Ladies and gentlemen, good day. Welcome to the Sterling and Wilson Renewable Energy Limited Q1 FY 2027 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 the date of this call. These statements do not guarantee the future performance of the company. It may involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Today on the call, we have Mr. C.K. Thakur, Global CEO, and Mr. Ajit Pratap Singh, CFO from Sterling and Wilson Renewable Energy Limited and SGA, who are their IR partner. I now hand the conference over to Mr. C.K. Thakur for his opening remarks. Thank you. Over to you, sir.
Thank you. Good morning, everyone. Let me begin with an update on our business operations and outlook. The most significant milestone of the quarter has been on the international front. In June this financial year, we received a letter of award for our 50/50 joint venture with Hassan Allam Construction, one of the leading construction company in Egypt and the wider MENA regions, for the West Minya solar power project in the Minya governorate of Egypt.
This is a landmark mandate, a 1,000 MW AC solar PV plant integrated with 600 MWh battery energy storage system, valued at approximately $560 million. Once completed, it will rank among Egypt's largest utility-scale renewables development. For us, it marks the third gigawatt scale order win in the space of nine months, a clear signal both of the rising ticket size of the projects and of the confidence that marquee developers place in our ability to execute complex storage integrated solar at scale.
The joint venture will undertake the full engineering, procurement, and construction scope, spanning the photovoltaic general facilities, the battery storage infrastructures, grid connection, transmission works, and all associated balance of the plant. With this order win, we concluded Q1 FY 2027 with highest ever UOV of INR 13,000 crore, driving a strong visibility for revenue growth for forthcoming quarters. At this point, I would like to draw your attention to the fact that current UOV comprises six turnkey projects, three each in India and international markets, which are yet to commence execution.
The total value of these six projects is approximately INR 9,000 crore. These orders were won during the second half of FY 2026 and Q1 FY 2027. We expect these orders to start contributing more meaningfully during the second half of the fiscal year. Since these are the large projects, we also expect the working capital cycle of the company to significantly improve as the customers' advances for these large projects start flowing through.
Moving to the market outlook. The domestic solar EPC market remained a bit slow for a second consecutive quarter due to geopolitical tensions, volatile commodity prices, and high domestic module prices, which deferred new project awards. Activity on battery storage market has been increasing exponentially, with both standalone BESS projects getting awarded and hybrid solar projects with battery storage. We believe there is significantly large market. We remain patient to get profitable orders out of this. We continue to remain patient and are only pursuing margin accretive projects.
The bid pipeline continues to remain extremely robust at 27.7 GW, of which almost 90% is India-focused. The current bid pipeline is purely focused on the solar PV market and also the BESS projects, which is another large opportunity in itself. In value terms, we expect the BESS market ordering activities to be almost equal to the size of the PV market. We anticipate ordering activity to pick up from this quarter in the domestic market, and we are confident of maintaining our market share, which in our view should enable us to deliver 10%-15% growth in revenue this fiscal, despite the high base of FY 2026.
On the international market outlook, we continue to remain very optimistic on the Africa and Middle East markets and certain geographies in Europe. We currently have three ongoing projects in Africa and Middle East, which should commence execution during this quarter. In all our international projects, we continue to judiciously evaluate the risks and rewards and are mindful of not being exposed to the commodity prices and equipment price increase risk.
As I have indicated in previous calls, all international solar projects undertaken thus far have been completed successfully within the projected margins. Moving to the operations and maintenance segment, we have now achieved a record 18.3 GW peak of capacities under operations. We anticipate this full portfolio to start contributing fully from the third quarter to this fiscal year. The O&M business provides us a steady annuity stream and good gross and EBITDA margins due to very low overheads. Our engagement with the Reliance Group continues to be deeper.
As you have seen, the Reliance Group articulated at its recent annual general body meeting, an ambition to build one of the world's largest integrated renewable energy hubs in the Kutch region of Gujarat. A development spread across 5.5 lakh acres, designed to deliver round-the-clock power at the gigawatt scale by integrating solar generation with battery storage, and targeted to generate in excess of 40 billion units annually, equivalent to close to 3% of India's current power demand.
The Reliance Group has already commissioned its integrated new energy manufacturing ecosystems, and the first phase of its 40 GWh battery gigafactory is on track for commissioning this year with a stated pathway to 120 GWh . We are working very closely with Reliance Group on technical configurations and execution readiness. While the timing and quantum of specific orders will necessarily follow their rollout schedule, we remain confident of becoming large shareholders of Reliance's initiative. I want to close my remarks with a point of philosophy, because in this business, the discipline that matters is not merely winning orders, but exiting projects without negative surprises.
