also, could you quickly elaborate on the gross margin impact for the international project, which is to do with the legacy projects?
Yeah, so I think we had to take about AUD 3 million cost that we incurred this quarter to achieve final punch points in one of the last projects that we had to essentially hand over in Australia. The client was, very honestly speaking, unreasonable or acting very unreasonable in our view, and contractually, our legal team was very confident of winning the case as well. But we didn't want to pick up another legal battle, and so we just decided to take the cost and complete it.
Okay. Sure. Thank you. I'll get back on the Q&A for any follow-on questions.
Thank you. The next question comes from the line of Nikhil Abhyankar from UTI Mutual Fund. Please go ahead.
Thank you, sir. Sir, in this year or last year, we had run our BESS system of one gigawatt from JSW. I think for that, the tariff hasn't been approved. So how are we placed over there? I mean, will we be incurring any losses for the amount that we have already spent?
Can you come back again, please?
We had won a BESS order from a private company for which the tariff wasn't approved, if I'm not mistaken.
Yeah. So you're talking about the BESS order from JSW. So yes.
Yes.
The tariff adoptions by the regulatory commission had been questioned and sent back to SECI. SECI and JSW, they are in discussions because the project has substantially picked up. That may be the present status at their end. Other than that, we have been not asked to I mean, there is no termination kind of situations at this stage. In fact, on the civil fronts, for some of the portions, which is a long lead item kind of thing, the project is still on.
Okay. So we don't expect this to be a stranded project going forward?
As of now, yes. No, we don't expect.
Sir, how do you see at this risk? I mean, we are also witnessing that a lot of tenders are being bid out, but the PPAs are not being signed. Can you just elaborate? I mean, how do you look at it going forward? Will it impact our execution as well?
No, sir, not really. So all those orders that we have, the PPA is already signed. So that will not be impacted in any case. For the next financial years, I mean, all those orders which are expected to be out for EPC contract, part of them are gradually being signed, and our expectations with the mix of the opportunities from PSU and IPPs, our growth potential for order bookings will remain as projected. Yeah.
Okay. Okay. Sure. That's all from my side. Thank you and all.
Thank you. The next question comes from the line of Aashish Upganlawar from Invesco PMS. Please go ahead.
Yeah. Just wanted to get clarity on this non-fund-based limit that we have been talking about. You said the 4,500 crores is the usable limit, and would that mean 2,000 or 2,500 crores of top line is the max that can be achieved with this as of now? I mean, just sort of understanding would help here.
No, no. That's not entirely true. So effectively, 4,500 crores of non-fund-based limit comprises limits which are used for bank guarantees. These include both advanced bank guarantees and performance bank guarantees, and also for letters of credit, which are LCs, right? Now, obviously, in the case of older projects, once we complete them, the bank guarantees which were given, they come back. For new projects, we need to give them. So it is essentially a pool where there are projects coming in and coming out. And at the same time, we also need to manage what effectively are the letters of credit as well. So what really impacts us over here from the non-fund-based limits is essentially the letters of credit number. And there, I mean, like I said, sometimes if BGs get vacated, then we can utilize that facility for LCs and so on.
So INR 4,500 crores effectively, what we had indicated last time with INR 1,000 crores of LCs, we should be able to churn it around once every quarter, at least. That was the ballpark estimate that we had given. Over and above that, you know that we already have taken a INR 500 crores IREDA loan, which also will ease some of the cash flow constraints. Our projects, in general, are negative working capital as well. So sometimes they throw up excess cash as well, which can be used for execution. And over and above that, you have the support from the suppliers in terms of open credit, right? So all these combinations of factors are what eventually leads to the final execution run rate.
Based on what our current client's requirements are and where we stand, we believe, like we had earlier indicated, we should be able to go about INR 2,300- 2,500 crores next quarter, which we hope will now become sort of an exit rate for the forthcoming quarter.
Okay. And the progression that you would see going ahead on easing of these things, I mean, you said that something is in the works, and that would help probably. So anything to share on that, on the limits getting enhanced?
Yeah, I mean, like I said, this is a continuous process. The fact that today we already have INR 1,500 crores' worth of limits and only INR 4,500 is usable. Our attempt will be to try to get back to a higher number, right, than what we are currently. But that is a continuous dialogue with the banks that we are having on the side. And as soon as we have updates over there, we will keep you guys posted as well.
So the net number of INR 1,000 crores between September quarter and now, that is the addition that we've had, right? I mean, someone questioned on that. So is that the right understanding?
These are essentially the unfrozen limits. That's currently about INR 4,500 crores, yeah.
That was 3,500 in September, right?
We'll have to check that number, but yeah.
Okay, and sir, wanted to check on the overall scenario as well because is competition coming in decently big, although the kind of macros for our business seem to be pretty good in terms of order inflows, typically, for the sector, but how is competition shaping up in that, and because we've seen one of the players, I mean, reporting not so great numbers, so just wanted to check on is anything changing on that, competition or the macros, basically?