We continue to protect ourselves through back-to-back pricing arrangements with our supply chain. We remain deliberately selective, staying away from the mandates that carry land, major right of way, or resource risk outside our control, and we run the business as we always have on the negative working capital model. That conservatism is, in our considered view, precisely what will separate the durable players from the rest as this cycle matures. With that, I'll hand over to Ajit to take you through the financials of the company.
Thank you, C.K.T., sir, and very good morning, everyone. I'm pleased to report a significant milestone in our unexecuted order value, exceeding INR 13,000 crore, which is a first in the company's operating history post-COVID era on the back of strong order inflows. While our first quarter performance may not be very exciting from a top-line perspective, the unexecuted order value and expected execution timelines give us confidence to close this fiscal year with around 10%-15% growth in overall top line. This implies a strong pickup in top-line growth in the forthcoming quarters.
For Q1 FY 2027, our revenue came in at INR 1,590 crore, it was lower both sequentially and year-on-year due to lower rate of execution, primarily in the international EPC segment. Due to the phased completion of four of our international projects in South Africa, Spain, and Italy, we were mindful in new international business due to earlier challenges faced in the international market. With the success story of four successful international projects, we have bagged three new projects, two in South Africa and one in Egypt, where the execution and revenue flow is likely to start soon.
As C.K.T. alluded during his opening remarks, a significant proportion of our UOV is yet to commence execution, post which our top-line growth is also expected to pick up. A bright spot in our Q1 results was the performance of O&M segment, where the top line grew around 40% year-on-year due to the significant increase in O&M portfolio size. We expect continued improvement in O&M top line as the complete portfolio is yet to contribute fully.
We anticipate full contribution of 18.3 GW to commence from Q3 FY 2027 onwards. On the gross margin front, our Q1 FY 2027 gross margins were around 9.9% compared to 10.5% in FY 2026. We expect the EPC gross margin to range between 8%-10%, depending on the project mix of turnkey and BoS. On the O&M side, we expect gross margins to stabilize at around 20% level. Our operational EBITDA, which is operating revenues less recurring overheads, amounted to INR 78 crore this quarter, and the operational EBITDA margin was around 4.9%. Our reported quarterly EBITDA was also positively impacted by Forex gains and amounted to INR 96 crore.
Our Q1 PAT grew 36% year-on-year to INR 53 crore, aided by lower effective taxation rates. Coming to the balance sheet. Our net debt levels have remained largely stable this quarter. Our gross borrowings declined by approximately INR 130 crore this quarter due to scheduled repayments of term loans. Our net working capital was at INR -260 crore compared to INR -329 crore in previous quarter.
As C.K.T. mentioned earlier, with the improved collections from the new large projects, we anticipate the working capital cycle to continue to improve. We continue to make good progress on fresh limits on non-fund and fund base requirement. We have cumulatively been able to obtain fresh credit lines to the tune of more than INR 3,200 crore to aid the growth momentum in the business. With this, we can now open the floor to questions and answers.
Thank you. 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 comes from the line of Kunal Shah with DAM Capital Advisors. Please go ahead.
Yeah. Hi, sir. Despite the order inflow momentum being strong, the revenues has declined 10% year-over-year, and you've not been able to achieve the targeted INR 20 billion-INR 25 billion run rate for revenues on a quarterly basis. Could you just explain what happened during the quarter and versus the last quarter guidance of 15% growth for FY 2027, you're mentioning about 10%-15%. Is there some bit of miss that we are seeing in terms of execution?
We have given the guidance of growth of, say, around roughly INR 2 billion quarter-on-quarter basis or INR 2.5 billion quarter-on-quarter basis. The assumption was that revenue would be coming from the projects in hand and the new orders where we were announced L1 in Q3 and Q4. The NTP dates or LOA for these projects were delayed for the specific reasons, the contributions from those new orders could not add to this quarter's revenue streams. The revenue and the UOV from the existing orders that we had, all those projects were during the advanced stage of the execution. Most of the supplies were taken into the previous quarters.
We were expecting that the revenue contribution from the new orders will come initially through the supply from here, and therefore our assumptions was absolutely on the right track, and we could have got it. Unfortunately, all new orders launch were delayed, and therefore, this is a seasonal phenomena that the revenue has dipped. In the subsequent quarters, we don't anticipate. Maybe the second quarters also would see the slight slow, third and second half of the years could be definitely very bright.
Understood. Secondly, with this mega order from Egypt, could you just explain the life cycle of this particular project and when will the execution start?
Yeah. That's a landmark project for us, and the project is for 13- 15 months times after NTP. The two months LNTP periods and the NTP of this project we are expecting in September. With this September NTP, we are expecting that the revenue contribution from this project will add to the last quarter of this financial year.
Okay, understood. This last bit on the orders from Adani or potential parent orders or the Egypt one, none of the company's specific banking limits would be used for these three projects, right? I mean.
No. Yeah. For this Egypt order, there could be part amount which we will use from existing credit lines, and partly we can get the new credit lines for project specific requirement. For Adani, there is no specific requirement for using credit line because supplies are primarily from their side. From parent company, we have still not closed the terms, would be speculative to say anything in terms of requirement of credit lines. Broadly, we anticipate that there may not be requirement of using any credit lines.
Understood. This is helpful, sir. Thanks a lot.
Thank you. The next question comes from the line of Yash Jurani with Code Advisors. Please go ahead.
Hi, sir. How much of our 13,000 crore UOV is exposed to, say, the ALMM list to sell? With domestic sale being at around 130%, 160% premium and a six-month certification backlog, what is the risk of that our execution ramp slips off into, say, the next few quarters?
Yes. Basically, the Coal India orders that we announced last time, where we are L1, the NTP or LOA still we are expecting. This is a turnkey project. You know that as per the policy guidelines, any project which were bidded after September 1st, 2026, they are all under the DCR category. The Coal India order is one that is under DCR category.
Interestingly, we have already locked the price, the price at which we have submitted our bids. Despite the fact that the market is not stabilized, the DCR market, there are a lot of speculations all around. The Coal India would be the first order, large first orders, where the DCR models demonstration will come. Fortunately, we have locked the price, and we don't anticipate any impact onto the module price increase because of the market upsides.
Understood, sir. Just a follow-up for that. For future orders and tenders that we will bid, the DCR cost tariff shock, will it break any project IRRs for you guys?
Not really. I say that our margins are, as you have given the guidelines, that it depends on the mix of the orders that we are getting. Whether full turnkey or BoS. Some seasonal impact in one quarters could happen, but overall, at the end of the year, if you see, then our margin will remain in basically 8%-10%.
For BESS, it has its own, say, localization pressure. How exposed is your BESS margin to the duty charges on the imported cells?
I could not really get your questions. Can you come back again, please?
The BESS projects have their own localization pressure in terms of the cells that are currently being imported. We just wanted to understand how exposed is our BESS projects' IRRs or the orders, say, on the duty charges which are put on the imported cells. What kind of margin do we expect from that segment if any, say, regulations come into place?
Yes, absolutely. I got it. This is basically you're talking about the BESS project. Basically, we are currently executing one BESS project, which is the BESS supply is not in our scope. It is being supplied by the client free of cost. There is no impact of such regulatory changes and all. We are doing only this project. In future, if the BESS projects comes with the turnkey orders, including the BESS supply in our scope. Whatever price we'll consider, kilowatt-hour price, we'll consider within the current market scenarios and all. As of now, in the existing orders, we are not exposed to any such risk.
Okay. Thank you so much.
Thank you. The next question comes from the line of Faisal Hawa with H.G. Hawa & Company. Please go ahead.
Sir, are we going to work on any kind of projects over the sea in this financial year, or any orders coming up for that? Secondly, sir, did you say that the second quarter will be also slow because of revenue not being recognized and execution being slow?
The first question is your over the sea. Are you talking about the floating solar plants?
Yes.
Okay. Great.
It was mentioned in the presentation also.
You may be aware that we are doing one of India's largest four floating plants with NTPC and DVC joint venture as a client. They are one of the biggest dam in Tilaiya, Jharkhand. After that, there was one more tender in the market that we lost to somebody, maybe KPI in Gujarat through SECI. These quarters, there are a few tenders which are coming. They're large size, including again, the NTPC, DVC ventures, and plus some of the state governments.
Having executed one large projects, we are well-positioned to participate in these tenders, and we are expecting, yes, some portions of the orders definitely will come to us. Second question, the revenue in the second quarters. Yes, what I say that in second quarters, there will be two factors. One that the new orders that I have mentioned, even if I'm expecting the LOI, LOA to come in this quarters, the revenue realization will happen in subsequent quarters only.
On the existing UOV in the hands, to that extent, it will be impacted, and plus the rainy seasons, the monsoons. That also will slightly affect. Nevertheless, the number that we have achieved in this quarters, I'm confident of achieving in the similar range for the next quarter as well. Quarter three and quarter four would be definitely very high because by that time, all the new orders will come into the execution stage, and I am expecting that the significant contributions from those orders will come to the revenue.
Just to add, what are the efforts that we are making to reduce the central office expenses and the overall fixed costs that we are having? Second is, sir, is there any way that we can mitigate the risks of this international order that we have also got?