Yeah. So I mean, market is quite competitive. That is true. So many new players have come. But there are enough opportunities. As per our business models, we are selective onto the project qualities, both from the PSU and the IPP side. So as far as our target seems to be there, and looking at the market opportunities, we don't feel that we are constrained upon achieving our target number.
Any impact on our profitability of competition or maybe aggression in that sense? Because we've seen the gross margins are a bit lower compared to maybe it's because of the mix or anything you could just highlight.
No, sir. Even in the intense market, we have been able to grab some of the projects at a fairly good margin. Like the GIPCL, recently, we have won this order. It's quite fairly good margin. However, I mean, this was, again, a very competitive bid, right? So sometimes it's all market-specific, and the market is obviously competitive, but our business model says that at what business price the margins we have to operate. We are, I mean, fairly trying to work around that only, so I don't think that because of this, I mean, there is going to be a huge pressure into the margin because ultimately, I mean, it's a question of some quarters could be the good scenario, some quarters could be probably too intense, but then we have to position ourselves to see that we are as per our own business understanding.
Okay. And lastly, nothing to add on the Nigeria bit, given the elections in the U.S. are over. So any sense further that you're getting into it, or we have status quo on what's been happening over the last two, three quarters?
So like I had earlier alluded to, on Nigeria, things are procedurally moving in a positive way. So just be lucky to just wait it out now until we actually get the order.
Okay. Thank you.
Thank you. Ladies and gentlemen, a reminder, please up to two questions per participant. The next question comes from the line of Alisha Mahawla from Envision Capital. Please go ahead. Alicia, please proceed with your question.
Hello. Am I audible?
Yes, you are. Please go ahead.
Yeah. Hi, good morning. Just taking the question of the previous participant, the order inflow for some players and even for us probably is slightly slower than what was expected. We still stand by our guidance of INR 8,000 crores of order inflow. So are we expecting maybe some order wins in the export market to bridge the gap in Q4?
It is also basically, if you see the quarter up to the nine-month order booking position, so we can say we are almost on track. So we are INR 2,000 crores sort of our target. This quarter, the quarter four in domestic market is still very robust, both from the IPP, mostly from the IPP and also from the PSU bids. Obviously, we are very selective onto the overseas market. We don't want to be, I mean, just for the sake of reaching the target to grab any orders. We are very selective. We are working on a few of the projects very seriously. Some of them may materialize, but we are confident of achieving the target which has been set forth.
In light of that, assuming that we close our order book at 10,000 crores by the end of FY25, and like you mentioned in the call, that customer realignment and delays from the customer end, how should one understand the execution period of this order book now?
Well, so typically, in the Indian market, for the project size of, say, 300 and above megawatt capacity, it is around 9- 12 months. So I mean, some of the orders which have been booked up to, say, Q2, quarter two, those would be part of them would be commissioned by March, and a few of them can spill over as per the project timelines. The orders which we'll be booking now, that definitely commissioning will go in the next financial year.
Do we still believe that we can execute this order book in nine to 12 months despite the fact that currently some customers are requesting for a slower execution?
Yeah. So wherever there would be, I mean, the work has been paced out. So there we will be getting time extensions and all. So the 12 months may extend to 15 months in a few cases. I mean, that is as per the input requirement for the project commissioning, which could be the execution, I mean, the evacuation delays and all sorts of kind of stuff.
Okay. I'm so great. Thank you.
Thank you. The next question comes from the line of Suraj Malu from Catamaran Ventures. Please go ahead.
Yeah. Hi, sir. My question was more like it might be a repeat, but just to clarify, the current order book, that is to be executed over what time frame exactly? Is it 12 months or 15 months or 18 months?
That's what I was just, I mean, the last questions I was just responding to. The project timelines is varying depending upon the scope of the works and the complexity of the project. It all depends between nine to 15 months in the domestic market, Indian market. A few of the projects are with the timelines of 15 months, a few of them 12 months, a few of them nine months, so like that.
Got it. Thank you.
Thank you. The next question comes from the line of Bajrang Bafna from Sunidhi Securities. Please go ahead.
Yeah. So just to understand, some bit of clarity on the, you have indicated in Q4 you are expecting INR 2,000 crores' worth of orders. But going into next year, considering the pipelines and competition with currently you are working on, can you throw some light at what sort of order intake that we can target in FY25? Because if we see the numbers which are going to flow from different sections of the market are going to be significantly higher. We have done almost 30 gigawatt in FY25 in terms of solar installations in the country. And hopefully, in FY25, those numbers are going to be upwards of almost 40 GW. That is what broadly the industry is talking about right now. So under that parlance, what sort of order intake that you can think of considering the and also the banking lines.