The first part of the question again, I just missed. The fixed cost you told?
Yes. Fixed cost, particularly our central office expenses, because that is what-
Okay. I got it. With all these order increase See, whatever manpower strength and the other things are being augmented to take up these kind of new orders, they are all costed into the project. Minuscule augmentations happens at the head office. If you see our manpower strength and other things, and the number also. This quarter's overhead is also less than the last quarter, in fact. We are pretty well on to managing the overhead at the company levels. On the international side, the risk, I don't foresee, because all the market surge and everything, and few of the items which we believe that could be getting impacted were all tied up back to back.
There's no risk. Having executed the four projects in international markets, as we have been telling in the previous calls also. The team is well-positioned to understand the market risk before times and position themselves to take care of all those. Both the projects in Africa, then Europe, successfully we have completed within the prescribed terms and or we can say above the targeted margins. We're pretty confident that there should not be any risk on the new projects that has come to us now.
Okay. Sir, what is the hit rate in this quarter for us out of total amount of projects that have been vetted out in India, how much have we won, and what is the kind of bid pipeline we see for the coming year in India in terms of INR crore?
Yeah. Unfortunately, this quarter, we were expecting that the order in the tune of over INR 20,000 crore could have been finalized. Those were the spill order from the Q4. Unfortunately, the total orders that were concluded was only INR 6,400 crore, including both the PSU and the IPP. Some of the new entrants have gone aggressive, and we remain patient to see the profitable orders. Since we had already very great visibility of the revenue streams out of the new orders that we got and the UOV that we had from the existing one. Definitely we have not gone that aggressive, and that's basically we decided not to go that aggressive.
Since these two quarters have been sluggish, the projects that have been announced in the quarter three and the project that are anticipated to be announced in quarter four, overall value, if you say that, still I can clearly see that the order worth of around INR 45,000 crore-INR 50,000 crore. Let's say around 35 GW orders on the 25 GW on the utility scale and around 35 GWh on the BESS side. Those kind of orders pipelines is clearly seen. I'm expecting that this quarter and next quarters, our shortfall will be definitely catching up. The huge pipeline, significant orders is seen, and we are anticipating our share to remain intact.
Okay. Thank you very much for answering my question so well, sir.
Thank you.
The next question comes from the line of Jayesh Shroff with Cask Capital. Please go ahead.
Hi. Thanks for taking my question. My question is, now that you have already reduced the top-line guidance from more than 15% to- - 10%-15%, you are also alluding to the fact that second quarter, of course, because of monsoon and other factors, is also going to be as slow as the first one. That means that your execution in H2 will need to be greater than maybe INR 2,600 crore-INR 2,700 crore, or maybe around INR 2,600 crore. On top of it, you will have Reliance starting their projects, which will also demand faster execution. Are we geared up for such kind of execution scale? Won't that be a bottleneck going ahead?
No, absolutely not. In fact, as per our guidance, we were geared up to achieve over INR 2,000 crore of revenue in this quarter as well. Unfortunately, the market scenario came into the play, we could not get the support from the orders that we had. The team was absolutely in place, we are completely geared up for even Reliance initiatives also. We are in the process of augmenting the team. We have more than the core team strength that we have in place. We are absolutely fine-tuned to take up this kind of. We have no other options also. We have to achieve the kind of the revenues in the second half of the years as you have explained. We have no other option. We have to.
Okay. Just one more clarification. This top-line guidance of 10%-15% is ex Reliance, right?
Yeah, that's right. Yeah.
Okay. That means that we'll have to do maybe around INR 3,000 crore around quarter four time. That's what I'm saying. See, you guided for execution of more than INR 2,000 crore, here we are talking of close to INR 3,000 crore. That is why I asked that question, that will that not become a bottleneck in execution?
Point well noted, we are mindful of this point that our target for quarter three and quarter four is going to be heavy. We are mindful of this and we're well prepared for that.
Okay. Management is confident and reassuring on that will not come as an excuse or whatever, a bottleneck to downgrade the top-line growth any further.
We have no option. We have no option.
In Q4 of FY 2025, I think we did more than INR 2,500 crore.
Yes. We have demonstrated already.
You have demonstrated in FY 2025 Q4.
The significant contribution will come in Q3 and Q4 from international orders also.
Right.
With the domestic and international mix, achieving the target of over INR 2,500 crore, I don't foresee any challenge in that.
Okay. We've at least stabilized on the operational front and our gross margins also closer to 9.5%-10%. Now we are talking of the guidance between 8%-10%. Is there some downgrade there, or why we are talking of 8%-10%?
No. Why we are talking is basically, in the beginning, I've told you, service margin basically comes from the mix of orders that you get.
Right.
The turnkey orders, in terms of absolute numbers for turnkey orders, while the percentage margin will remain low, absolute numbers will be high. Right? Whereas you have the BoS project, that was for BoS project. On the BoS project side, we have margin of, let's say, around 10%. Correct? It all depends. In the next few quarters, the kind of orders, the opportunities are huge for even both the turnkey and the BoS. At this moment, I can't tell you that. All are through the RA process and all. It will all depend on the kind of order mix that you will have, and that would be between 8% and 10%. That's what we have guided with it.
I'm sorry for asking this, maybe a very dumb question, will that have any bearing on our EBITDA margins also? Because of maybe a lower gross margin.
Our overheads, in terms of absolute number, will not increase. In terms of percentage, it should come down a little bit from the current number, because we are growing in terms of revenue. Of course, if the gross margin is getting impacted negatively, there will be some impact on EBITDA margin as well.
Marginal impact. Yeah.
Okay. All right. Otherwise, in case of a stable margin, your operating leverage scenario should play out.
Absolutely right. That's right.
All right. Thank you so much. That's it from my end.
Thank you. The next question comes from the line of Adwait Javkar with EquiPoise Capital Management. Please go ahead.
Thank you. Thank you for taking my question. Now you explained that revenue was impacted due to delays in the projects. Do these delays increase the risk of bank guarantee invocation or contract termination? If yes, what is the maximum financial impact in the worst-case scenario?
No, not really. Since the new orders that you say that have been delayed, so those orders contract date itself has not started because you are anticipating the LOA to come. The project timelines will start from the date of LOA. There's no question of the bank guarantee invocations or any further risk on such orders.
Okay. The second question is, there are total claims are around INR 1,800 crore. Realistically, when do you expect a meaningful portion of these claims to be resolved or recovered?
Indemnity? Ask the question again.
Not indemnity. Just basically you have done some claims. Basically, there are some claims related to arbitration, then some INR 508 crore of wrongfully invoked bank guarantee claims, and there are two international customer claims. At what time you are expecting that this will be recovered?
Yeah. Basically, if you see out of these claims, large claims are from the U.S., two projects, two orders. They are in the court. The settlement of this case in the court will take, let's say, two to three years' time. Conservatively, I can say minimum two years. It can go up to three years' time. The rest others could be settled much earlier, either through settlement or through the arbitration process being concluded. The two claims will go longer.
Yeah. Okay. Thank you.
Thanks.
The next question comes from the line of Sukrit Patel with Eyesight Fintrade. Please go ahead.
Good morning to the team. I have two forward-looking questions. Maybe these questions would have been answered back also. Just want to have clarity on this. The first question to Mr. Thakur is, beyond the headline order book growth, how are you planning to structurally reposition the company's EPC and O&M portfolio over 2025- 2028 financial year to defend margins in a rising input cost kind of a scenario? While ensuring the performance against execution delays and battling the competition also in the space. First question. I'll ask you a second question after. Thank you.
Basically, as we have been telling you that from the project side, we are anticipating the margin in the range of 8%- 10%. On O&M business, these times on the top line in the O&M has been the massive addition. That is largely from the gigawatt levels of the project that we completed in the last couple of quarters.
Those have come into the operational stage, and their revenue streams will start from the subsequent quarter. On an average, 30% margin on the O&M side will continue to be there. That would be the kind of scenario. Because of any uncertainty at this stage, either in the O&M or in the project, I'm not anticipating the margin to dip down from the level that we have now explained to you earlier and now explaining you in this call.
Thank you. My second question to Mr. Ajit Singh is, again, along the same lines. Just want to understand, with working capital intensity rising and financing costs also being volatile, what frameworks are you putting into place to sustain the profits and fund global expansion and maintain your regular dividend commitment? Just in case if any project delays or regulation increase comes in this quarter. We want to understand your view on this. Thank you.
Thank you. In terms of credit lines, we have diversified base of lenders. We have added few new lenders recently in couple of few quarters in India as well as globally. For example, in South African project, whatever we got over there, we have taken trade lines locally from the banks in South Africa. Now we have very diversified pool of lenders supporting our growth initiatives. In fact, the lead bank also has increased the limit. From existing lenders also, we are seeing good response, and they are increasing the limit.
That's on the credit line side. In terms of term loans, we have significant term loan which will get repaid during the current year and next year, and post that will be almost de-leveraged in terms of fund raise requirement. Working capital, we likely foresee that we continue to operate in negative working capital cycle, considering the advances what we receive from the customers and overall payment portfolio from customers and suppliers under LCs which is basically from 90- 120, 180 days, up to 180 days also in certain cases. We will continue to leverage that position in terms of managing working capital going forward.