You've already indicated we have been able to get INR 4,500 crores of bank limits right now in terms of LCs and BGs. So considering the banking constraints and some bit of clarity on that for FY25 will be really helpful. Thank you.
So in the pure play EPC space, if you see the opportunities are coming up, it's large. And assuming that our CAGR should be, say, 15%-20%. So if this year, suppose we will be closing at 8,000, so our target for next year could be safely around 10,000 crores. And looking at the, I mean, the banking constraints and all, so if you say that without the limit being enhanced, today we are able to do, say, this quarter, we say we are between 2,300-2,500 if that is the exit rate. So fairly, you can then expect that our revenue target will also go substantially high. So targeting a 10,000 crores order bookings from the execution capabilities and looking at the other constraints is the, I mean, is the fair ask.
The similar will be the revenue run rate considering 12-month execution cycle. The exit rate of 2,300-2,500 for Q4, looking at the current scenario, next year we would be targeting 10,000 crores' worth of execution also in terms of domestic market. Over and above, if we get anything from Nigeria or Reliance, that will be additional. That understanding should be okay for the time being?
No. So I think you're understanding me right. So we'll be working on 10,000 crores of project executions. We'll be working on that kind of things. Revenue numbers, obviously, all of them will not be commissioned in the next financial year. Few of them will spill over. So the revenue numbers will accordingly be adjusted.
No, but right now, you will be exiting, let's say, with INR 8,000 crores order book, and you will be targeting INR 10,000 crores order book in next year. So you'll be having the execution of INR 18,000 crores. And even if I assume nine to 12 or maybe 15-month execution cycle, achieving INR 10,000 crores top line should not be an issue in FY25.
Yeah. So when I say the 10,000 crores order book, fresh order booking next financial year, that would be, I mean, spanned over four quarters, right? So say even 50% of that. So that means we will be starting our financial year 2026 with 8,000- 10,000, 10,000 crores of order booking, right? It will be another 4,000- 5,000 will be adding. So we'll be working, say, on at different stages of the project we will be working on around 12,000- 15 ,000, right? So with this and the exit run rate of the revenues that we have, I mean, discussed now in the last quarters, it would be, I mean, safe to achieve approximately 8,000 crores of order, I mean, the revenue numbers next year.
Okay. Got it. Got it. And margins will be in the same range of 10%-11% gross margins. That is what you're achieving right now. Correct?
Yeah. Absolutely. Yeah.
Yeah. Yeah. Okay. Thank you. Thank you and all the best. Thank you.
Thank you. Ladies and gentlemen, we request you to restrict to one question per participant. The next question comes from the line of Bhavik Shah from MK Ventures. Please go ahead.
Hello, sir. So we understand the Reliance trials are completed or in progress, and they have been positive on that. So do you think it will take one year for the orders to come in? So you are not building in anything in FY26. So is that understanding correct?
I don't think so. So I mean, as I have told you that the pilot projects would be definitely over in this financial year, and they have started working for a few other projects. Overall, I mean, the development plans are in the public domain that you can see. But in my understanding, now the moment seems to be there, and we are well positioned. We are under dialogue with them to get some of the orders.
We are in financial closure at this moment, or we are still awaiting that?
A few projects are cleared by their board, and that discussion is going on.
Okay. So what I can understand is we'll get Nigeria as well as Reliance maybe towards the end of FY26 or in FY27. So do you think we have the bandwidth to execute both these projects together?
So we've been talking about this in the past as well, right, that we will scale up as we go, and as order inflow comes in, we will ramp up the teams to what we believe will be a sustainable level that is required. Specifically for Nigeria as such, we do not at this point see any need for additional overhead for Reliance. As in when, depending on the scale of those projects, we will take a call once we have more clarity and visibility on the steady state run rate over there.
Okay. I'm trying to understand INR 10,000 crores of order inflow for FY26. This is excluding Reliance and Nigeria, right?
True. That's true.
Yeah. Okay. Thank you so much.
Thank you. The next question comes from the line of Amit Mehendale from Robo Capital. Please go ahead.
Thanks. All my questions have been answered. Thanks.
Thank you. The next question comes from the line of Eshwar from iThought PMS. Please go ahead.
Hi, sir. Thank you for taking my question. I just had a clarification on the slide which was given. So you said that the future scale-up of the company has been realigned to the requirements of the domestic customers. Can you talk a little bit more on that?
We've already fairly in detail explained this. Is there anything specific that you would like us to add?
Is there any difference between the requirements of a, say, North American customer or a Middle Eastern customer and a domestic Indian customer?
No. No. So this essentially effectively just refers to largely our domestic customers, the realignment we've been talking about. And these have been, like CKT had earlier alluded to as well, due to land acquisition-related issues that they have been facing at their end. In certain cases, it has been transmission issues and so on.
Right. Great. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. On behalf of Sterling and Wilson Renewable Energy Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.