Thank you, and best wishes.
Thank you.
The next question comes from the line of Anirudh Singhi with Dalal & Broacha PMS. Please go ahead.
Hi. Good morning. This recent arbitration that we entered in Australia, is that covered under indemnity?
There are two portions. One is liquid damage under this contract. It's a contract with a party in Shell, and that is covered under indemnity. We are expecting the amount to get realized in the current fiscal from the promoters. The balance amount, we have very strong case because for the same LD, the customer encashed bank guarantees. They leave it LD also, and they encashed bank guarantee as well. There can't be two claims, and they withheld our receivables and payments. We gave a strong position in that case as per the legal advice we opted, and that's why we are going ahead with the litigation.
Okay. The total arbitration amount is about INR 200 crore. Of that, how much is covered by the indemnity?
Around INR 110 crore is covered under LD.
Okay. In our annual report, we mentioned certain cases which we think are not tenable, but the amount INR 3,800 crore. How much of that would be covered? Hello?
Yeah, we'll get back to you on this. Basically, these are frivolous kind of claims laws from our customers. There is no cash out as of now, so it is difficult to quantify the amount at this stage.
Okay. I just want to understand if any of it is covered by the indemnity or not.
Be covered. One large claim is covered that is from a customer where we have not taken the project. We bid the project, but later on that was canceled. That's covered. To quantify the exact amount, because these kind of frivolous claims and without any basis as of now, to quantify the amount is difficult, but we don't foresee any likely impact on the company because of these claims.
Okay. Thank you so much.
Thank you. The next question comes from the line of Balas ubramanian with Arihant Capital. Please go ahead.
Good morning, sir. Thank you so much for the opportunity. Sir, battery side, the opportunity side, we have mentioned about 50 GWh- 60 GWh . Our order backlog is around 300, 400 range. I am trying to understand what are the big pipeline in that BESS segment, what are that government target or triggered pipeline over next two to three years, and when we can expect a sizable revenue contribution in the BESS segment.
The Government of India target of achieving this 500 MW by 2030 is well on track. Contribution from solar is close to 200 MW as of now. I am expecting that in the next two to three years, the opportunities to be made available in the market will be in the tune of, let's say, 35 GW- 40 GW, right? Enough opportunities are there.
How our business philosophy operates is that whatever UOV you have from the projects that you have in hand, that we commit to the market, that from there we will be getting the revenue. Any new orders coming before the quarter one, let's say 20%-30% would be coming as a part of revenue in the subsequent quarters. Any orders which will come into quarter three, particularly quarter four and all, that will spill over to the next quarter. That's how basically we forecast the revenue streams and accordingly the other financials on that.
Okay. Sir, on the BESS margin, it seems like solar EPC margin, 8%-10% kind of gross margin. I am trying to understand in that EPC BESS side, which are the battery chemistries we are currently procuring, like whether it is the LFP, NMC, sodium ion. What is the current trend and what is our sourcing strategy? Because in Indian market, it is not that much mature. Right now, it is an evolving stage. You could explain your sourcing strategy and what kind of battery chemistries we are working on. Is there any changes in technology, whether it will improve our margin side?
In the BESS side, if you see the margin in the BoS is same as the PV plant, around 10%. On the battery side, in fact, market could be turbulent, and that also can go sometimes even lower than the PV module's margin that in the turnkey project you consider. More or less, you can consider into a similar amount. On the technology side, yes, we are also geared up. We know that having executed around 28 GW around the globes.
We are well-positioned to take care of any kind of technological development that is happening in the industries. We can see much ahead of the times. The market pressures is also basically leading us towards the more innovations and optimizations in the area. You are right, that pressure will come from the other uncertainties in terms of technological development and in terms of other things, we are well-positioned to handle all those kind of things, right.
The sourcing strategy side, sir, for battery?
Huh?
Our sourcing strategy for the batteries domestically plus globally?
Sourcing strategy. Sourcing strategy, you see currently, we don't have Indian market matured enough to get the battery in India. Now the government, the criteria for the tender is that it should be Make in India program. Most of the peoples, there could be mushroom growth in time to come. Currently, all those players, they are getting the cell, the containers, the rack, all other components from outside, and they are just assembling in India, and they say it's a make in India program.
We are very carefully evaluating that who all could be our partners in the future, particularly looking at their performance and all. Because as a listed company, the performance criteria comes on our head. With all these kind of uncertainties, you were just trying to understand, that's right, it is there. We being leader in the industries, we are trying to evaluate all those kind of things, and then accordingly, we'll go for the tie-ups. We are evaluating. We're still in the process of evaluating from the markets, all those who are trying to integrate the battery supplied from India.
Okay, sir.
For international projects wherever the BESS will come, they are all from the reputed suppliers. Their product is proven. There is no such conditions of the making specific country programs and all. There we don't foresee any problem. For India, till such time the market will be getting matured, we have to move carefully, and we have to evaluate all these things, and then we have to take a call.
Okay, sir. Sir, when we can expect improvement in Nigeria side? I think currently it's going through slow phase. What is our current exposure and is there any big pipeline in Nigeria market?
Nigeria market, I'll say the slow procedural delay. Heavily delays onto the procedure side. With the elections becoming due and all, it may get further delayed. Frankly speaking, sir, in all our business plans, we are not considering as of now in this particular year for any revenue coming from Nigeria and all. Other than that, there could be some opportunities in Nigeria, smaller ones, but we are not following that.
Got it, sir. Thank you.
The next question comes from the line of Kenil Mehta with Omkara Capital. Please go ahead.
Sir, any reason for increasing in our O&M capacity drastically from 13.5 GW- 18.3 GW within one quarter? Where do you see the O&M capacity going to? 25 GW by FY 2028? As we have scaled up our O&M capacity, our revenue should shoot up in next few quarters of O&M from INR 90 crore quarterly to INR 120 crore-INR 130 crore.
Thanks. Basically, it's very simple. Basically, our O&M business model is that order additions comes from the EPC orders. That's the integrated O&M contract, basically. When the project is completed, it comes to the O&M phase and equivalent to the O&M orders, this goes to the O&M. That is from our own EPC additions. If you see the last year, we completed around 5.8 GW DC commissionings. All those projects which were commissioned, straight they have come to the O&M stage because those orders were for two to three years of O&M in our scope. The third one is basically the orders from the third party.
There has been a significant improvement in the orders from third party as well in the last quarters, around 1.2 GW was one single order that we concluded, and then there were many few in the range of 200-300. I say that if you have seen the market, how it is surging in the financial year 2024- 2025, let's say it was 17 GW of additions. I am talking about only utility scale, not the rooftop and the other. The 2025- 2026 was around 25 GW. This year it could be around, let's say 30 GW-35 GW. All those projects when it is commissioned, it comes to the O&M stage.
Subsequently, we are also raising our limit for the project execution. Those will come to the O&M stage. The remaining from the third party, our efforts will grab some more orders from there. Basically putting together, this kind of growth is seen, which is quite logical and justified.
We expect the revenue of more than INR 400, maybe in the range of INR 400 crore-INR 450 crore in the current year from O&M business, which was around INR 268 crore in the last year. It is significant.
Okay. Should we see increase in margin from 18%-25%, which we have seen in FY 2022?
O&M margin we expect to be stabilized at around 20%.
Understood. Sir, what was the reason for increasing in our total employee base over one year? Because technically it's double.
Basically, as the project, you see the executions capacity you have to augment, right? Earlier, let's say we are doing 3 GW kind of thing. This year we have around 10.5 GW under execution. On the project specific manpower, you have to increase. Then the large portions of the projects have come to the O&M. The O&M manpower also getting added.
Also to see the market since the manpower attritions and the market is volatile because lot of infrastructure projects coming in. We also create the pipeline of our GETs and all. This year we have hired around 100 GETs, to be trained in next couple of years to take that positions and all. They are all futuristic plan. Because of that, you have to take some call, right? That's how it has increased. They are all onto the project specific. They are not adding to the overhead.
Okay. Based on your comment with the H2, FY 2027 EPC revenue will be way more higher than the H1, and it will cover the 15% growth we are expecting.
That's what I have told. Yes, you are right.
Sir, on the Reliance order, as we bid for the order, there is a delay in LOA. On Reliance side due to their parentage, there could be a quicker LOA acceptance given to you. Is it correct? The time to bid and win the orders and the time to execute will be way lower than the other orders.
Yes. Project execution plan would be very intensive. The time would be definitely lower than the markets, because the time. Accordingly, for Reliance, we are also preparing that kind of readiness. We as an EPC company also are gearing up to cope up with this kind of thing.
Sir, all the raw material will be provided by Reliance New Energy only? We have to only execute on the EPC side.
At this stage, it's difficult to reveal all the information because the kind of contract that will be formulated with some supply in our scope, majorly maybe being supplied by them. What would be the composition of the contracting in terms of pricing and all, is difficult to reveal at this stage. It will happen with some supply in our scope maybe, majorly by them, and then of course the exclusions. Revealing the exact fundamentals on the executed, the order set compositions is difficult at this stage.
Both the companies being all set companies, all those transactions will be on arm's length basis.
Yeah. That's what we can comment at this point in time.
Okay. Understood. Do you think your O&M order book shooting up to, as we execute more orders, O&M orders shooting up to 30 GW, 35 GW order book size fundament and by FY 2028, which will lead to more sticky revenue and EBITDA margins for our company.
Our business plan is, of course, if you see the five-year business plan, from 2018. We have started 1.8 GW of O&M orders in 2018. From there, today, we are at 18 GW. In last four or five years, you can say, 2018- 2023. No, eight or nine years. That means we have gone multifold, right? Adding even 4 GW- 5 GW per annum from our own EPC projects and 2 GW from the outside, the ramp-up rate would be pretty high. We do not foresee the O&M business and see that we add value to the customer. Having seen the kind of the O&M to do for the customer, that also spreads.
Some of the customers who have tried with the other agencies, O&M agencies, and seeing the performance of the plant that we operate, and we add value to them during this stage, they come to us for the operations. This market is pretty robust, I think, in our opinion. I cannot tell you that 35 GW or 45 GW, the CAGR for the O&M growth definitely would be going to at the much higher speed.
Understood. Sir, on the arbitration side, if we lose, we have two arbitrations, one in U.S., one in other geography. If we lose, are there any chances of losing it on the INR 1,800 crore and INR 1,300 crore counterclaims filed by the party?
As you know, in some of the questions, our CFO has already addressed these questions. There are two parts of any claim. One is the LD. Other is the operational frivolous claims or whatever it is from the client side, and some are our genuine claims. Those are under arbitration. While the U.S. claims, the cases are under the court, which will take pretty longer times, maybe two to three years. The LD side is indemnified. The others would depend on the court cases. In our opinions, all our cases are very strong. We are not anticipating any impact.
Shall we say a lower legal-
I'm sorry to interrupt, Kenil. I would request you to join back the queue. Thank you. The next question comes from the line of [Shirish Vaze] with Alembic Pharmaceuticals Limited. Please go ahead.
Hi, am I audible?
Yes.
Yes, Shirish.
Hi, good morning.
Yeah. Good morning. My question is regarding, you had mentioned that other receivables related to LC and BG invitations were around INR 1,064 crore from your annual reports. Just wanted to understand how much of these are covered under indemnity?
We are cashed out and covered under indemnity for around INR 800 crore, which is likely to fructify over next couple of years. Current year, we are expecting in the range of INR 120 crore- INR 130 crore to get realized under indemnity. Based on the outcome of the litigations, amount will get realized from indemnity or from the customer based on the final outcome. We believe that based on the legal opinions, whatever we have obtained, that all those litigations, we have very strong case to recover the money, either from the customer or from the promoters.
Got it. Second question is regarding your trade receivables. If I look at your undisputed trade receivables, more than three years, they were at around INR 145 crore as of FY 2023. If I take more than one year of trade receivables, they are around INR 392 crore. Are you expecting any credit impairment loss from these trade receivables?
Not exactly. These trade receivables you can see in three parts. One is normal trade receivables. Second is retention money, which is being locked post completion of the project and get released from the customer as per the contractual terms post completion of defect liability period. Third is under litigation, which outcome of final litigation will give the final cash flow to the company, either from the promoter or from the customer.
These undisputed that you have mentioned in the annual report, these would largely be pertaining to the retention money related to the project.
It has all component. That's what I mentioned. It has retention money also. It has the litigated receivables. So yeah.
Okay, got it. My final question is regarding your last phone call. You had said that the order book as of FY 2027 end would also grow at 15%. Considering that you've already achieved INR 13,000 crore of order book, would you still maintain that guidance of 15% of order book growth as of FY 2027 end?
That's why. Basically, last year, our progress run rate on the order achievement was more than the guided number. The base was really high. From that base, we are expecting the growth at least at 10%-15%. Yes, you can anticipate the additions of 10%-15% over the last year number.
I'm asking not about revenue, but about order book as of FY 2027. Do you have a number in mind what that you can achieve?
That's what I'm just trying to say that, we can say that the order book could be definitely more than INR 10,000 crore in this financial year. To start with, in the first quarter of next financial years, at maybe slightly higher numbers than this financial years we had as a UOV.
Got it. Thank you. That's all from my end.
Thank you, sir. Ladies and gentlemen, due to time constraints, that was the last question. With that, we conclude today's teleconference on behalf of Sterling and Wilson Renewable Energy Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines.